NIGERIA VEHICLE IMPORTS SLIDE AS CREDIT REMAINS TIGHT
Nigerian automobile imports fell by more than a quarter in the first ten months of 2010 compared to the same period last year as cash-strapped consumers shied away from big-ticket purchases, industry officials said.
Vehicle sales in Africa's most populous nation are a proxy measure for private purchasing power, a leading economic indicator which is not formally available in Nigeria.
Nigerian port figures showed new vehicle imports in the first ten months tumbled 26 percent to 29,372 units, according to Mohan Sethi, general manager at Nigeria's Dana Motors, which imports Kia cars and vans.
Banks in sub-Saharan Africa's second-biggest economy tightened lending in the wake of last year's $4 billion bailout of nine lenders and credit flows are yet to recover.
Credit to the private sector grew just 1.3 percent by the end of September from the start of the year, compared to 22 percent growth in the same period of 2009 and 48 percent growth in the same period of 2008, according to central bank figures.
The central bank has made restoring lending one of its top priorities. It raised the benchmark interest rate by 0.25 percent to 6.25 percent in September but had kept it on hold at 6.0 percent for more than a year despite double-digit inflation.
It has also established a state-run asset management company (AMCON) to absorb bad loans from banks in a bid to clean up their balance sheets and enable them to start lending again.
Sethi said most consumers in Nigeria used bank financing to purchase vehicles and estimated the pent-up demand meant sales could increase by 20 percent next year if credit recovered.
'The improvements we expect will come if banks start lending again,' Sethi told Reuters.
'I don't think there are more than 5 or 10 percent of Nigerians who can pay cash for vehicle purchases,' he said.
Dealers expect new car imports to Nigeria to reach just 35,000 units this year, shy of the 44,757 achieved last year.
Industry sources put the market size for used vehicles sold in Nigeria at 200,000 per annum and say the market has remained broadly stable because of its competitive pricing.
Reacting, Head of Corporate Communication of Peugeot Automobile of Nigeria (PAN) Malam Rabiu Ibrahim said the lesser the import of cars for a company like PAN, the better it is for the Nigerian economy.
He however attributed the decline to credit squeeze in the banking sector which has also affected the insurance sector, adding that the monetization policy of government whereby workers can decide to go for a 'third hand' car may have also affected importation. (Reuters).