Weeks ago, hurricane Ida wreaked havoc in the United States, causing about 350,000 automobiles to be destroyed. The hurricane is predicted to raise automobile costs, and some of the damaged vehicles may be rebuilt or sold as fairly used to other countries.

According to some analysts and car dealers, many of these vehicles will be auctioned and sent to Nigeria in a matter of weeks as the country has a huge appetite for used vehicles from the United States.

Nigeria imported secondhand automobiles (commonly known as ‘Tokunbo’ vehicles) worth N311.63 billion in Q1 2021. Year to date (2021), according to data from the National Bureau of Statistics (NBS), Secondhand vehicles worth N601.51 billion have been shipped into Nigeria from foreign countries, making Tokunbo vehicles the third most expensive item on Nigeria’s imports list. Of this figure, N140.2 billion was spent on importing used vehicles from the United States in Q1 2021, while N33.78 billion was spent on the same in Q2 of this year.

Back story

On August 29, Hurricane Ida hit the northern Gulf Coast, making a landfall near Port Fourchon, Louisiana. Flooding from Louisiana to the Northeast killed scores of people and caused severe property damage, including the destruction of thousands of vehicles both on the road and at dealerships. Flooding destroyed an estimated 350,000 vehicles.

Flood-damaged automobiles may re-enter the market following repairs and re-inspections, according to research. However, because those automobiles are frequently “transported much beyond their original territory” to regions where customers are less likely to know what to look for, the history of flood damage may not be revealed to buyers.

Flood-damaged cars coming into Nigeria

Nairametrics spoke to Mr Phillips Adeyemi, a car dealer, who said, “A vehicle that has been flooded in a hurricane as bad as Hurricane Ida is practically deteriorating from the inside out. These cars are taken to auctions or salvage yards in the United States, where the vehicles are scrapped and the parts that are not damaged are recovered. Yes, most of them will be shipped into African countries, particularly Nigeria where we have a large appetite for American automobiles.”

Another car dealer who chose anonymity stated that Nigeria has long been a significant market for second-hand vehicles from the United States. Those wrecked automobiles may now wind up in the country. They are usually repaired and classified as salvage cars. They will afterwards, be auctioned, shipped to Nigeria and sold to unsuspecting buyers at the same price as undamaged vehicles.

“Before importing a vehicle into the country, there are several factors, we consider but most of the time it’s based on our client’s specification. The clean cars without damage come more expensive compared to the damaged cars,” he added.

Another dealer, Benjamin Ikhide, said, “People are seeking discounts on social media or at vehicle auctions as the market for secondhand automobiles rises. However, you could end up with a flood-damaged vehicle, which might cause major issues down the line. A car with pre-existing water damage might be difficult to spot, especially if the dealer has gone to great lengths to clean it up. People should either avoid buying automobiles on social media or thoroughly test them before paying for them.”

How can you tell if a vehicle was flood-damaged?

Babasola Oyeleye is an automobile enthusiast and vehicle dealer who runs the Nigerian end of Tokunboh Cars Naija. He told Nairametrics that flood-damaged vehicles are difficult to identify by mere physical inspection because dealers usually go to great lengths to clean them up and refurbish them. However, buyers can run a VIN (Vehicle Identification Number) check on a vehicle they intend to buy.

“There are websites and apps where a buyer can run the VIN number of a vehicle to check its history, although the service costs money. These apps and websites give you the entire data on a vehicle, whether it was ‘accidented’ or not, if it was damaged by flood, etc. Running a VIN check is the easiest, fastest and most reliable way to identify flood-damaged vehicles,” he said.

What you should know

The cost of used vehicles has been on the rise for a while now in the United States due to a number of factors including a shortage of chips. Chips are vital in automobile production as they power everything from sensors, to power steering brakes, etc. Toyota, for instance, planned to slash worldwide vehicle production by 40% in September because of the global microchip shortage.

In Nigeria, the cost of Tokunbo and even Nigerian-used vehicles are on an alarming rise for entirely different reasons. Besides the cascading effect of the rise in the cost of used vehicles abroad, the exchange rate problem in Nigeria, which has worsened over the past couple of months has seen the naira exchanging for the dollar at rates as high as N575/$1 at the black market although the exchange rate still averages N413/$1 at the official window.

The inability of many import-based businesses to access forex at the banks has forced these entrepreneurs to seek the Greenback at the black market to keep their businesses running. In turn, this is increasing demand pressure at the parallel market and causing the exchange rate to spike.

The result? A rise in the price of all things imported, Tokunbo vehicles included!