Good news, bad news: FG slashes car import duty but bigger engines will now cost more

• FG reduced Customs duty on new vehicles from 20% to 10% and used vehicles from 15% to 5%.

• New Green Tax now applies to imported vehicles with engines above 2,000cc, attracting 2% or 4% depending on engine size.

• Electric vehicles, mass transit buses and locally manufactured vehicles are exempt from the new surcharge.

• Despite the duty cut, multiple other import levies and taxes still apply, meaning car prices may not fall significantly.

The Federal Government has announced a reduction in Customs duties on imported vehicles, but there's a catch that many Nigerians may not like.

The Nigeria Customs Service (NCS) said import duties on both new and used vehicles have been reduced as part of measures to soften the impact of the new Green Tax Surcharge, which officially took effect from July 1.

Under the new directive from the Ministry of Finance, Customs duty on brand-new vehicles has been cut from 20% to 10%, while duties on used vehicles, popularly known as Tokunbo, have dropped from 15% to 5%.

The move comes alongside the rollout of the government's Green Tax Surcharge, a new levy targeted at imported vehicles with larger engine capacities in an effort to reduce carbon emissions.

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Vehicles with engines between 2,000cc and 3,999cc (2.0L to 3.9L) will now attract a 2% green tax, while vehicles with engines of 4,000cc and above will pay a 4% surcharge.

Speaking on the development, the National Public Relations Officer of the Nigeria Customs Service, Abdulahi Maiwada, explained that not every vehicle will be affected.

"This policy excludes mass transit buses, electric vehicles (EVs), and locally manufactured vehicles are excluded from this green charge surcharge. The vehicles that are to pay are those that are above 2,000cc."

This means buyers of electric vehicles, locally assembled cars and commercial buses will not have to pay the extra levy.

However, many of the SUVs Nigerians love, including several versions of the Toyota Land Cruiser, Mercedes-Benz GLE, Volvo XC90, as well as some pickup trucks, fall within the engine range that attracts the new tax. Performance vehicles like the Porsche 911 and Honda Civic Type R are also affected.

The latest adjustment follows the Federal Government's earlier decision to reduce tariffs on fully built passenger vehicles from 70% to 40% in April as part of efforts to review Nigeria's automotive import policy.

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Even with the reduction in Customs duties, importing a vehicle into Nigeria still involves several other charges.

Apart from the import duty, importers also pay a 7% surcharge calculated on the duty, a 15% National Automotive Council levy, 7.5% Value Added Tax (VAT) and, where applicable, a 0.5% ECOWAS Trade Liberalisation Scheme levy for qualifying vehicles imported from within West Africa.

Explaining how the new levy will work, Murtala Muazu, Comptroller in charge of Tariff, System Audit and Coordination at the Nigeria Customs Service, said the Green Tax Surcharge is different from existing import charges and will have its own assessment process.

He noted that implementation will be done through the HS Code declaration platform, while awareness campaigns are already ongoing across Customs zonal headquarters to prepare importers and clearing agents for the new system.

For Nigerians hoping the duty reduction would immediately make imported cars much cheaper, the reality may be more complicated. While Customs duties have been cut, the new green tax and other existing import charges mean the final landing cost of many vehicles could still remain high, especially for larger-engine SUVs.