In a recent discussion on X (formerly Twitter), Nord Automobiles’ founder and CEO, Ajayi Oluwatobi, revealed the challenges of implementing car financing in Nigeria. According to him, the primary reason for these challenges is Nigeria’s inadequate identity system.
During the conversation, Oluwatobi emphasized that requiring people to make full car payments is not an ideal practice. However, implementing car financing in Nigeria is fraught with difficulties. He cited the example of his own car brand, where he pointed out the high-interest rates imposed by partner banks and Nigeria’s flawed identity system, which makes it easy for Nigerians to default on car payments.
Oluwatobi stated, “Cars are usually the second most expensive thing an average person will buy in their lifetime after a house. So, it makes sense to spread payment for cars. Nigerians should not buy cars all at once. They should spread payments over five to six years. However, we face some challenges. Two years ago, we initiated a financing program because we attempted to secure support from banks. Some banks did provide support, but the interest rates were exorbitant, at around 28% per annum. Trying to convince someone to buy a car and spread the payment over five to six years with a 28% interest rate is almost impossible.”
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The Nord CEO further explained that launching a financing system within his company encountered issues like defaults and other problems that afflict the credit system in Nigeria.
Ajayi Oluwatobi emphasized that for car financing to thrive in Nigeria, the government must address the deficiencies in the country’s credit system. He referred to President Bola Tinubu’s commitment, made during his inauguration, to reform the Nigerian credit system, aiming to provide affordable credit options to enable Nigerians to afford their dream cars.
The faulty credit system in Nigeria has been a major obstacle for brands like NORD when it comes to establishing a transparent and effective financing system in the country. Oluwatobi stressed this during the conversation, saying, “We experienced a high rate of defaults, with people changing addresses, moving away, and switching jobs. This was because we lacked a robust identity system, making it challenging for people to fulfil their credit obligations. Instead, we had to rely on individuals’ moral commitment to repay, which is not very reliable.”
