Coronavirus Weekly

Coronavirus Weekly Update: Nigerians are not buying phones

By Victor Ekwealor Jun 29, 2020

Image source: Techcabal

Before we get into today’s topic, here’s your weekly reminder to maintain the strictest safety measures as the coronavirus is still out and raging, now more than ever.

According to our live coronavirus counter, recoveries in Africa are impressive, but there have also been 9,488 deaths. So please wear a mask, and act responsibly.

In this week’s conversation, smartphone shipments in Africa have taken a big hit. We had earlier predicted a downward slide in smartphones coming into the continent, but
nobody saw this one coming; it is the biggest decline in 5 years.

According to a report from the International Data Corporation (IDC), things do not look so good. Inside the Computer Village in Lagos, things look even grimmer than on paper.

If you are new, do catch up on past editions of this newsletter.

Back to the conversation; Nigerians are not buying phones, and the ripple effect is bigger than just the economics of the smartphone
market.

Rising prices and falling demands

Inside Computer Village; Africa’s largest ICT market, Kassim (not real
name) is a trader who deals in fairly used phones. He tells me prices have risen as much as 50% in less than three months, and patronage is falling concurrently.

“In April, I sold a secondhand iPhone X for ₦105,000 and now it is ₦205,000. The iPhone XS Max that cost ₦235,000 is now ₦285,000. And people are always haggling these prices; it’s frustrating,’’ he said, echoing the sentiment of other merchants.

Before the pandemic, the Nigerian economy was already weakened by a crash in oil prices, and a devaluation of the naira against the dollar.

Shipping costs have also increased drastically. In March, importing 1kg smartphones and accessories to Nigeria cost $5.5 to $6 at an exchange rate of ₦380 to a dollar. Now, traders in Computer Village say the same quantity costs between $9.5 to $10, exchanging for
₦440 – ₦450, and depending on the shipping company.

All these added costs are causing a price fluctuation and worsening patronage of fairly used phones; a staple for smartphone users in the country.

Things are not exactly rosy for cheaper, brand new phones.

In Nigeria, and Africa,
Transsion has democratized smartphone access with its pocket-friendly brands and has a massive market share.

Despite the pandemic, the company has continued launching smartphones but the outlook is not so great.

Shipping hassles are multiplied for Transsion as sources close to the matter detail tedious processes and often hefty custom duties. The company will also be actively taking losses, considering that most dealers had already pre-ordered goods at the old exchange rates and pre-COVID conditions.

Most importantly, all these added costs are threatening its affordability value proposition.

The recommended retail price (RRP) for its Tecno Camon 15 is ₦65,000, and Tecno Spark 5 is ₦49,000.

Both newly launched, these phones will normally cost ₦50,000 and ₦39,000 respectively, but when the marketers add their margins, prices skyrocket above their RRPs.

Most phone sellers agree with Kassim’s 50% reduction in sales; people have stopped buying phones.

The bigger picture

There are many implications of this decline.

With 189 million subscribers, Nigeria is currently Africa’s largest mobile market, and most of this growth has been fueled largely by affordable smartphones.

GSMA had earlier projected that mobile phone penetration in Africa will be at
66% by 2025, this growth will most likely stall. Beyond Nigeria’s massive population, this pricing problem is a continental one.

Also, as Africa is mobile-first, most innovations have taken off on mobile, and inaccessibility to affordable smartphones will generally slow the rate of digital adoption.

What to do?

An executive and industry expert says the quickest fix to this problem is cutting down on the production costs of smartphones and, hence, their quality.

“This is a two-way street. OEMs can either cut down on quality and let customers know, or still do the same and not tell them at all. But it is a very thin line to walk because the brand’s credibility is at stake and when things are back to whatever version of normal, most consumers will jump ship when they are able to afford
better.”

This expert goes on to say that this is not an option most companies are willing to explore, or admit to, and that smartphone manufacturers will most likely ride out this storm.

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