Consumers switch to used gadgets as FX crisis worsens tech adoption
06 March 2024 |
4:00 am
The protracted foreign exchange (FX) crisis has found expression in computer hardware and software, cutting consumer electronics importation by as much as 45 per cent.
• Importation of devices drops by 45%, says player
• Companies opt for fairly-used laptops as prices of new units rise by 300%
• Importers express frustrations, lament banks’ indifference to their pains
The protracted foreign exchange (FX) crisis has found expression in computer hardware and software, cutting consumer electronics importation by as much as 45 per cent.
Though there have been pockets of imports in the last four months, The Guardian learnt that the last time a container of computer and related devices were imported into the country was the last quarter of 2022.
A major importer and vendor at the Computer Village, Lagos, with offices spread across Nigeria, said it has been tough to import products, largely because of FX scarcity.
According to the major player, importation has reduced by as much as 45 per cent. He said players, who could fund sole importation previously, now must join forces with others.
The source, who preferred anonymity, said vendors are seriously battling a price crisis, which he said has negatively impacted importation.
With the country’s inflation at close to 30-year in February, according to the National Bureau of Statistics (NBS), major sectors are battling to survive. Prices of some essential commodities have gone up by over 200 per cent since last year.
Consequently, people rather spend their lean incomes on essential consumption than on luxury items such as computers, smartphones and electronics.
While DataReportal puts smartphone penetration at about 18.9 per cent of the estimated 217 million population of Nigeria, prices have skyrocketed, making Nigerians either settle for fairly-used devices or feature phones. Airtel at a recent event said about 58 million Nigerians use feature phones.
Before the current crisis, the International Trade Centre (ITC) said $1.09 billion was spent on software acquisition and importation of computer services into Nigeria in five years.
Software and computer services worth $123.89 million were imported in 2016, the figure jumped to $216.57 million in 2017, $257.55 million in 2018 and dipped to $159.28 million in 2019, before skyrocketing to $336.43 million in 2020.
Last year, a report by Euromonitor International predicted that consumer electronics would suffer a seven-year low in Nigeria due to FX scarcity.
Consumer electronics are largely imported into Nigeria, Africa’s biggest economy. They include computers, laptops, smartphones, TVs, virtual cameras, air conditioners, dishwashers, refrigerators, washing machines, dryers and microwave ovens.
Euromonitor said the picture was to be bleak for consumer electronics in 2023 and going forward, with overall volume sales expected to fall, saying the government inherited a sluggish economy, record debt, and shrinking oil output, due to creaking infrastructure.
The report said that the volume of electronics in the formal market could fall for the fifth straight year to 19.8 million units in 2023 from 20.3 million in 2022. Its value was, however, expected to increase by 25.6 per cent (on the back of low naira value) to N1.57 trillion.
The Euromonitor report showed that portable consumer electronics, which contributed the largest share, would fall to 18.1 million from 18.6 million, in-home consumer electronics would reduce to 1.5 million from 1.53 million, in-car entertainment is projected to decline to 26,800 from 26,900 but computers and peripherals to stay at 186,000.
There has been a sharp rise in electronics prices. A 65-inch smart Hisense TV, which was sold for N700000 in December has increased to about N1,050,000. Double-door refrigerators have also moved from N800,000 to about N2.05 million within a month.
Computer and phone devices have seen similar rates of increase in the past few months. Corroborating Euromonitor’s claims, the President of the Computer and Allied Product Dealers Association of Nigeria (CAPDAN), Dr Ahmed Ojikutu, said the FX crisis has reached the rooftop for major players in Computer Village,
Ojikutu, who said prices of computers have increased by as much as 300 per cent, said because of this hike, some corporate companies are fast settling for used computers, among other things.
“For instance, a laptop previously sold for N500,000 has now gone above N1 million. In that regard, that has not been favourable to the business community. You know the economic principle: the higher the price, the lower the quantity demanded. The level of order has been badly affected to the extent that people are now resulting in buying used products, which is not good for the ecosystem. Nigerians need to use modern systems because of the digital transformation agenda we are enthroning. The ICT sector is not a luxury anymore, it has become a necessity, an enabler for so many things,” he stated.
The CAPDAN president said companies are forced to cut their budgets, “they have approval now to buy used computers. At least, two companies have approached us on that. The issue is how many companies can afford to buy Core i5, the basic one, which was sold for N320,000 but bow offered for N700,000. The Pavilion which was sold for N460,000 in January, is now sold for N1.05. A desktop that was sold for N520,000 now sells above N1 million. Core i4 is above N1.5 million.” Ojikutu, who called for urgent intervention, said smartphones that were sold for cheaper prices then, are now priced above the rooftop.
According to him, the Federal Government should, as a matter of urgency, stabilise the FX market. He said the implication would be weighty on the sector and the economy if nothing is done to stem the tide.
He said if a market lands a system for N500,000, later sold for N520,000, “the moment you sell and there is a profit of N20,000. If you are to buy the same product back, you will be buying at N600,000. Meaning, you have lost N80,000. Your profit and capital sunk because of the devaluation of the naira. This has affected the traders badly.”
Ojikutu disclosed the jump in price affected all the sub-sectors of the industry including software. He said what is still saving the software sub-sector is because they are not entirely relying on foreign knowledge, but the locals, who are developing products.
“We need to develop the knowledge economy by birthing enough programmers, software engineers, and coders. This will help the local economy and reduce capital flights and foreign expertise. We just need to look inward, same for the hardware sub-sector. We cannot be paying for licenses in dollars yearly or monthly,” he added.
The Chairman and Chief Executive Officer, Machito Ebony and Sons Limited, Ikeja, Alaba Davis, said because of the economic situation, the firm delved into sale of used computers, first grades, brought in from UK and American markets used for about seven months to one year, stressing that most firms are not buying new products.
Davis said the forex crisis in the country has greatly impacted sales, where the dollar rose to about N1,800, while the pound sterling moved higher to about N2,300, limiting imports.
While stressing the need to change the consuming nation tag culture of Nigeria, he said virtually everything done in Nigeria is through the dollar, making it for naira to widen. He said the challenge would linger for a long time because Nigeria cannot produce computers now. After all, no electricity to do that, describing the country as a generator economy.
Davis said before the market can stabilize, it could take another six to 12 months, saying: “The dollar-naira exchange has done more damage. Some of us bought goods when they were expensive. We even bought cash, buying dollars at a higher rate. Those who can enjoy it now are some, who bought on credit because they will be paying at a lower rate. If government can help stabilize the naira for at least the next three months, things will take shape, prices will come down because, we will have sold those we bought at higher rates and started bringing in at a reduced price, and by ending of the year into 2025, things would have been a bit better.”
While not disputing a significant drop in the importation, the Machito Ebony and Sons Limited boss, said: “I did three imports this year and based on what we do, it could be different from others. We have dealers we buy things from in Nigeria. He imports and we just go and clear. They call it ‘back-to-back’. But there is another one, you can buy directly from wherever you get a good deal. The problem is that shipment is very expensive now. The two importations I did were from the UK. I was charged £5 per kilo and other handling charges. So, if you are carrying goods of about 1000Kg, calculate the charges and then we are buying pounds for about N2,200. It makes everything go up.”
He called on the government to improve on security, especially around crude oil, stressing that most dollars come from that angle. He said Nigeria should secure the oil bases just like Saudi Arabia.
“While we pump about two million barrels per day, Saudi Arabia pumps over nine million barrels a day and they ensure they are not stolen. If we can secure that area, more dollars would come in,” he stated.
He said SMEs should also be helped, saying the players need single-digit loans, stressing that most times credits come from manufacturers and distributors, and they pay more when the economy is not stable.
From his perspective, CAPDAN Public Relations Officer, Ademola Olaifa, said the importation of goods has been affected seriously by the depreciation of naira.
Olaifa said when we make an order at N1500/$ this week by next week that you planned to get the product, they will tell you it is now N1800/$, “it is that bad. We have faced these crises in the last four to six months. Not producing anything in Nigeria has become a major threat. To make matters worse, the banks are not giving out loans, if they give; it is usually at cutthroat. Government should shut down the black market or merge it with officials. We need a stable forex regime.”
Olaifa posited that the lingering forex scarcity and continuous depreciation of the Naira have left manufacturers bleeding and limited their capacity utilisation since the importation of non-locally produced critical input has become a nightmare.
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