Device Financing Key As Nigerians Buy Less Smartphones Due To Economic Woes

The Nigerian smartphone market is experiencing a significant downturn, primarily driven by economic challenges and rising prices.

As inflation soars and disposable income dwindles, many Nigerians are finding it increasingly difficult to afford new smartphones. However, device financing is emerging as a viable option, as a result, amid the current decline in smartphone demand.

According to Canalys, a leading technology market analyst firm, smartphone shipments into Nigeria grew by a mere 5% in the second quarter of 2024. This marked a sharp decline from the robust double-digit growth witnessed in previous quarters.

The persistent economic headwinds—including soaring inflation, currency volatility, and sluggish GDP growth—have significantly eroded the purchasing power of Nigerian consumers, forcing them to prioritise essential goods and services over discretionary purchases like smartphones.

“We import our phones, and higher dollar prices mean higher prices,” said Ifeanyi Akubue, president of the Phone and Allied Product Dealers Association of Nigeria (PAPDAN).

An emerging alternative

To mitigate the financial impact of purchasing smartphones, more Nigerians are turning to device financing schemes. These schemes allow individuals to acquire their desired device by making an initial deposit and spreading the remaining balance over a period of time. Electronic commerce platforms, gadgets platforms, and banks have introduced such financing options, which are gradually gaining popularity.

The GSMA predicts that smartphone connections in Nigeria will hit 154 million by 2025, fueled in part by these financing schemes. While the exact number of smartphone users in Nigeria currently is tricky to pin down, available indicators suggest a strong growth outlook for the local smartphone market.

The rising cost of living has weakened the purchasing power of many Nigerians, increasing demand for entry-level phones, as noted by Manish Pravinkumar, senior consultant for Middle East and Africa at Canalys. This shift towards budget-friendly options has also been observed by Canalys, which found that vendors are striving to meet this market demand.

Pravinkumar argued that device financing and local manufacturing are crucial to ensure more people get access to smartphones.

“In sub-Saharan Africa, device financing is emerging as a critical driver, making smartphones more accessible to the average consumer… Over the long term, local manufacturing will be key to reducing costs. While countries like Egypt are taking the lead, other regions are expected to follow suit. Addressing broader challenges such as consumers’ willingness to pay, digital literacy, high taxation on devices, and currency fluctuations will be essential for unlocking the full potential of smartphone adoption across Africa,” he stated.

However, affordability remains a key barrier to smartphone adoption in Nigeria and other parts of Africa. The average selling price of smartphones has decreased in recent years due to the influx of sub-USD 100.00 devices from Chinese brands and the growing popularity of KaiOS-powered smart feature phones. Despite this, many consumers are still unable to afford the upfront cost of purchasing a device.

Smartphone financing schemes offer a solution to this challenge by allowing consumers to spread the cost of a device over time. In Nigeria, solutions such as Easybuy, CDCare, Jumia Flex, Slot Nigeria, Device Finance Scheme offered by Access Bank, M-KOPA (which has reported financing millions of smartphones in African markets since 2020) and several other buy-now-pay-later players, typically require an initial deposit and offer flexible repayment plans over a specified period.

Smartphone Slump

Despite the overall slowdown, Nigeria remains the largest smartphone market in Africa. However, the country’s growth rate has been significantly outpaced by other regions on the continent. North African markets, such as Algeria and Egypt, have experienced substantial growth, while Sub-Saharan Africa has seen mixed results.

Canalys emphasized that the rising living costs are driving consumers towards budget-friendly options, and phone vendors are striving to meet this market demand. “Vendors leveraged the cost advantages carried over into the first half of the year to drive volume, resulting in an impressive 42 percent growth for sub $100, and 33 percent of the shipment was attributed to the price band,” said Pravinkumar in the company’s Q2 assessment.

Transsion, the dominant player in the Nigerian smartphone market with its Tecno, Infinix and Itel brands, has experienced a slowdown in growth due to the overall market contraction. While the company still holds a commanding 51% market share, its growth rate has dipped to just 1%. This decline reflects the broader challenges facing the Nigerian smartphone market.

Samsung, once a major player in the country, has seen its shipments plummet by 25%. The company’s focus on high-end models has made it less competitive in the current market environment, where consumers are increasingly seeking more affordable options.

In contrast, Xiaomi has bucked the trend with a 45% surge in shipments, reaching a record-high 12% regional market share in Q2. The company’s aggressive sales tactics, on-the-ground investments, and focus on Nigeria and Egypt have contributed to its success.

Other vendors, such as Realme and OPPO, have also recorded impressive growth rates, driven by their ability to offer competitive pricing and feature-rich devices. However, the growing penetration of smartphones has not displaced feature phones, which still account for a substantial 52% market share.