Sales of electronic goods drops to seven-year low due to currency crunch – A recent report by a worldwide market research organisation predicts that as a result of the rising cost of foreign exchange, retail volumes of electronic devices in Nigeria would reach their lowest level in seven years.
According to Euromonitor International, annual declines in formal market volumes of electronics are possible from 20.3% in 2022 to 19.8% in 2023. However, a growth of 25.6% is anticipated, bringing its value to N1.57 trillion.
Overall unit sales of consumer gadgets are predicted to decrease in 2023, painting a grim picture. It claimed, “A new government took office into a stagnant economy, record debt, and falling oil output as a result of ageing infrastructure.”
To stabilise the economy, the government reportedly removed trading limits on the official currency market, which has resulted in a record low for the naira.
Most consumer electronics are imported, thus this drastic depreciation of the currency is likely to have an adverse effect on the industry as a whole. Consumers’ purchasing power is being further eroded as a result of rising inflation, the report notes.
The unification process will be aided by the integration of wholesale and retail alternative foreign exchange markets.
Nigeria, the largest economy in Africa, relies heavily on imports of consumer electronics. A few examples are air conditioners, dishwashers, refrigerators, washing machines, dryers, microwave ovens, and computers/laptops/smartphones/TVs/virtual cameras/etc.
In-home consumer electronics are predicted to decrease to 1.50 million from 1.53 million, in-car entertainment is predicted to decrease to 26,800 from 26,900, and computers and peripherals are predicted to increase to 186,000 from 185,200, according to the Euromonitor report.
The capacity to raise pricing has been a problem for the sector. Ayorinde Akinloye, an investor relations analyst at Seplat Energy Plc, stated, “If you look at the absolute growth in terms of price multiplied by quality, it would look as if it is growing, but when you look at the actual volumes, it is reducing because people are not buying.”
The conflict between Russia and Ukraine began in February of this year, and it exacerbated the dollar liquidity issue in Nigeria before the Central Bank of Nigeria collapsed all segments of the FX market into the Investors & Exporters window in June.
On Tuesday, the official market price of a dollar was 742 Nigerian naira, a depreciation from the previous day’s rate of 416.52 naira to $1. The dollar was priced at N930/$1 on the parallel market, also known as the black market, compared to N575/$1 on February 28, 2022.
A recent poll by the Manufacturers Association of Nigeria found that manufacturing in Nigeria is still struggling as a result of a lack of foreign exchange and the continued devaluation of the naira.
In a statement, the group noted that only 14.7% of manufacturers polled reported an increase in the speed with which they were able to access foreign currency in Q2; 66.0% reported the opposite, and 19.3% were unsure.
It went on to say that factories are losing money and using less of their capacity because importing vital input that isn’t made locally has become a nightmare due to the persistent forex scarcity and constant depreciation of the naira.
The cost of life for Nigerians has soared due to both the FX reform and the withdrawal of the petrol subsidy in May, which caused the price of petrol to triple from N184 to N617.
According to the NBS, inflation hit a near 18-year high of 24.08 percent in July, up from the previous month’s figure of 22.41 percent.
Inflation, the World Bank reported in June, is responsible for four million additional poor Nigerians in the first five months of this year.
Gbolahan Ologunro, portfolio manager at FBNQuest, noted that consumers are under pressure from their disposable income while manufacturers are battling with FX difficulties.
“The high cost of living has negatively impacted consumers’ disposable incomes, making them ration their incomes towards nondurable goods or basic necessities,” he said.
Euromonitor analysts claim that when customers’ purchasing power declines, they are seeking for ways to get more use out of their electronics by keeping them for longer.
“Televisions are a prime example of this. “Consumers are also looking to save money by purchasing pre-owned devices, especially mobile phones and to some extent, computers,” they continued.
The company claims that the growing availability of interest-free credit instruments like ‘Buy Now Pay Later’ is one new trend that is increasing sales volume.
“Some examples are Carbon Zero and Easybuy. As a result of these zero-interest credit options, more people are able to buy expensive goods like computers.
China, India, Germany, Turkey, and Sweden are among the top suppliers of electrical and electronic goods to Nigeria, the most populous country in Africa. According to the International Trade Centre, the value of imports of electrical and electronic equipment into the country increased to $3.45 billion in 2018 from $3.09 million in 2021.
The electrical and electronics industry had its growth slow to 1.06 percent in the second quarter of 2023, down from 1.80 percent in the same time a year earlier, according to data from the NBS.
Emmanuel Amaife, an official at Alaba International Association’s (Electronics Division), has stated that consumer spending has decreased alongside the general economic downturn. We are experiencing the same difficulties as individuals who sell electronics at superstores.
According to a new analysis by NielsenIQ, a worldwide consumer intelligence firm, in the coming year, Nigerian consumers will place an emphasis on financial security, personal growth, and physical and mental well-being.
New order growth and overall company activity slowed in the second half of the year due to “rising price pressures,” the report added.
According to Euromonitor, consumer electronics are not projected to perform well this year, but they have a brighter future ahead of them.
In order to reestablish economic stability over the projection period, the new administration has adopted several unpopular but vital economic changes, such as foreign exchange management. It is hoped that this would lead to healthy volume growth in consumer electronics.
Wearables, True Wireless earbuds, and wireless speakers were predicted to do particularly well. On the other hand, “laptops will also see healthy volume growth.”
Smartphones and smart televisions, in particular, will benefit from rising internet adoption and 5G connectivity with faster internet speed. Last but not least, the company said that “continuing population growth should also support increased volume sales.”