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Economy

Currency Crisis Affects Nigeria’s Electronics Market

Weak purchasing power and consumer demand are dampening sales in Nigeria’s electronics market, it was learnt through interactions with sales representatives of some major electronics stores.

Dealers in electronics or household appliances like air conditioners, dishwashers, refrigerators, washing machines, dryers, microwave ovens and so on are experiencing low patronage, a weekend visit to some electronic stores in Lagos showed.

Lack of improvement in consumer income has made consumers focus on food and food-related items or basic items while shifting interest away from secondary or disposable items like electronics, said Johnson Chukwu, CEO, Cowry Asset Management Limited.

“Aggregate demand and consumption have weakened because over time consumers’ income has been eroded by inflation and devaluation of the exchange rate which has made it difficult for them to afford the volume of goods and services they used to afford before,” Chukwu said.

This is despite a downward adjustment of prices after the 2016 foreign exchange crunch that forced a doubling of prices because most of the products are imported.

“We have adjusted our prices by just, say, 5 percent after the dollar crisis. For example, the price of a Panasonic fan was around N17,000-N18,000 in 2015. It rose to N30,000 in 2016, and now it is N24,000. But still, people are not buying,” said Blessing Obi, a sales representative at a Panasonic store in Ikeja, Lagos.

The foreign exchange crisis of 2015-2016 affected the cost of imported spare parts or finished products of electronics, causing a spike in the cost of production which ultimately fed into higher retail prices.

“The level of patronage is not like before. There is no money,” Obi said.

Nigeria entered its worst recession in 25 years in 2016. Even though the country has exited the recession, its after-effects linger, reflected in the Brookings Institution’s ranking of the country as the new poverty capital of the world in a 2018 report, with 87 million citizens in extreme poverty.

The country’s per capita income has been on a decline since 2014. Per capita income in Nigeria declined to $1,994 in 2017, from $3,268 in 2014, according to the International Monetary Fund (IMF).

Electronics dealers at Alaba International Market, West Africa’s largest electronics market located in Ojo, Lagos, are also feeling the heat of low patronage.

“What is happening to them (the big stores) is also happening to us. The purchasing power of people has dropped and the economy is not doing well,” Emmanuel Amaife, special assistant to the executive chairman, Alaba International Association (Electronics Division), told us.

“There are also other factors like government policies which have not been favourable to the business community, such as multiple taxation, and poor road network leading in and out of the environment. So sales have not been friendly to us,” Amaife said.

Growth in the electrical and electronics sector declined to 3.75 percent in 2018, from 6.47 percent in 2014, data from the National Bureau of Statistics (NBS) show.

The revenue of PZ Cussons Nigeria plc, a publicly listed Nigerian manufacturer and distributor of consumer products that covers home, personal care and electrical, reported a 12.9 percent decline year-on-year  to N55.1 billion in the first nine months of 2018/2019, from N63.3 billion in the corresponding period of the previous year.

Although the revenue for the electronics segment (Haier Thermocool) was not made known in its financials, a research report by Lagos-based CSL Stockbrokers said the segment remained weak as consumers continued to ration income in favour of essentials.

“The sustained weakness in consumer purchasing power has limited the demand for electronics. To put this in perspective, average inflation rate between January and June 2018 was 13.2 percent while NBS reported that disposable income within that period grew by about 10 percent which ultimately implies prices grew faster than income,” said Ayorinde Akinloye, a consumer goods analyst at Lagos-based CSL Stockbrokers.

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