Though Nigeria’s market is seemingly large, Samsung chief says it's fraught with business challenges not attractive for manufacturing.
Chief Executive Officer of Samsung Electronics Africa Sung Yoon disclosed at a recent media parley that the smartphone maker would not set up a manufacturing plant in Nigeria soon.
This is because of the small number of new phone buyers in the country and absence of the necessary economic environment needed for the factory to make attractive profit.
Though Nigeria reportedly had a 30 percent smartphone market penetration (54 million smartphone units) in 2016, the country has a strong second-hand (tokunbo) buying culture that would endanger sales of new Samsung devices should it manufacture in the country. This makes the idea of setting up a manufacturing plant not feasible.
He argued that in South Africa which had 95 percent penetration (53 million smartphones), the used phone buying trend isn’t as much as in Nigeria and is therefore more attractive to the company to set up there.
He also pointed out that the comparatively low adoption of high speed internet is a barrier.
“South Africa has almost 95 percent of its mobile market purely on smartphones and 4G/LTE has deep roots in the market unlike in Nigeria where in the overall market feature phones still takes a good percentage and 4GLTE is not widely accessible,” Yoon said in a Vanguard report.
Economic cause
Of course this is caused by the infrastructure challenge internet service providers in Nigeria face. They have to source expensive fuel or alternative energy sources to power their masts, build fibre optic cables, navigate unfriendly policies and business environments, etc.
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The high cost of operation is transferred to subscribers and this makes internet costs high in this part of the world. At $80 (N24,000) for average broadband package, that is double of almost double of $50 (N18,000) minimum wage, Nigeria suffers one of the costliests data packages even in Africa.
With 70 percent of its population in the lower class and most living below the $1 per day poverty line, it is impossible for this market to amply purchase new smartphones and data packages costing more than their monthly earnings.
Asides the challenges with purchasing power of the market, the country itself lacks many of the 400 plus components required to put together a mobile phone.
“There are certain factors taken into consideration before building a manufacturing plant. We have to consider market size, Return on Investment and environment among others,” Yoon pointed out. But he added that Nigeria has the potential to quickly overturn South Africa. Then setting up in Nigeria would have to be something the company would “have to consider in the future.”
Samsung Electronics Limited was founded in 1969 in South Korea. The company is the world’s largest manufacturer of mobile phones and smart phones. Samsung also manufactures components for its competitors such as Apple.