Nigeria’s small market size holds back global equipment manufacturers from setting up factories
January 23, 20181.7K views0 comments
The apparent small size of Nigeria’s market for original manufactured new hardware goods such as electronics and cars is holding back many global producers of these items from establishing plants in Nigeria. The country’s huge population, often touted as a huge market, is known to have 90 percent of the people patronising mainly used or second hand windows for these categories of products.
For example, Sung Yoon, the president and chief executive officer of Samsung Electronics West Africa (SEWA) disclosed recently that Samsung could not build a plant in the country because of this small size for brand new electronics.
He said though Samsung was the leading consumer electronics company in the country, its market size is not large when compared with that of South Africa, where it has a plant.
Yoon said the company’s smartphones market size in South Africa is about 80 percent, but that this is significantly lower in Nigeria.
- Pains, economic losses from back and forth Naira policy
- Global financial stocks lose $465bn as markets react to SVB collapse
- Bourse sustains negative trend with market capitalisation down N127bn
- FCMB raises N20.686bn from debt market to shore up capital
- Howo trucks market upbeat as CFAO grabs dealership pie
He listed other issues affecting the establishment of a manufacturing plant in the country to include low infrastructure, low Return on Investment (ROI) and gray market activities.
”We are trying to be a local company here. Building factory depends on the return on investment and efficiency of the economy. There are lots of gray products coming into the country and this will affect the return on investment.”
Market analysts say Nigeria with an overwhelmingly large population would have been a better place for manufacturers in electronics, cars and physical products to set up factories, but per capita income and poverty rate have pushed the so-called giant of Africa down in major indices.
“Where is the money to buy new phones? An average smartphone costs far more than the country’s minimum wage, so it would be difficult for manufacturers to set up plants to produce what the people can’t afford,” an analyst said, adding that people should see the business side in their criticisms of companies not setting factories in Nigeria.
“Even if the market size is there, what of the cost of running the plants since power is in grave short supply in the country,” he added.
The Samsung CEO said manufacturing a mobile phone requires about 400 different components, which were not sourced in Nigeria. He said the company had manufacturing plants in Vietnam, China, South Africa and South Korea hence, having one in Nigeria was a thing of the future.
Read also: S&P sees uncertain outlook for global Sukuk market in 2018 as Nigeria relishes success in first attempt
Yoon, who said on a yearly basis, the firm spent over $16 billion globally on research and development, noted that despite the challenges in the Nigerian market, the company is geared towards stimulating a higher level of operational efficiency with the overarching objective of providing customers with the highest quality products, sales, and services.
Samsung Electronics Co., Ltd. is a South Korean multinational electronics company headquartered in Suwon, South Korea. Through extremely complicated ownership structure with some circular ownership, it is the flagship company of the Samsung Group, accounting for 70 percent of the group’s revenue in 2012.
It has assembly plants and sales networks in 80 countries and employs around 308,745 people. It is the world’s second-largest information technology company by revenue. As of October 2017, Samsung Electronics’ market cap stood at $372.0 billion.
It has long been a major manufacturer of electronic components such as lithium-ion batteries, semiconductors, chips, flash memory and hard drive devices for clients such as Apple, Sony, HTC, and Nokia.
It is the world’s largest manufacturer of mobile phones and smartphones fueled by the popularity of its Samsung Galaxy line of devices