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Taxes raise Nigeria smartphone prices by 30%

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By Abiodun Okunloye

Most consumers in SSA cannot afford to buy devices in the 5G or 4G markets.

According to the Global System for Mobile Telecommunication Association (GSMA) report titled “The Mobile Economy Sub-Saharan Africa (2023),” it was revealed that taxation, along with other duty levies are having a significant impact on the adoption of smartphones in Nigeria and sub-Saharan Africa(SSA). In the country and across Africa, the GSMA estimates that taxes and duties add another 10%-30% to the price of a smartphone. As per the report, this has been impacting the costs of devices, rendering them unaffordable for most individuals in the area.

The body also found that manufacturing costs remained unsustainable for low price points in the region, suggesting that this wasn’t the only significant contributor to high costs. According to GSMA, most consumers in SSA cannot afford to buy devices in the current 5G or 4G markets, making it difficult for manufacturers in the region to expand their market share. Devices in the 5G and 4G markets are still too expensive for most people, the report said, so manufacturers there face a challenge in trying to increase their market.

Manufacturing costs, taxes and other levies affect smartphone prices.

Aside from the cost of making the product, other costs like taxes and fees have a direct effect on the final price. According to research conducted by GSMA Intelligence, depending on the nation, taxation and duty fees can add an additional cost to the price of a smartphone. In addition, the report noted that the price of smartphones remained a primary obstacle to the utilisation of mobile Internet in the region, resulting in a slow penetration of digital markets. About 60% of the African population does not use mobile Internet, even though they are in coverage areas.

However, the average selling price of smartphones has decreased significantly in recent years, which has been noted by the telcos association as evidence that operators and manufacturers are working to address the issue by reducing device costs. Specifically, it attributed this to the increasing number of inexpensive devices under $100 made by Chinese manufacturers like Tecno, Itel, and Infinix. Additionally, it stated that operators are increasingly collaborating with device manufacturers to control costs and provide financing options for customers.

Exemptions on tax ought to be provided on low-cost devices.

Regarding how regional governments can make mobile phone service more affordable, the GSMA stated that governments ought to re-evaluate these additional fees by providing tax exemptions on low-cost devices, similar to what is available in Rwanda. This would allow governments to make mobile phone services more accessible to their citizens. In addition to lowering the overall cost as well as encouraging an individual’s capacity to pay, companies also need to make sure that devices satisfy the life needs of users while promoting users’ willingness to pay for services.

Furthermore, the association emphasised that while manufacturing, inbound and outbound chains of supply, and company and manufacturer pricing decisions all play a role in the price of smartphones, ultimately, it is customer demand that determines people’s ability to acquire devices. According to the report, the demand sides drivers include things like people’s willingness to pay for the device and their estimation of the device’s value to them, as well as their level of knowledge about it, social norms, and their awareness of the full cost.

Over 804,000 new devices were added to the MTN network.

Lastly, Statista estimates that only around 10 to 20 percent of the population of Nigeria possess a smartphone. Also, according to an estimate provided by Alliance for Affordable Internet, approximately 44 percent of people in Nigeria have access to smartphones. However, MTN stated it added over 804,000 new devices to its network during the quarter, bringing the total number of smartphones on its network up to 52.7%, as reported in the company’s unaudited results for the quarter ending March 31, 2023.

Related Link

GSMA: Website

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