The slump in global oil prices has ensured the Nigerian naira has plummeted against the dollar to a 43 year low forcing the Central Bank of Nigeria (CBN) to halt weekly dollar sales due to increased scarcity – Andrew Fassnidge.
This has begun to feed into how companies in Nigeria are able to do business which is often denominated in US dollars. One such example is mobile social network Eskimi who have introduced Naira rates for Eskimi social platform due to dollar scarcity in the market.
“We see that clients struggle to obtain dollar currency due to forex limitations and new CBN policy. We introduced our new rate card to all clients and they can choose to pay in Naira”, Vytas Paukstys, Eskimi CEO explained. All Eskimi clients will be able to pay in Naira currency and can request the new rate card as the dollar issue continues.
The scarcity of foreign exchange is already having a big effect as the prices of some basic imported goods in the country are inflating. At the electronic markets, phone such as BlackBerry, Infinix, Samsung, Nokia, and LG and their accessories went up sharply as some distributors increased the prices by almost 5 per cent when the naira crashed.
Should this continue, tech importers in Nigeria will really begin to test price elasticity of both their customers and business models for dollar denominated products. This offers an opportunity for Nigerian home grown products and services to take advantage, grow domestically, export and get some dollars, sterling and euros.
Ireland faced similar problems over 40 years ago, huge unemployment, a net importer of goods, balance of payments problems and no oil to speak of. Through tax breaks, incentives and good policy, Ireland is now a high tech exporter and Dublin is where Google, Microsoft, Facebook and Intel all call home in Europe. More importantly the local tech ecosystem has flourished and created jobs.
After a savage recent recession in which Ireland had to obtain an IMF bailout, exports are now at an all time high and growth has surged to 6%. Could Nigeria not offer tax breaks and incentives for tech companies as a first step to change this trend? Lekki free trade zone is an example where this has begun in manufacturing.
While there are obviously big differences between the two, it is not impossible for Nigeria to aim high. This is the time when Nigerian tech leaders should rise up, draw a line in the sand and say enough is enough, we are too reliant on imports strangling business so lets do something collectively as an industry about it.
It is also time to lay out the red carpet for technology companies and investors to help build the ecosystem further and become a hub for West Africa. Kenya’s Silicon Savannah and Rwanda’s ease of doing business are examples Nigeria can learn from and are paying dividends in each country.
Mobile and technology is a massive enabler, Nigeria needs to build further on the great initiatives such as iROKO (who just raised $19M), Andela and CcHub and aim not just to sell in Nigeria but to become one of the biggest exporters in Africa, selling tech to the big boys in Dublin over a pint of Guinness, Ireland’s other great export.
Appsafrica Advisory is a private consultancy service providing expert insight helping to build strategy, business development, implementation and support operations for companies entering or expanding in Sub-Saharan Africa.