Why Dubai rules Nigeria's computer market

More than 3,000 exhibitors and 120,000 visitors made this year's edition of Gitex in Dubai the biggest ICT event in the Middle East and purportedly the third-largest in the world. For Nigeria and other West African ICT markets, Gitex offered some insight into why computers imported directly from Dubai continue to dominate locally assembled PCs.

Whether Nigeria's fledgling computer hardware manufacturing industry can survive in the long term is a topic that continues to split the industry. The local vendors struggling to run PC assembly lines are convinced they can keep the industry growing, but some analysts think grey-market trading and competitive hardware imports will ultimately wipe out the local industry or, at best, make it a breathing corpse.

"In terms of pricing, it would be difficult to match what these other [Arab] companies are bringing into the market," said Gboyega Ojuri, CEO of Geniac computer brand, a new entrant on the market with an assembly line in Lagos. "A local assembler has heavy overheads, including staff salaries, installation of heavy equipment in the assembly line, provisioning of alternative power source and other challenges that those that are just importing from Dubai direct to sell do not face."

An under-infrastructure economy and a low-skill labor market keep costs high for Nigerian vendors, and that cost is reflected in the unit price of a PC. Meanwhile, importing brain boxes straight from Dubai and selling directly to end-users make owning computers from Qlink or Mercury cheaper than any from the local assembly lines.

"The factors of production are against any local manufacturer of PCs. Take irregular power supply and the cost of maintaining power-generating sets, the manpower and cost of locally transporting the goods. By the time you add the cost of producing one unit of PC locally to what it would take to buy and ship in the same PC from Taiwan or Dubai, the unit price of one locally produced PC would buy about two imported PCs," explained Davies Mirilla, former CEO of Unitec Computers, the now defunct company that pioneered local PC manufacturing in 2003.

Nigeria is working on creating an IT manufacturers' haven to gradually move from an IT consuming market to a manufacturing one. A policy thrust at creating an economic free zone (EPZ), low duties and a more friendly tax regime to usher in a burgeoning IT manufacturing industry is in place, but implementation has been slow, allowing for parallel PC imports to flourish.

Meanwhile, the United Arab Emirates' working EPZ, almost zero custom duty, well-supported infrastructure and the government's promotion of Dubai as a meeting point for ideas and industries has made the territory a strategic warehouse from which vendors and their major partners ship products and services to Africa and the rest of the Arab world.

Along with refurbished systems from the E.U. and U.S., and clone systems assembled from cheap imported parts, these imports leave little room for respite for local manufacturers like Beta, Brian, Omatek and Zinox.

The IDG News Service is a Network World affiliate.