16.08.17

Local Report: Future looks bright for Nigeria’s home technology industry

busy streets in lagos, nigeria in Africa
Lagos, Nigeria

Once hindered by years of economic mismanagement, the outlook for Nigeria was looking positive before it slipped into a recession for the first time in over 20 years in 2016. With the country slowly getting back on track for recovery and GDP forecast to grow at 2.2%, those working in the home technology industry are doing they every can to adapt and thrive.

Labels like ‘middle-income,’ ‘mixed’ and ‘emerging’ may often crop up in descriptions of the economy of Nigeria, home to 184 million inhabitants and 47% of West Africa’s population. The country may have had a somewhat unpredictable economic landscape since the fall in oil prices in mid-2014, but demand for technology in the home is evidently still growing, alongside its emerging communications and entertainment industries.

The largest economy in Africa is commonly associated with its oil output, yet its recent decline due to over-reliance on funds from it (coupled with power instability and lack of government legislation) means recent times have been challenging for local members of the CEDIA community – yet for the most part, business is back on track.

“Indeed Nigeria is a relatively more established economy, especially in the sub-Saharan region. This can be ascribed to its abundant oil and gas reserves. However, due to the recent decline in the global demand for oil and gas products, the economy has also suffered a decline in its robustness,” says Kehinde Awoyinfa, head of business development at Woodstock Electronics, one of a small number of custom installation companies in Nigeria.

He continues, “This has posed a huge challenge in our business as system integrators, we have however been able to remain active in the past 12 months.” Despite this the company has successfully tendered for projects at Microsoft Nigeria and Deloitte Nigeria, with the majority (60%) of the integrator’s business still coming from residential projects.

“The last 12 months have seen significant improvement as opposed to business in 2015/2016,” states Toochukwu Onyemelukwe, managing director at Hausba Smarthomes. “Shortly after the transition of government, Nigeria witnessed a great recession and the real estate sector was almost grounded to a halt. Investors lost confidence and clients become speculative. However, in the last 8 months, we have had a stable economy and projects have resumed kicking off. We have commenced over 20 projects this year valued at over $1,000,000 USD. Our project pipeline is looking positive with over $1,000,000 hopefully to close the year. This is a remarkable improvement for us.”

“…in the last 8 months, we have had a stable economy and projects have resumed kicking off.”

It’s not unusual for business to be quieter in the first half of the year in the country, before picking up in the 6 months that follow. Awoyinfa says he is positive about the outlook for the 3rd and 4th quarter, and Oluwatosin, chief technical officer at Lagos-based integrator/distributor HomeTronix, agrees. “I think the business in the next 12-18 months here will be very interesting as people become increasingly aware of the benefits of IoT and having a smart home.” Onyemelukwe says he has high hopes for the year ahead for Hausba Smarthomes and forecasts 70% to 100% growth if the economy remains stable and the current political unrest in Nigeria is eventually resolved.

All of the installers affirm that word of mouth is most essential to acquiring new business in the country. “Nigeria isn't that advanced in technology acquisition and acceptance. Our custom AV solution is still afforded by only the wealthy and it's really a small circle. They show off and brag about the next luxury villa they just acquired and integrated and then others request either a dedicated home cinema and/or whole house automation.

In addition to referrals, imperative to the success of integrator’s in the country has been adapting marketing strategies to expand beyond the end user and target consultants, architects and allied trade members (“the real eyes and ears of the end users”), according to one. Another says it plans to ramp up its digital marketing activities (via its website and social media channels) to broaden its reach in the country. For many, including Hausba, diversifying revenue opportunities by opening up to the commercial channel has been a rewarding experience, and the integrator will soon complete a 100,000-person capacity church auditorium with a budget of $5,000,000 USD.

automated bedroom with TV installed by woodstock electronics in home in nigeria

Just where does the opportunity lie in Nigeria for residential installations? “In addition to the rise of multiroom AV technology, we are also seeing a huge demand for lighting and shading automation at the moment,” notes Woodstock's Awoyinfa. “We are commonly working on complete home automation projects with smart lighting, motorised curtains, multiroom technology and voice control at the moment. We find that most clients aren’t product-orientated, they just want something that works reliably – however we find Control4 products are in demand,” says Oluwatosin. Onyemelukwe adds that “every” luxury villa now assigns a space for a home cinema, with prices starting at $100,000 USD.

Despite not having an official skill release in the region, the appeal of the Amazon Echo has spread to the country according to integrators who note its popularity among early adopters. Oluwatosin says, “We see interest in voice control growing at an exponential rate.” Although Onyemelukwe affirms “it’s too early” for voice technology to be realised in Nigeria on a larger scale due to the technological limitations in the country. The wider Africa region may be witnessing the huge growth of mobile technology and local capacity for greater internet bandwidth, yet internet is still costly for the most part, meaning complex systems are reserved for the select few who can afford it. A region of contrasts, according to CNN more people own a mobile phone in Africa than having access to basic electricity in their home.

exterior of high-end luxury Penthouse with full custom electronics and system integration installed by hausba smart homes in ikoyi, nigeria

The nuances of the local marketplace when it comes to logistics and brokering deals means Nigerians often opt to hire companies based in the country to deploy systems, yet these companies still face competition from abroad. “Our greatest competition is the grey market,” says Onyemelukwe. “We have AV companies parachuting into Nigeria from the UK, South Africa and the USA to handle residential projects. This is especially when the architects and lighting consultants are foreign. This practice has begun shrinking though, as clients become more aware of our presence.”

“Due to the complexity of the market here, a local integrator is better positioned to complete projects here,” affirms Awoyinfa. “We do a few collaborations with international companies however.” Although the opportunity is not just in Nigeria for integrators. “We work mainly in South Africa and Nigeria, but we have quite a number of prospects in other African countries,” says Oluwatosin. Awoyinfa and Onyemelukwe’s companies both see the potential in branching out into Ghana, with the latter planning on establishing an official presence there by the Q2 of 2018.

The country has the groundworks for the typical supply chain model commonly found in Europe, yet the market is not quite fully developed enough to realise this structure. Therefore it’s not uncommon for manufacturers to sell direct or distributors to complete installations and vice versa – something Oluwatosin argues is essential. “Sometimes, distributors participate in the installation chain but with a mutual agreement with the installers to ensure there is a level playing ground for everyone. Distributors need to understand fully the peculiarity and bottlenecks available in the market which can only be garnered if they participate in few installation projects.”

“The biggest challenge definitely is staff training, we spend a huge portion of our yearly budget on training our staff.”

Nigeria may boast one of the largest youth populations in the country in the world but it has long struggled with mobilising these people into the workforce, but Awoyinfa says it is the continual education of staff rather than the recruiting of staff that is the biggest strain on the company. “The biggest challenge definitely is training, we spend a huge portion of our yearly budget on training our staff.” The training process is often a mixture of in-house, CEDIA or manufacturer-led training (either online or abroad) for most, whilst HomeTronix’s Oluwatosin’s pinpoints that inhouse lab testing, simulations and sharing ideas between the team often proves the most effective form of education for employees.

Installer Hausba Smarthomes is being proactive to tackle to challenge of hiring staff, and has a mandate with its sister distribution company, CED (Custom Electronics Distribution) Africa to achieve this with 50 dealers yearly. Onyemelukwe notes: “We believe with more dealers being certified the struggle to find skilled labour will naturally be reversed.” With residential technology still a relatively new sector for the Nigeria, he adds that the company is looking to recruit an expat from Europe to take its technical team “to the next level.”

There is still a long way to go for Nigeria’s home technology market – although high-end projects will continued to be completed and upgraded here, change from the top and some basic fundamentals are needed to allow the industry to truly thrive. “We need the infrastructure in place from the government. We need stable power. Good road network. Affordable and available internet. These all add up to make the operating environment conducive for growth,” stresses Onyemelukwe. “We also need government legislation to regulate the industry and enforce standards.” With such infrastructural changes, alongside the economic growth predicted for the country (forecast to grow faster than South Africa in 2018 by the WEO), Nigeria may well soon lead the way in the way in the West African home technology market. “With increased awareness of the industry, we believe the potential of what is a rich market here can be realised,” concludes Oluwatosin.