Phone financing schemes gain traction on economic crunch

When Tolu Abolaji’s phone got damaged and needed replacement, a friend wanted her to take a loan from her bank. After buying the phone, she learned about Klump, a financing platform that could have helped spread the cost over several months.

“I had got the phone when a friend mentioned Klump,” she said.

Saving for the new phone was not an option due to inflation and the volatility of the naira. “Everyone I spoke to advised against saving for it because prices were unstable,” she added.

With Klump, Tolu could have spread the cost of her phone across three to 12 months. Schemes like this are increasingly becoming common in Nigeria, where smartphone prices have soared by as much as 60 percent or more in the last one year following the significant devaluation of the naira.

Device financing has emerged as a solution to increase smartphone accessibility, especially for underserved customers. In 2023, smartphone penetration in Nigeria stood at 59 percent in urban areas and 26 percent in rural regions.

“Models such as Buy-Now, Pay-Later (BNPL) and Pay-As-You-Go (PAYGO) are redefining affordability, enabling broader smartphone ownership and driving digital inclusion,” said Manish Pravinkumar, senior consultant for Middle East and Africa (MEA) at Canalys.

Read also: Nigeria records nearly 3,000 phone thefts per hour in one year

He noted that financing schemes like TRANSSION’s Easy Buy and Palmpay have enabled consumers to purchase new smartphones through long-term installment plans.

These schemes have gained traction as economic pressures, including record-high inflation of 34.6 percent in November 2024, have made it increasingly difficult for Nigerians to afford smartphones outright. Also, the naira’s value has dropped from N769.51/$1 in July 2023 to N1538.25/$1 by December 31, 2024, worsening costs.

These economic challenges have impacted the smartphone market, threatening the country’s digital inclusion efforts. The Alliance for Affordable Internet (A4AI) says that smartphones are important in providing people with meaningful connectivity and are crucial in developing digital economies.

Smartphones have driven Nigeria’s internet consumption to record highs, with data consumption growing from 125,149.86 terabytes (TB) in December 2019 to 870,398.28 in October 2024.

“Smartphones have become the computer for many Nigerians today,” stated Adia Sowho, former chief marketing officer of MTN Nigeria, when the telco launched its device financing in partnership with Intelligra in 2022.

At the time, Sowho had explained that the high costs of these devices have made them out of reach for many, with factors such as forex fluctuation and inflation driving up the cost of phones.

Ifeanyi Akubue, president of the Phone and Allied Product Dealers Association of Nigeria (PAPDAN), told BusinessDay, “We import our phones, and higher dollar prices mean higher prices.”

Since 2019, Nigerians have spent $3.82 billion importing telephones, including smartphones, according to the International Trade Center (ITC).

In Nigeria, providers such as M-Kopa, Easybuy, CDCare, Jumia Flex, Slot Nigeria, and the Device Finance Scheme by Access Bank, among others, are shaping phone ownership.

Babajide Duroshola, general manager of M-KOPA Nigeria, highlighted that while the cheapest smartphone may cost about N200,000, customers can make an initial deposit of N36,000 and then pay as little as N900 daily over six months to own the phone.

He noted that about 42 percent of the company’s customers are first-time smartphone users, highlighting Pravinkumar of Canalys’ sentiment that device financing is shaping the continent’s digital future, enabling millions to access smartphones and fostering greater digital inclusion.

Adeolu Ogunbanjo, national president of the National Association of Telecoms Subscribers (NATCOMS), emphasized that people need to get access, noting that mobile phones are a need.

However, this model is not isolated from challenges. “Fraudulent activities, such as hacking and identity theft, remain significant concerns. Device-locking mechanisms offer protection but are not foolproof. Customers often revert to feature phones when locked devices become inaccessible, leading to repayment challenges,” Pravinkumar of Canalys said.

Other challenges include regulatory and policy uncertainty and infrastructure gaps, with limited mobile money adoption in markets affecting scalability in South Africa and Nigeria. Also, some consumers consider the payment rates on financed phones as high or exorbitant.

However, for stakeholders like Pravinkumar, device financing offers a sure pathway to smartphone ownership for many individuals on the continent, where feature phones still account for a 55 percent share of the total mobile phone market.