Dear Subscriber,
Nigeria Telecoms – A Sector in Dire Need of New Investment
The stark reality of the Nigerian macroeconomic performance shows that no sector has been spared. In the last five years, revenue in the telecoms sector has dropped by 50% to $3bn from $6bn with all major players reporting significant forex losses. Telecom CAPEX has plunged sharply by 36.33% to $1.70bn in 2022 from $2.67bn in 2021. But as averred by Michael Powell (former chairman of the US Federal Communication Commission), “the telecommunications sector is not just about connecting people, it’s about connecting economies and shaping the future of nations.” Simply put, the telecom sector is not just an isolated industry contributing approximately 10% of the GDP; it is a catalyst for innovation, connectivity, and economic transformation.
Imagine what will happen to the economy if, for just one day, the telecom infrastructure breaks down. Banking services, healthcare, education, the stock market, aviation, etc. will be in serious jeopardy. In March 2024, when a major undersea cable breakage affected internet connectivity in Nigeria, many transactions were disrupted, causing panic and concern in the country. Imagine what happens if the telecoms break down on an election day. Indeed, telecommunication is the lifeblood of the modern economy, and a slowdown in the sector could have ripple effects on the economy. This cannot be allowed to happen!
The Way Forward – Tariff Review & Deregulation
Amid the macroeconomic headwinds of rising costs, the fall in revenue and profit of the sector has been exacerbated by the inability to price their services on a marginal cost basis. While the prices of all other goods and commodities in the economy have quadrupled in the past 11 years, telecoms’ tariffs have nominally remained unchanged but declined in real terms, with the cost of one gig of data plunging to $0.39 from $3.23 in 2013. This trend is, no doubt, detrimental to the growth and sustainability of the sector and the entire economy. Thus, what is required now is efficient pricing and regulators holding providers to quality-of-service standards while also preventing collusion.
As we have seen in India, an increased investment in telecom infrastructure will enhance connectivity, drive digital inclusion, and support the growth of other sectors such as e-commerce, fintech, and digital services. India’s GDP is projected to grow by 6.8% in 2024, aided by its ICT sector and critical investment in its digital infrastructure.
In an interview on Channels TV Politics Today programme, and Arise TV Business Week programme, Mr. Bismarck Rewane discusses the dire need for new investment in the telecoms sector to ensure the quality of services and the consequences of doing nothing and limping along.
The video links and slides are attached.
Enjoy your read!
