June 12: Inconsistent regulation in Nigeria stifling $8bn telecom market
The telecommunication sector in Nigeria saw its biggest growth in the months of April, May, and June of 2020 jumping to 18.10 percent from 9.71 percent in the previous quarter. It was a cherry of hope on the Democracy Day celebration of that year that despite the COVID-19 pandemic and recession the country was in, there was a path to recovery should the sector continue on that growth trajectory.
Fast forward to 2021, the sector operators are no longer certain about what the outlook for the second quarter of 2021 would look like, having suffered a historic decline in the first quarter. The sector, a primary driver of Nigeria’s economy, saw an era of double-digit growth reduced to single-digit. The first-quarter growth tanked to 7.69 percent from the previous quarter where it recorded 17.64 percent.
The damage to the sector was inflicted by a combination of poorly thought and executed policies and macroeconomic realities. Among them were the ban on SIM registration to accelerate the National Identification Number (NIN) registration exercise, recessive income per capita, and the growing number of people migrating to WhatsApp, Telegram, and other platforms that do not require SIM cards to stay connected.
The telecommunication market generates average revenue of $8 billion annually according to Teniola Olushola, former President of the Association of Telecommunication Companies in Nigeria (ATCON).
In the new National Broadband Plan 2020-2025, the country set ambitious goals to deliver data download speeds of about 25Mbps in urban areas and 10Mbpds in rural areas. The plan also targets covering at least 90 percent of the population and a penetration rate of 70 percent by the end of the plan’s lifetime. In recent times, the Minister of Communications and Digital Economy has clarified that the country is actually targeting the attainment of a 90 percent broadband rate in terms of population and a 70 percent rate in terms of the total landmass within the next two years (2023).
The latest figures released by the Nigeria Communications Commission (NCC) in June not only showed that the big four operators in the sector lost significantly in April, but the broadband penetration in the country has also now declined to 40.66 percent from 41.18 percent in March. At 40.66 percent, the sector has seen 4.36 percent erased from the 45.02 percent penetration it recorded in December 2020.
A target of 90 percent would mean the country plans to add about 49 percent broadband penetration to the current 41 percent in 2 years. It is a very tall order considering that Nigeria needed about 3 years to add about 24 percent penetration growing from 21.69 percent in 2017 to 45.02 percent in December 2020. Interestingly, it only needed 4 months to wipe off 5 percentage points to take penetration down to 40.66 percent in April 2021. It also means the country is now 50 percent off its 90 percent broadband penetration target by 2023 as recently announced by the Minister of Communication and Digital Economy, Ali Isa Pantami.
While the appointment of Isa Pantami ignited many expectations of the possible turnaround of the sector, the result so far has not lived up to those expectations.
Some social projects have been executed by the minister’s administration including the NCC’S Emergency Communications Centre, Ado-Ekiti; the Digital Awareness Programme (DAP) for Secondary Schools, whose beneficiaries are Methodist Girls’ High School, Yaba, Lagos State, and Bishop Okoye Girls’ Secondary School, Ukpor, Anambra State; as well as the School Knowledge Centre (SKC) at Ijaloke Grammer School, Ado-Ekiti, Ekiti State, executed by the USPF.
The Minister also flagged off the National Adopted Village for Smart Agriculture (NAVSA) initiative located at Jewel’s Suit, Okoe Urejee, Ado Ekiti, Ekiti State, which was executed by the National Information Technology Development Agency (NITDA).
In terms of development in network infrastructure, not much has really changed except in January 2020 when the Minister attempted to get state Governors to agree to reduce Right of Way fees for broadband fibre. That effort only changed the mind of seven state Governors including Ekiti, Imo, Plateau, and Katsina. Kaduna and Anambra waived the fees while Kwara dropped the fees to N1.
However, 29 states have stuck to their old charges. A few have managed to give concessions. For example, in 2020, MainOne said Ogun state gave them a charge waiver to deploy fibre cables across the state. As of April, the market share by the technology of fixed wired internet – comprising fibre cables – was at 0.10 percent a position it has been for many years.
“The high rates of the ROW adversely impact our business,” said Uche Nnakenyi, Divisional CEO, ipNX. “Fibre-To-The-Home infrastructure is highly capital intensive hence with the high rates of the ROW, the total cost of ownership of our infrastructure is increased, impeding the rate of expansion of the footprint of our infrastructure within and across cities and states. Additionally, this increases the cost of service delivery.”
Poor fibre infrastructure deployment is responsible for the cost of data in the country. Worldwide Mobile Mobile Data Pricing 2021 ranks Nigeria 43rd among countries with exorbitant data charges. The report which surveyed 230 countries on the affordability of data, put Nigeria behind Sudan (fifth globally); Algeria (16th); Somalia (22nd); Ghana (27th); Libya (30th); Tanzania 32nd; and Mauritius (33rd).
Beyond right-of-way fees, operators are also lamenting the destruction of their equipment. In 2020, Airtel said over 1400 base stations had been vandalised because there was no adequate security for equipment. Criminal elements cut fibre cables meant for internet access, remove air conditioners, generators, and other equipment at these base stations.
Insecurity in the various parts of the country also means that telcos’ investments are now restricted to few locations where these companies feel “Safest”. An official at ATCON told BusinessDay that telecom investors would not go to regions where they would potentially be killed. Telcos are also known to be relocating their workers from these regions back to Lagos where they are safe. This deepens the challenge of connectivity already existing in these hotspots.
As of 2019, The NCC confirmed that Nigeria had about 200 communities that have never seen internet connectivity. The commission also said it has come up with a programme to connect these communities, however, it required collaboration between it and the telecom operators. While insecurity is likely to ensure the state of unconnectedness continues, the NCC had pledged to provide a subsidy of N65 billion counterpart funding. It is part of a larger plan to raise N265 billion which falls under the State Accelerated Broadband Initiative designed to address the infrastructural deficits in the telecommunications sector. The infrastructural companies would raise the balance of the N200 billion. Operators say they are yet to receive the NCC pledge.
A few operators who would not speak on the record said it would be impossible to commence any deployment without the support of the government. It is perhaps why the Lagos State government has embarked on an ambitious plan of deploying about 3500km of fibre infrastructure around the state. The infrastructure is expected to bring connectivity to mainly public hospitals, schools, and government offices. So far only 1800km of fibre has been completed.
“We are using it to develop a mesh city and the infrastructure that is required to power your businesses. Once we complete our fibre infrastructure we would have all our public schools connected and all of our public buildings and hospitals and the telcos would have an opportunity to reach the last mile. It would mean cheaper and faster technology,” Babajide Sanwo-Olu, Governor of Lagos State said recently.
While it is commendable, it is but a drop in the ocean of what the country requires to ensure adequate connectivity and give it a chance at 90 percent penetration. Researchers at FBN Quest said one way to achieve this is for state governments to allow open access infrastructure rollout.
“We understand that Anambra state has waived right-of-way (RoW) fees for telecom operators. This is part of the state’s efforts to drive broadband expansion. The absence of a unified RoW fee across states within the country continuously stalls the advancement of broadband fibre networks,” the researchers said. According to the NCC, the fibre requirements of the country are around 120,000km. So far, less than 40,000km has been achieved, leaving a deficit of over 80,000km. Experts say addressing insecurity would be the best place to start, however, there needs to be consistency in the policy statements that give assurance of a direction to investors.