Economy loses $25bn FDI in telecoms amid low local content push

Despite the massive growth recorded in Nigeria’s vibrant telecommunications industry after it was successfully deregulated in 2001, little of the $25 billion foreign direct investments (FDI) in the industry over the years is retained in the country due to the absence of appropriate local content policy, market observers have said.

Considering the period from 2007 till 2013, more than 50 percent of FDI capital invested in the country has been ploughed into capital-intensive resource sectors, according to Omobola Johnson, minister of communications technology.

Nearly, 50 percent of FDI projects are service-oriented, with telecoms experiencing strong growth by attracting about 24 percent of FDI projects.
In view of this, there are concerns amongst industry stakeholders that what Nigerians derive from this industry has been diminishing over the years due to low level of local participation in the sector.

“A good chunk of the much talked about FDI did not remain in Nigeria because of very poor manufacturing and local content policies”, said Emmanuel Ekuwem, former president, Association of Telecommunications Companies of Nigeria (ATCON).

According to him, this capital flight which weakens the naira and depletes the country’s foreign reserves is a direct consequence of an import-oriented economy.
Industry observers have called on government to pursue to a logical conclusion policies geared towards strengthening local content development in 2015. This call is, however, compelling in view of the recent ban on import of telecoms equipment with official foreign exchange (forex) by the Central Bank of Nigeria (CBN).

“Nigeria is blessed with natural resources that could be tapped into and used for telecoms development instead of relying so much on foreign importations,” Ekuwem further said.
According to industry observers, there is need for the formulation of a telecoms version of the Petroleum Industry Bill (PIB), which is essentially aimed at enhancing increased local participation in the oil and gas industry.

“Nigeria contributes minimal local content to the services enjoyed. Telecom has become a larger part of our Gross Domestic Product (GDP), so it creates some jobs and income; however, the significant gains from providing the initial capital, network and subscriber equipment, software and specialised services are gained offshore”, said Funke Opeke, chief executive officer, MainOne.

Austin Okere, group chief executive officer, CWG (Computer Warehouse Group) Plc, has warned that in as much as the industry craves for local content development, stakeholders should desist from stampeding the regulator into taking actions that will impede the much needed FDI in the sector.

“We should not confuse local content with taking businesses from foreign investors and handing them over to locals without recourse to technical ability and financial capability within the value chain”, Okere told BusinessDay at an industry forum in Lagos recently.

Okere says that while telecoms operation requires huge financial outlay, the rewards are slow in terms of manifestation. For example, Etisalat, he said, with over 15 million mobile subscribers has admitted that it is not making any profit despite huge investments ploughed into network expansion since inception.

Nigeria is losing over $6 million (N930 million) yearly for the renewal of domain names that were registered with foreign registrars. Apart from paying renewal fees to foreign registrars yearly, Nigerians also pay for the hosting of such domain names, whereas domain names like .ng could easily be registered with local Internet Service Providers (ISPs) in Nigeria, and the domain names could also be hosted in Nigeria by Nigerians in order to keep local traffic.

BusinessDay further gathered that the country’s ICT landscape loses N68.4 billion annually to bandwidth purchase from organisation and businesses abroad.
The Ministry of Communications Technology had earlier disclosed that Nigeria’s purchase of foreign-made phones, SIM cards, computers and software maintenance had gulped over N59 billion.

According to the National Office for Technology Acquisition and Promotions (NOTAP), Nigeria has lost approximately $1 billion to foreign software imports and maintenance contracts on an annual basis over recent years.

Ben Uzor