Since May 2020, about seven Nigerian state governors have signed to reduce the right of way (RoW) fee for laying of fibre cables across their states, seen as a necessary first step to ubiquitous broadband deployment in Nigeria.
However, unless the Nigerian Communications Commission (NCC) fulfils its promise of releasing N65 billion before the end of the year, infrastructure companies (InfraCos) will likely struggle in deploying fibre in the 774 local government areas of Nigeria, stakeholders say.
This is because, like other sectors, the telecoms sector is also adversely impacted by the COVID-19 pandemic. Unfortunately, the sector is excluded from the N50 billion financial stimulus declared by the Central Bank of Nigeria (CBN) to aid sectors badly affected by the coronavirus.
The N65 billion subsidy is part of the counterpart funding proposed by the NCC to mitigate the cost burden on telecoms operators. The decision was made by the National Executive Council (NEC) and contained in the National Broadband Plan 2020-2025.
The plan ensures that the NCC supports the infrastructure companies responsible for deploying broadband, with a subsidy of N65 billion counterparts funding. It is also 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 telecoms sector. The infrastructure companies would raise the balance of the N200 billion.
The plan also gives priority to the 774 local government authorities across the country.
The Federal Government is expected to release this fund by the third quarter of 2020 to InfraCos depending on their physical broadband rollout plan.
Last Tuesday, Akin Oyebode, special adviser on trade and investment to Ekiti State governor, announced that a major telecoms operator was seeking approval to lay 160km of fibre infrastructure across the state. Ekiti was the first state to announce it has reduced its RoW fee to N145 from N4,500.
Funke Opeke, CEO of MainOne, told BusinessDay in May that it was considering areas of partnership with the Ekiti State government.
“MainOne continues to engage various governments to explore potential areas of partnership and investment, but at this time, we are still assessing opportunities available to us in the state,” she said via email.
While six more states including Kaduna (N0); Kwara (N1 per km); Imo (N145); Plateau (N145); Anambra (N0), and Katsina (N145) – Ogun (waived fees for MainOne) – followed the Ekiti example in May, the momentum appears to have been lost in June, and so far in July, with no new state joining the party.
Experts say the speed will likely pick up again once the InfraCos start deploying fibre cables in the states that have already reduced the fee.
“Remember the governors have their options, they can harmonise the rates or even waive it. It is through that collaborative approach that we will see more governors and states following the example of the first seven.
“Is there a timeline to this? Actually, we would like to have something happen immediately, but we need to be reasonable. It is not a switch, there are IGR impacts to the decisions made by governors and they need to see the sacrifice of slow term gains with the benefits of medium to long term gains. Until we get to that point, we might be looking at some governors still waiting until they see the proof, and that may mean Q3 of 2021 or even into 2022,” Olusola Teniola, president, Association of Telecommunications Companies of Nigeria (ATCON), told BusinessDay.
Deploying fibre infrastructure across the entire 774 LGAs in Nigeria as stipulated by the National Broadband Plan 2020-2025 is a very capital intensive project. Matter of fact, the plan set out an ambitious strategy aimed at delivering data download speeds across Nigeria of a minimum 25Mbps in urban areas, and 10Mbps in rural areas with effective coverage available to at least 90 percent of Nigerians by 2025 at a price not more than N390 per 1GB of data (i.e. 2% of medium income or 1% of minimum wage).
The ambitious plan also comes with a hefty price tag of around $3.5 billion (N1.3trn at current rate) to $5 billion (N1.9trn). The government acknowledges that successful execution would only be possible if the public and private sectors align and harmonise activities, including contributing the needed money.
Prior to the COVID-19 pandemic, most of the InfraCos had expressed willingness to deploy in states that were willing to waive or reduce their right of way fee to the agreed N145. The spread of the virus has changed the calculations of many providers, hence the need for the NCC and the government to fast track subsidies to the telecoms sector. Some experts have also suggested that the N145 right of way fee may not be good enough if the operators are to effectively bridge the 4G gaps in the country.
“We need to review the inland distribution of fibre. For us, we need to lay more fibre and, to this extent, we strongly advocate the elimination of the right of way charges. Now, the Federal Government is advocating N145 per linear metre based on certain studies, but the dynamics are changing and we should begin to consider free right of way and put some coverage obligations against the service providers,” Gbenga Adebayo, chairman, Association of Licensed Telecommunication Operators (ALTON) said in May.
The telecoms sector in many developed countries was included in the government palliative, an indication that the authorities recognise the important part they play in enabling the economy. The UK and US governments provided over $40 billion government subsidy and palliatives for the sector.
In Nigeria, InfraCo licensees are still waiting to sign a draft agreement with the regulator, NCC, which will finalise the subsidy arrangement.
“If we don’t have that agreement sorted and we don’t have an ability for the InfraCos to access subsidies, it puts a question mark over their business model and the investments they have already made to roll out because for Nigerians we don’t want excuses, we want to be able to say by this timeline this LGA has been connected and this is what will happen,” Teniola said.
