Telecommunications companies have been mandated to increase their investments in network infrastructure following the approval of hikes in their tariffs after 11 years of lobbying.
This follows an assertion by Bosun Tijani, the minister of communications, innovation, and digital economy, on Wednesday that tariff hikes will happen in the interests of the industry’s sustainability. “Tariff will go up,” he asserted.
The condition of this increase is tied to a commitment that telcos will increase investments in the sector. The sector’s investments have declined in recent years, leading to a slump in network quality in the country.
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“This balance of tariff increases, alongside investment commitments, means that not only will the telecoms industry have the confidence to invest and a clear pathway back to sustainability – but the higher prices will lead to better networks, more relevant services and so the better customer experience that enables growth,” stated Karl Toriola, the chief executive officer of MTN Nigeria
Telcos have slowed investments in the country due to rising costs and record losses. Foreign investments in the telecoms sector fell to a six-year low of $14.74 million in the third quarter (Q3) of 2024, according to capital importation data from the Nigerian Bureau of Statistics.
Between January and September 2024, MTN Nigeria’s core capital expenditure (capex) dropped 27.79 percent to N217.64 billion, while Airtel’s capex fell 36.59 percent to $149 million.
This investment decline is tied to a N514.93 billion loss between January and September 2024 for MTNN and a 46.9 percent decline to $755 million in Airtel Nigeria’s revenue in the period.
“The increasing demand for digital services across sectors such as education, banking, and healthcare requires us to continually upgrade our networks to deliver more capacity and improve service quality. These investments come at a cost that must be shared proportionally to guarantee long-term viability,” said Dinesh Balsingh, CEO of Airtel Nigeria.
To adjust to these harsh realities, telcos renewed their push for tariff hikes in April 2024. According to the Association of Licensed Telecom Operators of Nigeria (ALTON) and the Association of Telecommunication Companies of Nigeria (ATCON), telecom operators have been advocating for higher prices for the last 11 years.
They argued that telcos need cost-reflective tariffs in the face of adverse economic headwinds like record inflation of 34.6 percent in November 2024 and losses resulting from foreign exchange fluctuations.
“For a fully liberalised and deregulated sector, the current price control mechanism, which is not aligned with economic realities, threatens the industry’s sustainability and can erode investors’ confidence,” the associations said.
To adjust to rising operational costs, telcos asked for a 100 percent increase in tariffs, noted Toriola of MTNN. He argued that this is necessary in the face of a 300 percent increase in operating expenses.
Balsingh of Airtel Nigeria stated that these tariff adjustments will ensure the sector’s sustainability and lead to improvements in service delivery. “By enabling us to expand coverage, strengthen network security, and introduce cutting-edge technologies, the adjustments will directly enhance the quality of connectivity for Nigerians. Our priority is to ensure that no one is left behind in the country’s digital transformation journey,” he emphasised.
According to Tijani, the minister of communications, the increase in tariffs will fall short of telcos’ 100 percent request but will help return the sector to a path of growth.
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He said, “It won’t be 100 percent. We need to ensure that as a sector, we put the right regulations in place that can ensure the growth of this sector, continue to contribute to job creation, but also enable other key sectors in the country as well.”
He noted that the government commissioned a study to evaluate the sector’s financial needs while minimising the potential impact on consumers.
Aminu Maida, executive vice chairman of the Nigerian Communications Commission (NCC), highlighted that the tariff adjustments will be accompanied by measures to simplify billing systems and increase transparency.
“We have revised our quality of service regulations, bringing the entire value chain into scope for compliance, from MNOs to tower codes and transmission companies. So, when we see these tariff modifications, it’s also going to come with simplification,” he said.
While the new rates have not been announced, Tijani noted that the NCC will roll out new rates soon. However, the National Association of Telecoms Subscribers (NATCOMS) has stated that it will kick against tariff hikes because they do not favour subscribers, who will be paying more for calls, data, and SMS.
“This represents additional digital costs consumers will have to square up with at the beginning of a new year among other harsh economic realities of Nigeria of today. This, undoubtedly, is against public interest, contrary to the false narrative of NCC that described the recent adjustments as pro-public interest,” the association said in a communique.
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