Nigeria’s emergence from recession in Q4 2020, was a reassuring indicator that things were gradually beginning to return to a form of normality after a tumultuous year that tested all of us. But behind the headline numbers, there is an important story to tell about the structural changes to the economy COVID accelerated and the opportunities and challenges they represent.
One of the critical drivers for the economic recovery was the pace of growth in the non-oil sector, driven by the Information and Communications sector that is made up of Telecommunications and Information Services; Publishing; Motion Picture; Sound Recording and Music Production; and Broadcasting. Telecommunications, specifically, grew by 15.9% in 2020, up from 11.41% in 2019 and 11.33% in 2018. In the fourth quarter of 2020, the telecoms sector played a key role in lifting the country out of recession, contributing 12.45 percent to the country’s Gross Domestic Product (GDP).
The pace of growth in the sector is remarkable, especially in a year of such disruption, and reflects the fact that communications have become even more critical to our personal and business lives. But with this increased demand for services comes the need to accelerate the expansion of the infrastructure that drives it, and that requires funding. Telecoms is a very capital-intensive business, so how you finance it is essential. Small margins in the cost of funds can significantly impact on the business’ efficiency to provide quality products and services at an affordable price point especially in an economy like ours with inflation running at the high teens.
Building the physical infrastructure on which communications ride is a significant feat of engineering but maintaining, and even enhancing it during a pandemic is one of our proudest achievements. Not just because the engineers have built the network, but because we’ve been able to ensure that the finance is in place when it is needed and that it flows to the right places. That is why I am especially proud that MTN was the first mobile network operator in Africa to be awarded the highest possible long and short-term ratings on Global Credit Ratings (GCR) national ratings scale. The rating was awarded as a reflection of the business’ strong competitive position, solid earnings and cash flow, and the strength of its governance.
The recognition of our financial stability and strength is so important because it means we are able to attract capital at favourable rates, and so drive growth faster and more efficiently. This reassures our investors, and hopefully all other stakeholders, that we operate to the highest possible standards. In so doing, we also contribute our quota to the growth of the Nigerian economy. The rates at which we borrow set a benchmark for the industry, and so facilitates access to finance for the wider ecosystem.
It’s often difficult to see what this means for the ordinary Nigerian who relies on our services and is the backbone on which the business is built. It means two important things. First is that the cheaper we can access capital, the cheaper we can operate the business, and so the less pressure there is on prices. The cost of telecommunications is a function of our costs as a business, and so the stronger and more stable we are, the easier it is for us to pass on those savings to the customer. It also means that our services can be relied upon for the long term. Shocks to the system will not necessarily mean shocks to the customer as we have the capital buffers and operational systems in place to overcome them without affecting the customer experience.
In conclusion, the platform that this stability and strength provide could not be more important as the growth of the digital economy accelerates. Whilst we have seen the continuous growth in the ICT sector, we have barely begun to scratch the surface of the existing opportunities. At MTN, our Ambition 2025 is built on four key strategic priorities: build the largest and most valuable platforms, drive industry leading connectivity operation, create shared value and accelerate portfolio transformation.
We know that the optimal solution for everyone is to have access to all these at the lowest possible entry point, ourselves included. So we see a new phase of growth ahead. One that leverages the success of the first 20 years of our corporate existence in Nigeria to find new and even more transformational ways to drive inclusive growth. That’s an opportunity I look forward to financing!