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ICT’s contribution to growth falls below expectation in two consecutive quarters

Recent data from the National Bureau of Statistics (NBS) have revealed that the contribution of the ICT sector to growth in Q1 and Q2 of 2021 was below expectation.

The Information, Communication and Telecommunications (ICT) sector is a significant driver of growth since micro and aggregate activity depends on the sector’s broad range of services.

Nearly every activity relies in some way on the ICT sector – education, production, distribution and supply chain, entertainment, health, religion, politics and governance, and crime.

The importance ICT holds in the overall economic activities cannot be overemphasised, as the world evolves into a digitally-driven cosmos, and almost all processes and controls now depend on automation to function maximally.

As the world new order revolves around the internet of things (IoT), machine learning (ML), big data, cloud computing, nanotechnology, artificial intelligence (AI) and robotics, space travel and astral science, ICT is seen to perform a pivotal role in ensuring that these functions are well fused in the view to achieving a much more globalised and digitally-driven universe.

In the light of the above, it is clear that ICT plays a crucial role in the development process of any nation, whether it is a developed or a developing country.

Read Also: Telecom’s growth hits 3-year low as government policy stifles sector

Nigeria’s ICT sector

However, in Nigeria, recent data show that ICT’s contribution to growth has been trending southwards in the last two quarters.

Indeed, Nigeria’s ICT sector, according to the National Bureau of Statistics (NBS), grew by 6.31 percent in Q1’ 2021, different from 14.7 percent in Q4’ 2020 and 9.99 percent in Q1’ 2020. Telecommunications and information services under the ICT sector grew by 7.69 percent in Q1’ 2021 from 17.64 percent in Q4’ 2020 and 9.71 percent in Q1’ 2020. This shows that, compared with a year before, the ICT sector’s performance has recessed.

Furthermore, the NBS reports that the ICT sector contributed about 9.91 percent to total gross domestic product (GDP) in Q1’ 2021, lower than 10.31 percent recorded in Q1’ 2020 and 10.58 percent in Q4’ 2020.

However, the NBS reveals that ICT’s contribution to GDP still outperforms that of the oil sector, whose contribution currently stands at 9.25 percent.

During the heat of the pandemic in 2020, the global quarantine order mandated a shift towards remote activities, which necessitated increased use of mobile data networks for communication, entertainment, work, and other business concerns. Through that period, the ICT sector got a global boost, and its performance outpaced a host of other sector giants, including industry and manufacturing.

However, post-pandemic recovery efforts required a gradual shift from the considerable data usage due to the quarantine order to tending to other pro-survival needs such as food and clothing. As a result, there now seems to be a gradual decline in the volume of profits earned by the sector globally.

While post-pandemic recovery and stabilisation efforts have also affected ICT’s revenue accruals in Nigeria, reports have also revealed that government policy has a role to play in the decreasing contribution of the sector to overall growth.

In December 2020, the Federal Government of Nigeria suspended the sales and activation of SIM cards issued to Mobile Network Operators (MNOs). This suspension was to enforce the linking of Nigerians National Identity Number (NIN) to their Subscribers Identification Modules (SIM) cards.

Within the period of this directive, about 15 million telephone lines were reported lost while network operators recorded about N30 billion losses.

Although the Federal Government has made efforts in times past to provide an enabling environment for the ICT sector to thrive through the establishment and implementation of policies such as the National Digital Economy Policy for a Digital Nigeria, Nigerian National Broadband Plan and the Revised National Digital Identity Policy for SIM Card Registration, the most recent movie with the NIN linkage with SIM cards has adversely affected data usage and consequently, revenue for the ICT sector.

Within the period of the registration order, lost sales on SIM cards, mobile network airtime and data purchase have resulted in a huge economic loss to the sector, which has also impacted its ability to contribute to growth.

The drop in the demand for telecommunication services in Q1 and Q2 of 2021, according to the national coordinator, Alliance for Affordable Internet, Olusola Teniola, is due to the government’s SIM card policy regulation. Teniola believes this policy led to the decline in ICT contribution to GDP in Q1 and Q2 of 2021.

Furthermore, Teniola reveals that capital importation to the telecommunications industry fell in Q2’ 2021, the lowest in a long while. This realisation, according to him, is a strong point of concern, especially in the era of an expected 5G investment in the sector.

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