$461m investment gap slows Nigeria’s internet coverage

Nigeria’s broadband penetration fell to 42.53 percent as of January, and subscriptions stood at 92.19 million, spotlighting the huge deficit in a country with a population of over 200 million.

According to the Nigerian National Broadband Plan 2020-2025, the country hopes to increase broadband penetration to 70 percent by 2025. To achieve 96 percent mobile broadband coverage by 2030 (which will offer internet access to almost all), the country needs about $461 million in investments, according to GSMA.

The global telco association cited a “$461 million investment gap (no policy reform)” regarding Nigeria in its recent report on universal service funds in Africa policy reforms to enhance effectiveness.

Over the years, service providers’ network infrastructure investments have significantly reduced the coverage gap. Across Africa, the coverage gap for mobile broadband networks fell to 13 percent in 2022 from 56 percent in 2012.

In Nigeria, telcos have been responsible for the growth of communications networks since the telecom revolution began in 2001. These service providers have continued to invest in expanding their network capacity, closing coverage gaps, and deploying new technologies, GSMA said recently.

“Providers across Africa have made substantial investments to close the coverage gap. In particular, 4G/5G coverage has more than doubled from 32 percent in 2018 to 68 percent of the population in 2022,” it said.

In 2021, MTN Nigeria and Airtel Africa recorded N536.91 billion in capital expenditures (largely network rollouts), which increased to N613.13 billion in 2022 and N732.42 billion in 2023.

Despite this, according to the Nigerian Communications Commission (NCC), about 27 million Nigerians do not have access to telecom services because they live in the 97 clusters, primarily rural areas, that lack access to telecom networks. In 2021, the government revealed that 301 local government areas did not have internet access.

Because telcos make most of their investments in cities, rural areas are primarily underserved or unserved. A recent white paper, titled ‘Deepening Nigeria’s National Backbone and Middle Mile Infrastructure,’ by the Ministry of Communications, Innovation, and Digital Economy revealed that about 25 percent of the metro fibre network’s distance were concentrated in the major cities of Lagos, Edo, Abuja, Oyo, and Ogun states, leaving other states underserved.

Fibre optic cable deployment is crucial to achieving wider connectivity in the country, and as of 2023, 78,676 kilometres of fibre optic cables had been deployed.

Lagos led with 7,864.60km; Edo, 4,892.71km; FCT, 4,472.03km; Ogun, 4,189.18km; Niger, 3,681.66km; Kaduna, 3,028.88km; Delta, 2,750.42km; Kano, 2,697.72km; and Kogi, 2, 602.25km.

The 10 states with the least fibre deployment are Yobe (1,233.31km), Borno (1,190.04km), Gombe (1,182.40km), Ekiti (1,178.04km), Jigawa (1,100.53km), Taraba (1,076.58km), Sokoto (1,066.56km), Plateau (997.45km), Ebonyi (651.65km), and Bayelsa (407.88km).

As of 2022, Nigeria had 34,862 towers, 127,294 base stations, and 96,198km of fibre optics deployment (terrestrial fibre and submarine cable). Most of the towers were concentrated in a few states. As of 2021, Lagos had 5,851; Ogun, 2,418; Rivers, 2,049; FCT, 1,944; Oyo, 1,713; and Edo, 1,556.

The states with the fewest towers are Kebbi (415), Bayelsa (367), Ebonyi (363), Gombe (356), Yobe (316), and Zamfara (283).

Closing this remaining coverage gap is primarily an economic challenge. GSMA said: “Expanding mobile broadband networks becomes increasingly costly, while revenues for each additional mobile site decline as the number of people covered per new site becomes smaller.”

In a report released in October 2023, GSMA argued that the remaining uncovered populations in places like Nigeria would only be covered by subsidised investments.

To help close this coverage gap, governments in Africa and around the world have introduced policies to incentivise internet infrastructure rollout in underserved locations and stimulate demand for services among consumers, according to GSMA.

At least 51 of the 54 countries in Africa have a universal service fund (USF) mechanism to deploy mobile broadband infrastructure in commercially unviable areas and bridge the connectivity gap.

GSMA highlighted that these USFs are partly or entirely financed through contributions from telecom service providers. Nigeria’s government established its Universal Service Provision Fund (USPF) in August 2006 to close this access divide.

The fund aims to help the government achieve universal access to information and communication technologies in the country’s rural, unserved, and underserved areas. The government said on the fund’s website: “The fund is being managed to facilitate the widest possible access to affordable telecommunications services for greater social equity and inclusion for the people of Nigeria.”

“The fund should be deployed to boost rural penetration, but telcos get their money from city centres and suburban areas, and the fund has not been attractive for them,” Adeolu Ogunbanjo, president of the National Association of Telecoms Subscribers, told BusinessDay.

Approximately 70 percent of Nigerians live in rural areas, according to the National Bureau of Statistics’ National Multidimensional Poverty Index report in 2022.

“These rural areas are not economically viable; so setting up there is an issue,” an industry expert who did not want to be named said.

GSMA said that using this fund properly could help service providers expand coverage by subsidising network rollout in underserved areas. The association highlighted that these funds are increasingly used for non-infrastructural projects.

Between 2019 and 2021 (the last year a report was released), Nigeria’s USPF spent N34.14 billion on projects in the country. Between 2016 and 2021, the fund facilitated the construction of 363 base transceiver stations and 104 Rural base transceiver stations between 2015 and 2021.

Ayoola Oke, a telecommunications lawyer, said these USPF projects are tailored to meet the needs of unserved and underserved areas.

“They advertise every year. The fund is working. It is for rural areas because it is expensive to set up there. The areas do not have economies of scale so that the fund can subsidise the construction of those areas. They have been having projects and programmes there,” he said.

Other experts who spoke to BusinessDay confirmed that the fund was available, but the sustainability of the projects has been an issue.

“The main issue is the politicisation of the whole fund, which is why a couple of operators do not even touch it. There must be a commercial side if you are going to rural areas. This is where the challenge is. It is the commercial aspect that makes it sustainable. Even if it is a subsidy, it needs to be sustainable. What they can start doing is asking for commercial proposals, too,” one expert said.

The expert, however, said as rural areas open up for add-on services like mobile money, telcos will get incentivised to invest in these areas.

“Commerce, mobile money require coverage. So, even if the people in these areas do not use as much data, there is now a case for coverage because of these add-on services. This demand is now driving the rural delivery of projects,” he added.

In recent years, the fund has come under scrutiny. In April 2023, the House of Representatives said it would investigate the Nigerian Communications Commission over how it has used the USPF, an allocation of 2.5 percent of the annual turnover of mobile telecommunication network operators.

A member of the House, Sergius Ogun, said: “The House is disturbed that the inability of the NCC to utilise the USPF to promote the widespread availability and usage of network services and applications throughout Nigeria, as enshrined in Section 112 of the Nigerian Communications Act, Cap N97, Laws of the Federation of Nigeria, 2004, is a great disservice to the nation.”

In May 2023, Umar Danbatta, the theb executive vice-chairman of the NCC, Umar Danbatta, appeared before the House to discuss the use of the fund. Danbatta was queried about the 1014 projects carried out under the USPF, including an e-library project that cost N2 billion.

The lawmakers faulted the NCC’s request for N700 billion to ensure that 27 million Nigerians had access to telecommunication coverage.

Bamidele Salam, chairman of the committee, said: “There is a list of contracts awarded by the USPF since inception provided for us here, which is about 1014 various contracts on which a few observations have been made. There is also the submission of the annual audited report of the USPF which has been from 2007 till date.”

Despite these hiccups, GSMA said the authorities and service providers can maximise the potential of the fund to close the connectivity gap and bring the benefits of the internet to citizens.

Recently, Bosun Tijani, minister of communications, said the Federal Government and the World Bank were collaborating to raise $3 billion to fund an additional 120,000km of fibre optic cables to boost broadband infrastructure and connectivity nationwide.

He also announced plans to provide internet and digital access to all 774 local government secretariats in the country to improve connectivity in underserved and unserved areas.