COVID pushes Nigeria’s ICT sector to second largest
Nigeria’s economy rose by 5 percent in the second quarter of 2021, the highest it has come in seven years, with the information and communication technology (ICT) sector contributing a major share and becoming the second-largest sector. This is according to the latest data on GDP by the National Bureau of Statistics (NBS).
The second-quarter growth is significant given that the economy had contracted by as much as 6.1 percent in the same period of 2020 and only grew by 0.5 percent in the first quarter of 2021. The growth also beats analysts’ expectations for the second quarter.
“Our expectation was a less robust rebound of 3.4 percent year-on-year,” note analysts at FBN Quest, saying, “We had not expected that trade would recoup all the ground lost in the year-earlier quarter (22.5% y/y-16.6%).”
The five biggest sectors of the Nigerian economy now include agriculture, information and communications, trade, manufacturing, and oil and gas. In the past, agriculture, industries, and services sectors were the top three.
The ICT sector’s new position is mainly driven by the COVID-19 pandemic, the lockdown it induced and the negative impact on many businesses. As a result of the pandemic and lockdown, embracing digital technology became an urgent demand for the majority of companies. The race to upgrade their digital infrastructure contributed to increased revenue for telecommunication operators.
However, it should be said that the telecommunication industry has not had a smooth ride with regard to policies from regulators in the past year. Hence, analysts who attribute the GDP growth to companies taking back profits from the COVID-19 pandemic and not a result of improved regulatory policies are closer to the reality. A case in point is the decision to ban SIM card sales until the completion of the National Identification Number (NIN) registration exercise.
The industry lost a total of 11.08 million mobile subscribers between January and June 2021. The industry added 25.5 million subscribers in all of 2020. This essentially means that in the first half of 2021 it has lost about 40 percent of what it gained from one year ago.
It also means significant revenue set back for the sector. Going by the industry’s average revenue per user (ARPU) of N1,420, the networks lost a total of N15.7 billion in revenue.
The industry has started a slow recovery in the month of June with over 500,000 mobile subscribers returning to the networks. Operators like MTN are beginning to see growth again after losing revenue over the SIM ban. The telco also has a three-year plan to deploy over N600 billion on infrastructure and expand its services across the country. In view of this, the ICT would likely retain its second-largest sector position in the third quarter should the momentum continue across all operators.