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Financial inclusion sails as high cost of internet keeps 42% Nigerians offline

On many street corners, inside Africa’s largest economy, you find vendors with umbrellas and colorful kiosks advertising a wide array of data packages from different operators. 

Faced with diminishing income and widespread poverty mobile network operators (MNOs) are seizing the opportunity to woo existing and new subscribers with “cheap” data plans. 

MTN, the largest network in Africa, now sends unsolicited SMS adverts informing its more than 51 million active subscribers that they can now buy 1GB for as low as N200 for seven days. It is the cheapest and lowest by any telco. To further set the bar higher, the network also promises 4GB at N1,000 (30days).

Even Globacom that describes itself as the “Grandmasters of data” and employs a legion of Nigeria’s top movie actors just to sell its data packages, knows it can’t compete below N200. 

Airtel which many says has the most engaging advertisements and is hot on the heels of MTN, also has some attractive data packages, like its Double Data promo in which it offers subscribers 100 percent return on each data purchase.

It is perhaps for these reasons that the latest report from the Alliance for Affordable Internet (A4AI) found that Nigeria has one of the most competitive broadband markets in Africa. The country is in good company with Somalia, Tanzania, Democratic Republic of Congo, and Madagascar. 

Nigeria’s competitive broadband market and cheap data plans notwithstanding, 42 percent of the country’s entire population are still offline compared with less than 25 percent in Africa as a continent. Many people offline cite mobile data affordability as one of the reasons they do not go online and it is critical to an efficient and sustainable financial inclusion drive. 

“Internet access gives people the tools to earn a living and start a business. It offers them ways to build skills and achieve their ambitions. And it provides them access to information to support their families and be active citizens in their communities. The billions of people still unconnected are missing these opportunities and so are societies where digital exclusion remains the norm,” Sonia Jorge, executive director at Alliance for Affordable Internet said in a statement sent to BusinessDay. “

In August, MTN lost over 660,000 subscribers. While the majority of them could have moved on to rival networks like Airtel which recorded an unprecedented 8-month growth streak, over 100,000 subscribers went offline entirely. 

It should be said that for both existing and migrating subscribers,  the challenge is not necessarily the unit cost of data as per the frequency of data exhaustion. 

“On the 5th of January 2019. I borrowed a 2GB data from MTN because the one I subscribed got exhausted within a week. Before I could turn on my data. MTN sent me a text that I have exhausted the data I just borrowed,” Adaeze Chalene a Twitter user said. MTN has explained that quick data exhaustion is sometimes a factor of the speed of its 3G and 4G technology. 

Regardless, the cost of data is still a major problem for many people as the A4AI report also showed. According to the report, 1GB of data costs Nigerians 1.7 percent of their monthly income, on average, compared with 7.1 percent for Africa and 2 percent average for the rest of the world.

As far as cheap data goes, another data from Howmuch.net found that Nigeria’s average price of $2.22 for 1 GB is still way behind countries like Egypt ($1.49); Ghana ($1.56); Morocco ($1.66); Western Sahara ($1.66); Cameroon ($1.71); Guinea ($1:94); and Burundi ($2). 

The country falls further in the pecking order with countries like Sudan ($0.68) Rwanda ($0.54) and DR Congo (0.88). 

Apart from individual subscribers, small businesses including startups are the most affected. At a recent World Bank conference, Odunaya Eweniyi, cofounder and COO of fintech firm, Piggyvest listed high cost of data as one of the factors affecting the profitability of startups in Africa.

“This situation, where entrepreneurs and small businesses struggle to get an affordable and reliable connection, is a huge problem,” Callum Cameron, communications manager at A4AI told BusinessDay in an email response. “It is so important that policymakers act quickly to get this issue right so that these businesses and the larger emerging digital economy in Nigeria are able to flourish.”

The A4AI report explains how the pricing for data works. A user usually pays an internet service provider (ISP) for their connection. The ISP, in turn, pays other network operators interconnection fees to plug into the domestic network. A network operator then pays a fee to a submarine cable company for international connectivity. If a user pays $2 for 1GB of mobile broadband, fractions of that retail price are used to settle the various interconnection fees across layers of the internet. The amount of competition at each of these levels affects the price that a user pays. A high fee at the first mile, for example, can trickle down to increase the price an individual user pays. 

Unfortunately, investment in internet infrastructure in Nigeria has not kept pace with demand. Data from the Nigerian Communications Commission (NCC) showed that the growth of fixed wireless and wired technology remained at 0.08 percent as of August 2019. This is unlike mobile technology (GSM) which has grown by 99.58 percent in the same period.

“The evidence is clear that fixed broadband has greater economic benefits than mobile. But both are important and both have to be prioritised at the same time to support Nigeria’s digital economy,” Cameron said. 

 

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