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ICT sector slumps to 5-yr low as investments slow

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Nigeria’s Information and Communication Technology (ICT) sector, which has powered economic growth for more than five years in Africa’s most populous nation is showing signs of slowing down.

The sector expanded in real terms by 6.69 percent (year-on-year) in the third quarter (Q3) of 2023, the lowest in five years.

The slow down is as a result of lower capital expenditure or capital expense (CAPEX) intensity by major telecommunication players, according to analysts at Cardinal Stone Research.

In addition, rising inflation (currently at an 18-year high) dampened consumer spending capacity and might have led to weaker trade sector growth.

According to the latest Gross Domestic Product (GDP) report from the National Bureau of Statistics (NBS), despite contributing 15.97 percent to the GDP in Q3, up from 15.35 percent in the same period in 2022, the data indicates a struggle for the ICT sector to maintain its previous growth momentum.

In October 2023, Nigeria’s inflation rate rose to 27.33 percent on a month-on-month basis, up from 26.72 percent in September 2023 causing the prices of food to rise and less amount spent on data.

Food continues to be the major driver of inflation as food inflation rose to 1.52 percent on a year-on-year basis. This represents a 7.80 percent point increase to the rate recorded in October 2022 (23.72%).

Mustapha Umaru, Equity Research Analyst (Telecoms), CSL Stockbrokers Limited attributes the decline in the ICT sector to a notable decrease in the month-on-month telecom industry data, primarily due to constraints in subscriber purchasing power and economic challenges.

“The telecommunications sub-sector, a vital component of Nigeria’s ICT landscape, has faced challenges in meeting the growing demands of an increasingly connected population. Issues such as network congestion, frequent service disruptions, and a lack of adequate broadband infrastructure have hindered the sector’s ability to provide reliable and high-speed internet connectivity,” he said.

Read also: In Nigeria, agriculture became fraud. Tech was the enabler

Apart from the fall in subscriber numbers which is a result of a constraint in the purchasing power of consumers, the rise of inflation and naira devaluation, fuel subsidy removal affected Nigerians’ means of survival.

The removal of the fuel subsidy by President Bola Tinubu led to a significant surge in fuel prices across the country, tripling the petrol price from N184 to N617.

This resulted in increased transportation fares for public transportation providers, including buses, tricycles, and motorcycles.

Adeolu Ogunbanjo, President of the National Association of Telecoms Subscribers (NATCOMS) said it is a clear indicator that the economy is taking a toll on Nigerians, particularly with the disposal income being eroded by the removal of subsidies and the unification of the Naira, coupled with inflation that is rising.

“With the government effort to address the issues facing the ICT sector. Plans for a comprehensive review of existing policies, the introduction of incentives for private sector participation, and the ICT industry will experience growth in the coming years,” he said.

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