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Nigeria’s telcos’ investment declines 55.7% in one year

Nigeria’s telecom industry in 2019 attracted investment worth over $942.86 million. However, in 2020, it recorded a decline of 55.7 percent as the industry only attracted investment worth about $417.48 million for the period under review. This was disclosed by the Nigerian Communications Commission (NCC) via its 2020 subscriber/network data report.

The report indicates, “Capital Inflow (Foreign Direct Investment) into the Nigerian telecoms industry in 2020 was approximately $417,481,615.30. This is against $942, 863,833.96 as at 2019.”

The apex regulator attributed this development to FX scarcity and the COVID-19 pandemic, which it claimed affected global activities negatively.

Ikechukwu Nnamani, president, Association of Telecommunication Companies of Nigeria (ATCON), in June, decried the impact of foreign exchange scarcity on the operations of many telecom operators in the country while seeking special intervention from the Central Bank of Nigeria (CBN).

He stated that the association was in active collaboration with the NCC to hasten the process of securing special consideration from the apex bank. The inability of the telecom operators to source FX from the official window is compelling operators to patronise the black market, leading to increased costs, which, under normal circumstances should be passed on to consumers through price increases.

“Lack of forex to telcos is an open secret. Forex is scarce in the country, and it affects the telecom sub-sectors. We have been asking for special consideration from the CBN, but we have not got it,” Nnamani said.

“We are hoping this happens, given the critical role telecom plays. We are hoping the CBN will soon begin to give special consideration to the telcos. We’ve been trying to engage with them, to see how possible it is”, he said.

Read also: Nigeria’s telecom industry needs more investment to compete with peers – Afrinvest

When asked if telcos resort to black market for forex, he said, “If one is desperate and needs to make transactions, yes. Although, it comes at a higher cost, which increases the cost of doing business.”

Operators in the sector have sought special consideration to enable them to get access to more foreign exchange. Some industry stakeholders have stated that operators have been struggling to get foreign exchange, and this has been responsible for the recent decline in capital inflows.

Biodun Omoniyi, managing director/CEO of VDT Communications, says the industry was import-dependent and thus, the need for special forex intervention remains germane.

“There is no accessibility to forex, which affects the quality of service as operators cannot quickly replace damaged equipment. When we talk about communication, we are also referring to the equipment involved. We don’t manufacture them in Nigeria,” Omoniyi notes, but laments that the fall of the naira had increased the cost of equipment and service delivery.

He said, “Telcos provide service in naira. The naira has been falling; so, it is more expensive to buy equipment. Since COVID-19 started, the naira has lost about 35 percent of its value.

“We import almost everything in the telecom space. We are import-dependent and need forex for almost everything in the space, including computers. We can’t expand our networks without buying more equipment, which means forex. Operators are not getting easy access to forex, and I don’t think anyone is getting easy access to forex. I think it is affecting other industries as well.

“Before, we used to buy the dollar for N350 or N360; today it is N500. That is N150 more. The naira you have gathered today or one year ago and feel would be able to buy you three pieces of equipment can just buy you two at most now.”

The Commission also stated that the decline in capital importation was also largely attributed by the Operators to the outbreak of the COVID-19 pandemic that distorted global businesses and impacted businesses negatively.

CAPEX (domestic investment) stood at N408, 151,627,158.62 as the Year 2020 based on submissions from responsive Licensees. The CAPEX investment declined by 18.62% due to probable challenges of the global pandemic in the Year 2020.

Despite the covid-19 induced economic headwinds which impacted many sectors negatively, the telecommunications sector proved to be a bright spot at the period of uncertainty and even beyond. The sector recorded real growth of 15.90% in 2020 (vs GDP growth of -1.92%) and 7.7% in Q1 2021 (vs GDP growth of 0.51%).

This performance was driven by the increased use of digital channels for daily routine activities from telecommuting to social engagements. On the flip side, the sector has been plagued by several challenges including eroding consumer purchasing power and insecurity.

NCC aggregated total outgoing local and national traffic at 150,825,830,687.40 minutes. The average tariff charged by the mobile networks was N11.5, thus putting the total cost of outgoing calls on the mobile networks during the period at N1.73 trillion. The total number of national SMS sent stood at 8,223,933,975.02.

The NCC had pegged the cost of SMS at N4. Therefore, the cost of sending SMS within the period totalled N32.89 billion. Total outgoing local and national traffic was 150,825,830,687.40 minutes, while total incoming local and national traffic was 151,871,687,402.67 minutes.

Ranking the various telecom operations in hierarchical order, we have:

MTN Nigeria had the highest total outgoing and incoming traffic of 103,531,547,686 and 105,473,566,557 minutes, respectively.

 Airtel had total outgoing and incoming traffic of 41,888,554,009.00 and 41,869,399,065.00 minutes, respectively.

Globacom had total outgoing and incoming traffic of 758,717,879.40 and 128,255.78 minutes respectively, while 9mobile had total outgoing and incoming traffic of 3,522,412,570.00 and 4,415,048,371.89 minutes, respectively.

SMILE had total outgoing and incoming traffic of 328,751,159.00 and 48,532,478.00 minutes, respectively. NTEL had total outgoing and incoming traffic of 795,847,384.00 and 65,012,675.00 minutes, respectively.

While we acknowledge the need for the government to focus more on sectors that have been badly hit by the pandemic through various interventions, the telecommunications sector should however not be left out, given its growing contribution to GDP (11.66% as of Q1 2021).

The telecom sector remains one of the fastest-growing sectors in Nigeria’s ailing economy. The lingering impact of FX scarcity may subsequently undermine investments by industry operators and players to enhance the quality of network infrastructure, thus limiting broadband penetration.

Broadband penetration however stood at 40.66% as of April 2021 when compared with the target of 70% by 2025.

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