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Telecoms contribution to GDP in five years

Telecoms contribution to GDP in five years

The telecommunications sector’s contribution to the GDP has been consistently high in the last five years, with its highest contribution often recorded in the second quarter (Q2).

The first-quarter contribution of the sector to the GDP in 2017 was 9.19 percent. The figure stayed at 9.19 percent in 2018 before rising to 10.11 percent in 2019, 10.88 percent in 2020, and 11.66 percent in 2021.

The contribution in Q2 was 9.47 percent in 2017. It increased to 10.43 percent in 2018, 11.39 percent in 2019 and 14.3 percent in 2020 before closing high at 14.42 percent in 2021.

Similarly, the third and fourth quarters showed the same trend. For the third quarter, the contribution was 7.43 percent in 2017, 8.39 percent in 2018, 9.2 percent in 2019, 11.2 percent in 2020, and 11.94 percent in 2021.

The fourth-quarter contribution to GDP over the period under review followed a similar pattern. It was 8.65 percent in 2017, 9.85 percent in 2018, 10.85 percent in 2019, 12.45 percent in 2020, and 12.61 percent in 2021.

According to the Nigerian Communications Commission (NCC), for the past five years, the telecommunications sector has consistently been driving the digital economy agenda of the government, as it provided the needed catalyst in the digital space in supporting the economy to thrive.

Broadband penetration increased from 19.9 percent in 2017 to 40.9 percent in December 2021, which indicates a percentage increase of 105.5, and over 78 million Nigerians now enjoy internet connectivity, compared to 38 million in 2017.

Data from the NCC also indicates that teledensity rate stands at 102.4 percent in 2021 from 103.6 percent in 2017, with a population estimate of 190 million, up from 140 million in 2017. Basic active internet subscriptions grew from 106 million to 112 million during the period under review.

What constitutes telecoms revenue?

Although the NCC is under the category of self-funding organisation, and not primarily a revenue-generating agency, its efforts in contributing towards the country’s GDP boost revenue through yearly remittances, especially spectrum sales and surplus budgets.

“NCC’s primary role is not to generate revenue for the government, but to nurture and regulate the industry. However, figures obtained from the commission show impressive remittance of funds to the coffers of the consolidated revenue of the Federal Government,” Umar Danbatta, executive vice chairman of NCC, said.

According to Danbatta, NCC has once contributed about N362.344 billion of its remittances into the Federal Government’s Consolidated Revenue Fund, in accordance with the Fiscal Responsibility Act of 2007. Further, it also decided to make payments on accounts as revenues are generated.

Earnings from spectrum management

Spectrum is a scarce national resource for telecommunications services. It is often described as the oxygen that keeps the telecom sector going. Globally, spectrum auctions and sales have remained one of the most viable sources of revenue generation in the telecoms industry. From the US to China, Germany to Australia, Bahrain to the UK, contributions from spectrum sales have been huge.

Similarly, the various spectrum auctions done by the NCC which started in Nigeria over two decades ago have fetched the government huge revenues as well. For example, in 2001, MTN and Airtel, which was Econet at the time, paid $285 million for their cellular licences.

Globacom and Etisalat also paid in 2002 and 2008, respectively before they commenced commercial services. In the first five years of the sale, the report shows that over $400 million have accrued to the government from spectrum sales alone.

In 2016, MTN Nigeria bid and won spectrum in the 2.6GHz band, and it paid N18.96 billion.

To ensure effective spectrum management, the Danbatta administration introduced spectrum trading, where unused frequency bands can be sold among the operators.

While this has been commended for ensuring optimum and efficient use of scarce resources, it has also contributed to the revenue generation drive of the commission.

Read also: Nigeria’s telecom market attracts least investment in almost 10 years

Regulations and fines

Part of the measures to ensure stability in the sector is the introduction of regulations and fines. Although fines are seen as a discouragement to investments, experts say it is to bring sanity to the sector.

In October 2015, the NCC sanctioned MTN for violating the SIM registration rules. The telecoms firm was slammed with N1.04 trillion. The total sum was based on a fine of N200,000 for each unregistered subscriber, put at about 5.1 million lines.

However, after prolonged negotiation between the governments of Nigeria and South Africa, the fine was reduced to N330 billion. With the resolution in 2016, there was an agreement for settlement over a three-year period, which the telecom operator completed in 2019.

Apart from MTN, other telecom operators have also at one time or the other had to pay fines for going against the industry regulation, which contributed to the revenue growth.

5G licence

According to the Global Mobile Suppliers Association, the number of launched 5G networks has surpassed 175, and now stands at 176, with a presence in 72 countries and territories as at August 2021.

Revenues are expected to be generated through 5G spectrum sales. Nigeria joined other countries who have sold the 5G spectrum licence to their telecoms operators in February. For example, Taiwan realised about $4.61 billion from the first phase of its 5G auction, which was about 4.6 times more than the floor price. Germany also raised $7.15 billion in its auction in 2019.

MTN Communications Nigeria Plc and Mafab Communications Limited, who were the provisional winners of the 3.5 Gigahertz (GHz) spectrum licence, made their full payment of $273.6 million each for the 5G spectrum licence to the NCC.

The NCC is expected to take the country’s broadband project higher with 5G deployment. The Federal Government stated that 5G is a significant upgrade for networks and will be the backbone for the information and communication technology industry post-pandemic recovery.