Nigeria’s telecommunication sector recorded its lowest growth in three years, thanks to the Federal Government decision to ban SIM card sales, stifling the growth of the sector that has contributed immensely to the growth of the economy over the years.
According to a recent report by the National Bureau of Statistics (NBS), telecom’s growth rate slowed to 7.6 percent in Q1 2021 compared to 9.7 percent growth in Q1 2020.
This is the lowest growth the sector has recorded in three years, an indication that the economy may have grown better if it had continued on its double-digit growth trajectory.
“If the telecommunication sector grew in line with what we have been seeing from Q2’ 2020, Nigeria’s growth rate in Q1 would have been higher,” said Abudulazeez Kuranga, an economist at Lagos-based Cordros.
The Nigerian economy grew 0.51 percent in Q1 2020 compared to 1.87 percent recorded in the same period last year, and 0.11 percent in Q4’ 2020.
The telecom sector has been growing double digits every quarter since Q2’ 2020. It grew 18.1 percent, 17.36 percent and 17.64 in the second, third and fourth quarter of 2020, helping to lift the economy out of the pandemic-induced recession as other sectors contracted.
Omotola Abimbola, an economist at Chapel Hill Denham, also pointed out that if the telecom sector’s growth had been better, we would have seen a stronger performance in the non-oil sector. Non-oil sector slowed in Q1 and that was partly because of the telcos.
The slowdown in performance can be linked to a decision by the Federal Government on December 15, 2020, calling for the suspension of registration of new SIM cards in the country, also stating that all SIMs not registered with valid NINs on telecommunications networks would be blocked after December 30, 2020.
The ill-timed policy mandated the telecom sector to register over 100 million people in two weeks or lose half of their customer base.
Last month, the ban on SIM registration was lifted, but the damage was already done.
According to data from the Nigerian Communications Commission (NCC), the biggest telecom provider, MTN Nigeria, lost 4.8 million subscribers in the first quarter of 2021. Airtel lost 5.26 million subscribers, while Globacom and 9mobile lost 1.92 million and 131.7 thousand subscribers, respectively. This means about 12.1 million subscribers were lost in Q1 2020.
The telcos have done a great deal in growing their subscribers over the years. As at 2001, only about 400,000 Nigerians had telephone lines from the defunct Nigerian Telecommunications Limited (NITEL). In a period of 20 years, Nigeria has about 208 million active lines.
This means that on a yearly basis about 10.4 million lines were activated and 866,000 lines were activated on an average monthly.
The telcos listed on the Nigerian Exchange Group – MTN and Airtel – saw a surge in their revenue despite the loss in subscribers. MTN grew its revenue 17.2 percent year-on-year to N385.1 billion while Airtel recorded a revenue growth of 15.4 percent growth to $1.03 billion in Q1’ 2020.
MTN recorded a 42 percent growth in profit to N73.7 billion in Q1’ 2020 compared to N51.7 billion in Q1’ 2021. The management of MTN explained that the effect of the SIM ban on voice revenue was offset by increased data usage by active SIMs in its base and migration to a higher quality of experience. Airtel also grew its profit by 1.8 percent to $415 million.
However, 2 million youth were rendered jobless by the suspension of sale, registration and activation of SIM cards, according to the Arewa Telecom Operators Agents and SIM card Dealers Association (ATOASDA). There are about 23 million jobless Nigerians, according to the NBS.
This is not the first time a Federal Government policy would be ill-timed and counter-productive to the economy.
In August 2019, the Federal Government made a decision to shut land borders to trade with neighbouring countries, which was supposed to stimulate local production and drive down inflation. But the policy only succeeded in driving up food prices and headline inflation.
The policy was also ill-timed because Nigeria does not produce enough to meet demand, and as the borders were closed the gap that local production cannot cover is passed on to the consumers in the form of high prices.
Inflation rose from 11.08 percent in July 2019 to 12.82 percent in July 2020. By the time the border closure policy was lifted in December 2020, inflation hit 15.75 percent. Although the pandemic occurred, inflation had been on the rise since September 2019.
According to Kuranga, there is a caveat to what happened with the telcos. “Their double digit growth came on the back of the pandemic. There was an increase in mobile subscriptions as many people worked from home but as the pandemic continued to ease, the slowed growth could be partly because more people have returned to work,” he said.