Teleco’s tariff hike seen spurring growth, driving investment

The 50 percent approved hike in tariff for Nigerian telecommunications is expected to drive growth and lure in capital for investment to strengthen the economy, according to GSMA, a non-profit group representing the interest of mobile network operators.

Both Angela Wamola, head GSMA, Sub-Saharan Africa (SSA) and Caroline Mbugua, senior director Public Policy, & Communications SSA, GSMA who spoke to journalists last Friday at a virtual meeting said Nigeria’s bold step to revamp its digital economy could unlock two million jobs and add 15 million mobile network users by 2028.

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The telecoms regulator had in January approved the increase in mobile tariffs, the first such hike in more than a decade, bowing to pressure from operators struggling with surging costs amid high inflation and currency devaluation.

According to Wamola, the move by the NCC will improve the quality of service for consumers and spur economic growth in a country direly in need of investment to boost its gross domestic product (GDP).

“This decision by the NCC is an important milestone for Nigeria’s digital future. By enabling sustainable investment, we are improving the quality of service for consumers and fostering opportunities for innovation and economic growth,” Wamola said in a statement on Wednesday.

While commending the federal government for the bold initiatives, she made known that unlocking the full potential of this reform lies in implementing “critical” additional measures such as “simplifying Right of Way permits, implementing a Critical National Infrastructure plan, and reducing the mobile sector’s tax burden”.

“These steps will be essential to accelerate digital adoption across sectors. It is estimated that increased digitalisation in agriculture, manufacturing, transport, trade and government will increase GDP by around two percentage points by 2028.

“This would also create nearly 2 million jobs and raise an additional NGN 1.6 trillion in tax revenue.”

Wamola stated that a shortfall in digitalisation means a reduction in the overall economy, limiting the contribution in the amount of tax revenue that the sector generates in helping governments meet their social economic obligations to its people.

“In the medium term, a slowdown in digital adoption will forfeit all the productivity gains and service delivery improvements that go along with digitalisation.

“And finally, in the long term, this will result in shrinking the telecom sector, which will lead to our people remaining on older obsolete technologies, receiving even poorer quality of service,” she said.

Nigerians are worried that the 50 percent straight increment may stoke prices in a country reeling from its worst cost-of-living crisis in a generation.

Read also: NLC plans nationwide rally against telecom tariff hike

Last week, the Nigeria Labour Congress (NLC) talked tough, rejecting the hike in telecommunications tariffs and announced plans for a nationwide protest scheduled for February 4.

Meanwhile, speaking about the possible inflationary effects the increase portends for ordinary Nigerians, Mbugua said the “risk is a macroeconomic situation, which means that most of these factors, we don’t have control over as Nigeria or Africa.

“It might look like the consumer will feel the pressure from a pricing perspective. But with the improvement of service and the compounding of positive externalities of connectivity, more opportunities will be opened up for us to start seeing the value of connectivity in the country,” Mbugua said.

Wamola revealed that the infrastructural gap means Nigeria and other countries in Africa are lagging with 4G still being the dominant technology, emphasising that by 2030, Africa’s transition to 5G network will be at 17 percent compared to 80 percent adoption in China, North America, Asia and Europe.

“As we have said, 2G is working in the villages, even sometimes 3G, but this is not the technology of the future when the rest of the world is already competing almost 80% coverage in 5G, and the and the region is today at 1% coverage of 5G and only aspiring to get to 17% of our population by 2030,” she said.

Read also: First telecoms tariff hike in 10 years to fuel investments

Mbugua added that the increase in tariff will accelerate the contribution of the telecom sector to the economy from about 13.5 percent to 20-22 percent by 2030.

“That requires investment. And the more the sector grows because of how big it is in the economy of Nigeria, the more beneficial it is,” she stated.

“We see sectors such as health, energy, manufacturing, agriculture benefiting immensely from connectivity. And at the end of the day, we are all serving one common stakeholder who is a consumer. So, the consumer is at the front and center of the development and the growth of the telecommunication sector,” Mbugua added.