Twenty-twenty was the year Nigeria saw the most growth in broadband penetration and by December of every year since 2018, the numbers have closed higher than what it began with in January. This is likely not going to repeat in 2021.
The Nigerian Communications Commission (NCC) the regulator that compiles the report on broadband penetration has so far released the data from January to July with five months of data still to be expected. The country has recorded a month of growth so far and has seen a decline from a peak of 45 percent penetration drop to below 40 percent.
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In the latest NCC report in July, the penetration declined to 39.79 percent from 39.97 percent in June representing a 0.18 percentage point drop. The decline means that broadband penetration is now 6.14 percentage points adrift of the all-time high set in October 2020 where it hit 45.93 percent. It later closed in December 2020 at 45.02 percent and has been on a downward slope since then.
Broadband penetration is defined as the number of subscriptions to fixed and mobile broadband services, i.e. with advertised data speeds of 256 kbps or more, divided by the number of residents in each country.
According to the Organisation for Economic Co-operation and Development (OECD), broadband penetration is calculated by the number of broadband subscribers per 100 inhabitants. Broadband connections comprise both fixed and wireless services offering connectivity with download speeds greater than 256kbit/seconds.
Fixed broadband comprises DSL, cable, fiber-to-the-home (FTTH) and fiber-to-the-building (FTTB), satellite, terrestrial fixed wireless, and other fixed-wired technologies. Mobile broadband comprises data and voice and data-only subscriptions. The World Bank identified broadband internet connectivity as a vital means for economic growth with every 10 percent increase in connectivity enabling a 1.38 percent growth in GDP.
The NCC has been measuring growth since 2017. Broadband growth in Nigeria has been a function of the level of investments in telecom infrastructure.
The last time broadband penetration in Nigeria closed the year in decline was in 2017. It had begun the year at 21.69 percent, rose to 22.40 percent the next month, only to go on a four-month slide of up to 19.69 percent. It ended the year at 19.86 percent representing 2 percentage points adrift of what it began the year with.
After 2017, the industry has been on a rollercoaster piling numbers on numbers until the peak in October 2020. Broadband penetration was recorded at 38.49 percent in January of 2020 and needed 9 months to add 7.44 percentage points to hit a record 45.93 percent in October and surpass the gain of 5.46 percentage points in 2019 which ended at 37.80 percent.
However, neither year could come even close to the remarkable growth of 11.51 percentage points recorded in 2018. The year began with 19.97 percent in January and went on to a remarkably unbroken run of gains reaching 31.48 percent in December.
2021 has been on a run of losses so far. Nonetheless, to meet the 45.02 percent recorded in December 2020, broadband penetration would need to grow by at least 1.5 percentage points in the remaining five months of the year.
But several factors make achieving this goal almost impossible.
To start with, foreign direct investments (FDI) into the sector have been down by 20 percent in the past 3 to 4 years. Low investment means not much is being done to advance existing or build new infrastructure that has the capacity to carry the new innovations and solutions that are being built by businesses.
Capital expenditure (CAPEX) in the sector declined in 2020 compared to the previous year. A full-year report by the NCC found that capital inflow into the telecoms industry in 2020 was approximately $417 million compared to $942.8 million in 2019.
There is also the slow pace of the process for licensing of spectrum. Spectrum license is permission given by a government agency to an entity that gives that entity exclusive rights to use a frequency band for a particular application, such as radio broadcasting. Licenses are designated for a specific geographic area, such as rural areas, metropolitan areas, regions, or the entire nation.
The NCC is responsible for authorising and supervising firms operating in the communications industry. This includes granting, licensing and transfer of a spectrum license. So far the speed and frequency of giving out the required spectrum has not been encouraging for operators.
Insecurity in the country has also contributed to the low level of capital deployed in the past 3 to 4 years in the telecom industry. On Saturday 3 September, a leaked letter from the NCC to Globacom revealed the plan to shut down telecommunication services in Zamfara state in light of pervading security situation and to enable the military to carry out covert operations in the region. The shutdown will last for 2 weeks.
Before the letter from NCC, operators had largely stayed away or reduced their activities in many states with high insecurity. The implication is infrastructure investments have stalled and will likely not return to pre-security levels before the end of the year unless some sense of normalcy is restored in the affected states.
Inconsistency in the policy environment is also pushing out new investors and forcing those already exposed to the market to stall the fresh deployment of funding towards infrastructure. For example, the market is still struggling to recover from the impact of the temporary ban on SIM card registration which lasted for about five months before the government was forced to lift it in April. The operators have also had to engage with banks on USSD with one of the consequences being the shut down of MTN airtime services.
Also, state governments are yet to fully complete the reduction in Right of Way charges. So far, only about 7 states have publicly complied with either the N145 recommended fee from National Executive Council (NEC) or removed the fee entirely.
With MTN announcing a three-year plan in which it would deploy new capital for infrastructure, it would appear the operators are willing to sail again but without regulators making some serious changes to improve the ease of doing business in the market, the destination might not lead to the promised land in 2021.
