Why telecom market attracts low capital imports in recent years
The telecom sector imported its lowest amount of capital in 2020, with a consistent decrease from $944.5 million in 2019 to $417.5 million and $107.5million respectively in 2020 and 2021, according to a recent report from National Bureau of Statistics (NBS).
Sadiq Abu, CEO of ABSA Nigeria, a Financial Service company, said this is due to the growth in the Nigerian telecom market.
“It is a sign of the maturity of the market, capital importation relates to equity investment. If you are a mature business, you are not going to get equity investment because you already have the equity you need and what you are looking for is debt finance.
Equity investment according to investopedia means buying shares directly from companies or other individual investors with the expectation of earning dividends or reselling while Debt financing is when a firm raises money for capital by selling debt instruments to investors
The CEO asserted that MTN and others did not get equity investment because they are raising a lot of money from the local market.
According to him, telecom is a mature market when you look at Telco but is a developing market, when you look at Telco infrastructure.
“So you see huge Foreign Direct Investment (FDI) in Data centres, Fibre optic networks, huge FDI in towers which are some of the emerging areas but Telco is a big market and looking at FDI in Telco is not the right way,” he said.
Ajibola Olude, Executive Secretary and Chief Operating Officer at the Association of Telecommunication of Nigeria (ATCON) disclosed that the cause of the decrease in capital importation or FDI can be traced to the issue of the NIN-SIM registration linkage issue and the negative impact of the covid-19 pandemic which has a global effect
“During Covid-19, money was unable to move from one country to another, and people who want to release their money for investment could not because, when it involves finance, you will always want to know the person you are dealing with and those organisations that would have facilitated the movement of money were not fully operational during the period and all this accounts for the decrease of FDI in the sector,
Speaking on the impact of the NIN-SIM to FDI, the president stated that the NIN-SIM linkage issues occurred within the same period in 2021 which also accounted for slow FDI that could get to the sector.
He explained that the expansionary motive of the telecom sector was affected since the FDI that came into the country was impacted negatively and majority of the telecom equipment were imported, meaning that it will be difficult to replace faulty equipment.