The once-booming telecommunications sector in Nigeria has continued its downward spiral with a continuous decline in the Gross Domestic Product (GDP) growth rate over the last one year.
According to the National Bureau of Statistics (NBS), the sector’s real GDP growth has steadily declined from 11.71% in the first quarter of 2023 to 5.17% by the second quarter of 2024.
This significant drop is attributed to a challenging operating environment characterized by inflation and currency depreciation.
While telecom operators are reporting revenue growth, the gains have been overshadowed by the broader economic challenges facing the sector.
Industry stakeholders said the inability of these companies to adjust prices in line with the depreciating naira has eroded the real value of their earnings, limiting their overall growth.
The forex debacle
Aside from other peculiar challenges in the industry telecommunications companies in Nigeria are now grappling with heavy forex losses caused by the dwindling value of the Naira. This has overshadowed the subscriptions and revenue growth recorded by the operators.
- For instance, MTN, with a subscriber base of 79.7 million as of December 2023, reported a first loss after tax of N137 billion since its 2019 listing on the Nigerian Stock Exchange in 2023.
- The telco incurred FX losses of N740 billion ($815.79 million at N907.1/$).
- Airtel Africa, which had 50.9 million subscribers in Nigeria as of March 2024, reported a loss after tax of $89 million for its full year ended March 2024, primarily due to FX headwinds in Nigeria and Malawi.
- It lost $1.26 billion to derivative and FX exposures, with $770 million attributed to the naira’s devaluation.
- According to industry analysts, the devaluation of the Naira has led to dwindled investment in the telecoms sector. The telecom operators rely heavily on importation of infrastructure to grow and expand their capacity.
Need for urgent action
Commenting on this development, the Founder/CEO of Africa Digital Economy Forum (ADEF), Mr. Akin Naphtal, said there is a need for the government to address the perennial challenges in the telecom sector, which according to him, are now reflected in the dwindling fortunes of the sector.
“Telecommunications is the engine room of the digital economy. A steady decline in the GDP growth rate of the sector for more than a year is a clear indication that things are not going the right way.
“Before the current forex and inflation issues, there have been the perennial challenges of high right-of-way fees and multiple taxation, which have held the industry down for years. There is an urgent need for the government and all stakeholders to address these issues in the interest of the digital economy,” he said.
What you should know
Telecom operators under the aegis of the Association of Licensed Telecom Operators of Nigeria (ALTON) and the Association of Telecommunications Companies of Nigeria (ATCON) have been clamouring for a tariff increase to mitigate the impact of the high inflation and Naira devaluation on their businesses.
- According to them, the telecom industry is the only industry that has not reviewed its prices despite the rising inflation in the country and other economic realities that warrant increment.
- They blamed this on the regulatory restraints that have been preventing them from pricing appropriately.
- The NCC regulates prices in the telecom industry and telecom operators are not allowed to implement any price change without the regulator’s approval.
- The regulator has, however, said a cost-based study is being conducted to determine if it would approve price increments for the operators.
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