Telecommunications investment has been identified as one with a strong potential to spur economic growth and create employment in the short and long terms.
Today, Nigeria can boast of a telecoms sector worth over $75 billion, with connected telephone lines of about 286 million, of which 199 million are active.
Research findings indicate that telecoms investment has an impact far beyond the scope of the industry itself, promoting growth in adjacent industries and creating new ones. Telecommunications investment accounts for up to one-third of economic growth.
This is evident in the resilience of Nigerian telecoms industry, which has remained consistent in the midst of the several challenges plaguing the economy.
Amid a general economic downturn aggravated by the outbreak of coronavirus, the information and communications technology (ICT) sector contributed 17.83 per cent in the second quarter (Q2). This was boosted by activities in the telecommunications sub-sector, which share of the gross domestic product (GDP) stood at 14.30 per cent in the quarter under review.
At a period when most sectors came out negative, the ICT sector, in the second quarter, recorded a growth rate of 15.09 per cent in real terms, year-on-year. Compared to the rate recorded in the corresponding period of 2019, this was an increase of 6.09 per cent points.
According to the National Bureau of Statistics (NBS) data, quarter-on-quarter, the sector exhibited a growth of 20.32 per cent in real terms. Telecommunications’ contribution in Q2 translates to N2.272 trillion, up from N1.821 trillion in Q1, 2020.
The NBS disclosed that foreign capital investment in the telecommunications industry rose by 725 per cent in 2019 from the $114.43 million recorded in 2018. About $829.62 million was invested in the industry, increasing the foreign capital to $944.05 million.
Impact of Regulation and Policy
According to analysts, the impact of regulation cannot be isolated from the sector’s positive contributions to the country’s economic growth.
Telecoms expert, Kehinde Aluko, said the Nigerian Communications Commission (NCC), with the backing of NCA 2003, must be working critically on the eight-point agenda of the Executive Vice Chairman, Prof. Umar Danbatta.
With the Strategic Vision Plan (SVP), which housed the eight point agenda, broadband penetration moved from six per cent in 2015 to 42.02 per cent by July, 2020. Its contribution to the GDP increased from 8.50 per cent in 2015 to 14.30 per cent in Q2, 2020.
When Danbatta assumed leadership of the Commission five years ago, 217 access gap clusters were identified in the country affecting 40 million Nigerians without access to telecoms services. But today, it has reduced to 114, with 15 million previously digitally-excluded Nigerians now having access to telecoms services.
Danbatta, while giving account of his stewardship in the last five years with media executives last week, said the Commission is committed to addressing the remaining access gap clusters, which are areas outside the frontier of economic viability to ensure the remaining 25 million Nigerians have access.
Similarly, on assumption of office, there were 47,000 kilometres of fibre optic cables laid across the country. However, five years later, as a result of regulatory focus, this has been extended to 54,725 kilometres through the efforts of some private sector operators.
“In line with the Federal Government’s target, additional 120,000 kilometre of fibre are being planned over the next four years. In this regard, the NCC is working on last-mile connectivity to different parts of the country through leveraging the 40 terabyte capacity of five submarine cables on the coastal shores of Nigeria,” he said.
Danbatta pointed out that the licensing of six infrastructure companies (InfraCos) to deploy fibre infrastructure across the six-geo political zones will also help to galvanise increased connectivity. “This will also bring about a reduction in cost of data from N1000, per gigabyte of data to around N390 with broadband penetration target of 70 per cent to cover 90 per cent of the population within the next five years, as contained in the new National Broadband Plan (2020-2025),” the EVC said.
Growth catalysts
While attributing the second quarter performance of the ICT sector to the sound regulatory environment enthroned by the NCC, stakeholders in the industry have called for strategic policy measures to sustain the growth. Reacting to the development, Chairman of the Association of Licensed Telecoms Operators (ALTON), Gbenga Adebayo, hinged the growth on many factors, including the investor-friendly policy, and regulatory environment championed by the NCC leadership, the commitment of all stakeholders, consistent investment in network maintenance and expansion, and sacrifice by sector operators.
To sustain this growth, the ALTON Chairman urged the country to continue to invest in network expansion and maintenance operations, increase access to foreign exchange to procure network critical equipment, consistency in policy, and policy environment. Adebayo said there should be access to spectrum and friendly policies around its allocation, assignment, and cooperation between the stakeholders.
Also speaking, the President, Association of Telecommunications Companies of Nigeria (ATCON), Olusola Teniola, said: “Telecoms industry has remained bullish owing to the quality of leadership at the helm of affairs at the Commission.”
He added that NCC has become a reference point in the telecoms regulatory ecosystem in Africa and beyond.
Commenting, the President, National Association of Telecoms Subscribers of Nigeria (NATCOMS), Adeolu Ogunbajo, said the regulatory approach of Danbatta has made telecoms “the oxygen that keeps economic activities afloat during the lockdown.”
He added “consumers are appreciative of the fact that the Commission, working with its supervising ministry, didn’t allow the consumer to suffer serious disruption to quality of service and quality of experience.”
More investments required
Danbatta, who promised to improve greatly on the achievements of the last five years, admitted that the sector still requires fresh and huge investments, as more gaps needed to be bridged.
The EVC said: “We cannot have pervasive broadband with only 37,000, 4G-enabled Base Transceiver Station (BTS) of the total 50,000 BTS currently in the country. We need more next-generation technologies as we work through addressing infrastructure deficits occasioned by the spike in data usage in the country.”
In this regard, he said the 5G trial conducted in 2019, and its eventual safe deployment in the country will increase data speed and boost efficiency in service experience for the consumers.
On capital importation, Danbatta said in 2015, foreign direct investment (FDI) in the telecom sector stood at $1 billion, but declined to $212 million by 2018. He however, noted that through regulatory efforts, the FDI in the sector has picked up again reaching $930 million according to recent figures from the Central Bank of Nigeria (CBN).
According to analysts at Afrininvest with broadband penetration relatively low in Nigeria compared with peers such as South Africa and Egypt, more investments would be required, as there are significant earning prospects.
“Currently, the average revenue per user (ARPU) of our coverage companies remains weak relative to levels in other peer countries such as South Africa and Egypt. We believe platforms of operators can be leveraged to catalyse change in other sectors, especially financial services, and deliver enhanced earnings performance,” it said.
Afrinvest added that the major pressure point for the industry had been regulation, with NCC’s heavy regulatory fines and policies to ensure fair competition thereby restraining the growth of some major players. “Similarly, regulation has restricted the expansion into other business lines with strong prospects such as financial services, unlike in markets like Kenya and South Africa. We believe the speed and flexibility of regulation would shape the trajectory of growth and investment in the sector,” it pointed out.
Future outlook
Although there are still challenges, including infrastructure deficits, the ICT sector appears set to maintain a steady growth trajectory in the coming years. Regulatory reforms should help ensure better consumer protection and more equitable distribution of telecoms’ economic benefits, while on-going government efforts to expand its fibre-optic network should offer the country significant economic dividends.
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