A report by GSMA has indicated that telecommunications industries could not increase their revenue in Naira despite increasing the number of subscribers.
GSMA is a global organisation unifying the mobile ecosystem to discover, develop, and deliver innovation foundational to positive business environments and societal change.
The report, which was released yesterday in Abuja, also noted that the mobile telecoms sector accounted for 13.5% of total GDP in 2023, including the direct value-added by wider ICT industries and the impact of the sector in enhancing the productivity of other sectors.
It said the adoption of digital technologies by individuals and businesses has been shown to enhance productivity and raise household incomes.
“Overall, the mobile sector’s total contribution to GDP is estimated at 33 trillion NGN in 2023, with 2,4 trillion NGN in tax revenue contributions. A successful digital economy would have a material impact on the economy of Nigeria over the next 3–5 years.
“It is estimated that growth in digitalization in agriculture, manufacturing, transport, trade, and government will result in an increase in GDP of around 2 percentage points by 2028. This would also create nearly 2 million jobs and raise an additional NGN 1.6 trillion in tax revenue.
“Improving the policy environment through the initiatives described in this report would stimulate growth and development of the sector and the broader economy. It would boost coverage and adoption of mobile broadband, resulting in an additional 15 million internet users by 2028′, the report said.
On the financial performance of the sector, the report said, “The financial performance of the mobile industry in Nigeria has slowed down in recent years after a long period of sustained growth.
“The overall financial performance of the industry in recent years has not been sufficient to support the capital-intensive nature of the business.
“Revenue in Naira has stopped growing as the number of subscribers has increased. Falls in ARPUs indicate pressure on prices and reductions in average usage,” the report noted.
On increased operating costs in the recent period, the report said, “The primary driver of this has been increases in the cost of power for sites due to the rapid increases in the price of fuel, high and increasing costs of tax compliance because of the complex and overlapping tax structure within the country, and increased demand for forex due to contractual obligations for rollout that are denominated in USD.”
The report also said that the cost of building and operating fibre-optic networks has increased because of the difficulty and expense of obtaining rights of way (RoW) from state authorities and the very high number of fibre cuts, primarily caused by construction work and vandalism.
“Underlying these trends in revenue and operating costs has been the deteriorating macroeconomic situation in Nigeria. The high levels of inflation have pushed up the cost of many inputs into mobile service providers’ businesses.
“Mobile service providers need to generate sufficient revenue to cover their operating costs and support this level of capex over the medium term. If this is not realised, they are likely to cut back on either capital, operating expenditures, or both.
“This results in a shrinking sector, which leads to subscribers receiving a poorer quality of service and delays in coverage expansion. In the short term, it would result in a reduction in the amount of tax revenue generated by the sector.
“In the medium term, a slowdown in digital adoption will forfeit all of the productivity gains and service delivery improvements that go with digitization. The sector would further benefit from a policy and regulatory environment that takes account of the impact on the financial and operational sustainability of service providers.
“Decisions on issues such as tax, regulatory fees, spectrum fees, customs duties, and other government levies all have an impact on this.
“In particular, the current approach to the regulation of both wholesale and retail mobile tariffs by the Nigerian Communications Commission (NCC) does not allow for the adjustment of tariffs to reflect the changing cost of inputs into businesses and facilitate investment into improved network coverage and quality of service. By international standards, the NCC’s approach to retail tariff regulation is not considered to be standard practice.
“In addition to the financial sustainability of the industry, further progress on the national strategy for digitalization could be made through a partnership between the sector and the government. The sector can contribute in specific ways to the government’s strategic initiatives.
“The government, the NCC, and all federal and state ministries and regulatory authorities can, in turn, support the sector to deliver on these initiatives. This can be done by improving the sector’s regulatory environment and its investment climate. Together, this will further support the government’s digital economy objectives,” the report added.
In his remarks, the Minister of Communication, Innovation, and Digital Economy, Bosun Tijani, said that beyond the strategic blueprint, it was clear that Nigeria needs a report that speaks to the reality that everyone can actually understand.
“There is no nation that can leapfrog the government without proper application of science and technology, and fortunately for us, the core set of technologies that are driving the change that we all see and seek in our world today are digital technologies; they offer us the opportunity to be able to leverage data immensely in manners we have never seen before.
Also, the Executive Vice Chairman of the Nigerian Communications Commission (NCC), Aminu Maida, said the report came at an important time when the Ministry of Communication, Innovation, and Digital Economy is setting in motion a strategic plan with the goal of harnessing the power of technology in order to bring about all-round development of our nation’s economy.
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