Telecoms sector growth falls to six-year low on naira woes, tariff freeze

• Tariff hike seen halting growth decline trend

The growth of Nigeria’s telecommunication and information sector fell to the lowest in at least six years owing largely to the NIN-SIM linkage initiative, stagnant tariffs amid rising inflation, multiple taxation, and naira weakness.

The latest growth data followed the recently approved increase in tariffs for data, calls, and SMS for the first time in 11 years.

The full-year 2024 GDP report shows that the sector grew at a slower pace of 6.25 percent last year compared to 8.90 percent in 2023. The decline in the telecommunication sector drove down the growth of the Information and Communication sector to 5.42 percent, the lowest in seven years.

Further findings revealed that both sectors have been on a downward trajectory since 2022.

“The moderation in ICT growth reflects the lingering impact of mobile line disconnections on subscription rates amid the conclusion of the NIN-SIM linkage program by network providers in September,” analysts at Cordros Research said in a note on Wednesday.

Benedict Egwuchukwu, investment research associate at Afrinvest Limited, said the decline in the telecoms sector affected the growth of ICT as every sector increased prices in 2024 except telecommunication. “Their operating cost was rising but they could not increase tariffs.”

The naira, which has lost more than 70 percent of its value against the dollar following two sharp devaluations since July 2023, has created a challenging economic environment for the telecommunications sector. The tough business environment has had negative implications for operational costs, and profitability, slowing investments and leading to a slump in network quality in the country.

According to the National Bureau of Statistics (NBS), investments in the information and technology space dropped to $172 million in the first six months of last year from $216.1 million in the same period of 2023.

Africa’s most populous nation grappled with a significant rise in prices last year as the country’s average inflation rate rose to 33.2 percent from 24.5 percent in 2023. Data from the Nigerian Communication Commission (NCC) shows that operating costs for telecommunications companies rose to N2.092 trillion in 2023 from N3.15 trillion in 2022.

Despite the skyrocketing operational costs, inflation, and currency devaluations, telecommunications were forced to retain prices for over a decade.

Last month, the NCC approved a 50 percent tariff hike for operators to ensure the sector’s long-term sustainability and improved service delivery.

At a recent virtual press conference, Angela Wamola, head of GSMA, sub-Saharan Africa said the tariff hike would drive growth and lure in capital needed for investment to strengthen the economy.

“This decision by the NCC is an important milestone for Nigeria’s digital future. By enabling sustainable investment, we are improving the quality of service for consumers and fostering opportunities for innovation and economic growth,” she added.

Wamola projected that by 2028, increased digitalisation in agriculture, manufacturing, transport, and trade will increase GDP by around two percentage points. “This would also create nearly 2 million jobs and raise an additional N1.6 trillion in tax revenue.”

Before the tariff hike, telcos were mandated to increase their investments in network infrastructure for the hike to take effect.

“The increasing demand for digital services across sectors such as education, banking, and healthcare requires us to continually upgrade our networks to deliver more capacity and improve service quality. These investments come at a cost that must be shared proportionally to guarantee long-term viability,” said Dinesh Balsingh, CEO of Airtel Nigeria.