Nigeria’s once-thriving telecommunications sector has seen a continuous decline in its Gross Domestic Product (GDP) growth rate over the past year, amidst mounting challenges related to inflation and currency depreciation. Data from the National Bureau of Statistics (NBS) indicates that the sector’s real GDP growth has steadily fallen from 11.71% in the first quarter of 2023 to just 5.17% by the second quarter of 2024.
Despite reporting revenue growth, telecom operators are struggling to maintain their overall profitability due to the harsh economic environment. The inability to adjust prices in line with the depreciating naira has eroded the real value of their earnings, significantly impacting their growth.
A major factor contributing to these challenges is the heavy forex losses suffered by telecommunications companies as the value of the naira continues to plummet. For example, MTN Nigeria, which had 79.7 million subscribers as of December 2023, reported a loss after tax of N137 billion in 2023, its first since being listed on the Nigerian Stock Exchange in 2019. The company incurred FX losses amounting to N740 billion ($815.79 million at N907.1/$). Similarly, Airtel Africa, with 50.9 million subscribers in Nigeria as of March 2024, recorded a loss after tax of $89 million for the financial year ending March 2024, primarily due to forex challenges in Nigeria and Malawi. The company reported a $1.26 billion loss due to derivative and FX exposures, with $770 million attributed to the naira’s devaluation.
Industry analysts have noted that the devaluation of the naira has led to reduced investment in the telecom sector, which relies heavily on imported infrastructure to expand and improve capacity.
The Founder/CEO of Africa Digital Economy Forum (ADEF), Mr. Akin Naphtal, has called for urgent action from the government to address the longstanding issues in the telecom sector, now exacerbated by current economic conditions. He stressed that telecommunications is the backbone of the digital economy, and a prolonged decline in GDP growth for more than a year signals that the sector is heading in the wrong direction. Mr. Naphtal also pointed out that, even before the current forex and inflation issues, the industry had been hampered by high right-of-way fees and multiple taxation, which have long stifled its growth. He emphasized the need for a collaborative effort from the government and stakeholders to tackle these problems in order to safeguard the future of Nigeria’s digital economy.
Telecom operators, represented by the Association of Licensed Telecom Operators of Nigeria (ALTON) and the Association of Telecommunications Companies of Nigeria (ATCON), have been advocating for a tariff increase to counteract the effects of rising inflation and naira devaluation on their businesses. They argue that the telecom industry is one of the few that has not adjusted its prices despite the economic realities that justify such a move, largely due to regulatory restrictions.
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The Nigerian Communications Commission (NCC) currently regulates prices in the telecom sector, preventing operators from implementing any changes without approval. The NCC has indicated that it is conducting a cost-based study to determine whether it will allow price increases for the operators.
