Nigeria’s telecommunications sector is facing a significant decline in investment as the country’s deteriorating economic conditions impact the industry.
This sector, vital for the nation’s digital transformation and economic development, is grappling with shrinking revenues and rising operational costs, making it difficult to attract and sustain investments.
Adeolu Ogunbanjo, President of the National Association of Telecoms Subscribers, noted that many telecom components, like base stations, are primarily imported, necessitating the use of dollars.
According to Sunday Punch, he suggested that a modest adjustment in tariffs could help telecom operators manage the increasing costs of imports and maintain service quality.
The naira has drastically depreciated by around 98% against the dollar since May 2023, plunging from approximately N420 to N1500 per dollar, largely due to the removal of fuel subsidies and the consolidation of multiple foreign exchange windows into a single import and export window.
By Friday, the exchange rate had further declined to N1579.89/$ from N1,586.04 on Wednesday.
Gbenga Adebayo, Chairman of the Association of Licensed Telecommunications Companies of Nigeria, expressed concerns about the industry’s sustainability in the current economic climate.
He pointed out the lack of government concessions and incentives that could stimulate investment, which has left the industry in a precarious position. Adebayo warned that the sector was showing signs of distress due to these challenges.
At a recent town hall event in Lagos, organised by Financial Derivatives Company, telecom stakeholders discussed the future of the industry and its broader economic implications.
Carl Cruz, CEO of Airtel Nigeria, highlighted the adverse effects of the naira’s devaluation on the telecom sector, noting that it had severely strained companies over the past 18 months.
While Cruz remained hopeful about continued investments, he acknowledged that they might occur at a slower pace.
Karl Toriola, CEO of MTN Nigeria, also cautioned that the worsening economic conditions could further reduce investment in the telecom sector.
He emphasised that investment would only persist if returns were viable, stressing that it was unrealistic to expect investors to put in a dollar and receive only 66 cents in return.
