By Chinenye Anuforo, [email protected]
Agusto & Co recently released its 2021 Telecommunications Industry report, which provided a comprehensive view of the industry, including the impact of the macroeconomic environment and COVID-19 on the industry’s performance.
According to the report, the imminent deployment of 5G technology and the Federal Government of Nigeria’s target broadband penetration rate of 70 per cent by 2025, will support substantial additional foreign investments in the near to medium term.
Nigeria’s telecommunications industry has continued to thrive on the back of the liberalisation in the early 2000s. Between 2015 and 2020, foreign investments (portfolio and direct) attributable to the telecommunications industry amounted to US$3.9 billion, an average of 7 per cent of Nigeria’s total capital importation during the same period. The industry has consistently remained one of the top five ranking economic sectors for foreign investments during the period.
The report stated that due to key connectivity support the industry provides, telecommunications was one of the economy’s few bright spots in 2020 (along with sectors such as financial institutions, agriculture and health services). Except during the 2016/2017 economic recession, the telecommunications industry’s real growth has consistently exceeded the country’s GDP growth.
“Furthermore, value-added services provided by telecommunications companies, albeit still a low contributor to overall earnings, has continued to expand. In 2020, two mobile network operators (9 mobile and Globacom) were granted payment service bank (PSB) licenses while MTN’s MoMo agency service which commenced in 2019 has about half a million agents across the nation.”
Despite the aforementioned positives, the unstable macroeconomic environment in Nigeria poses a huge threat to successfully harnessing the vast potential the telecommunications industry, Agusto & Co stated in the report.
“In the span of five years (2016-2020), Nigeria has gone through two economic recessions while the naira has continuously lost value against the world’s major currencies, negatively impacting purchasing power and the ability to maintain quality network equipment and services. In addition to the fragile macroeconomy, the telecommunications industry has also had its fair share of unfavourable regulatory changes through onerous tax regimes, delayed approvals and heavy regulatory penalties. Regulatory changes, with the initiation of the NIN-SIM verification exercise, drove a considerable decline in the industry’s growth rate to 6.3 per cent in Q1 2021 from 17.7 per cent in Q4 2020. In order to complete the NIN-SIM exercise, the NCC mandated the suspension of SIM card activations and registrations, thereby slowing the Industry’s growth pace. In only four months of the NIN-SIM verification exercise, the industry’s active telephony subscriptions reduced by 7.7 per cent from 204.5 million as at the end of December 2020 to 188.7 million at the end of April 2021. On the back of anticipated SIM deactivations for subscribers without valid NINs, we estimate that the subscriber base will shrink by 3 per cent (year-on-year) by the end of 2021 to 198 million subscribers.”