Modupe Gbadeyanka
By Modupe Gbadeyanka
The telecommunications industry in Nigeria will continue to face different challenges like high business costs occasioned by the devaluation of Naira and others.
This was the view of Agusto & Co in its recently released 2021 Telecommunications Industry Report, which provides a comprehensive view of the industry including the impact of the macroeconomic environment and COVID-19 on the Industry’s performance.
The agency said though the sector will witness prevailing inflationary pressures and the adverse impact of regulatory changes, its outlook for the year remains stable as it will provide recovery support to key economic sectors post-pandemic.
Agusto said Nigeria’s telecom industry has continued to thrive on the back of the liberalisation in the early 2000s as between 2015 and 2020, foreign investments (portfolio and direct) attributable to the sector amounted to $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 and it believes 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.
Due to the 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.
But it said despite the positives, the unstable macroeconomic environment in Nigeria poses a huge threat to successfully harnessing the vast potential of the telecommunications industry.
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 sector’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.
“However, due to the sustained uptake in mobile internet services and increasing diversification of value-added services by telcos, we believe revenue will grow, albeit by a lower rate of 5 per cent in 2021 (2020: 14 per cent).
“We anticipate that logistics around the NIN-SIM verification exercise will be resolved by the end of 2021 and thus, double-digit top-line growth should be restored by 2022,” the report said.
