The sector is burdened by a staggering N250 billion debt owed by the banking sector for Unstructured Supplementary Services Data (USSD) services. Additionally, rising operational costs, stagnant tariffs, and unfavorable macroeconomic conditions are exacerbating the crisis. Industry operators and stakeholders are increasingly alarmed, as these issues threaten the sector's stability and future growth.
MTN Nigeria CEO, Karl Toriola, highlighted the dire situation at a recent event in Lagos, stating, "The telecoms sector is now in the Intensive Care Unit (ICU), and sooner than later, the breath will finally cease."
The sector faces numerous challenges, including repeated attacks on its facilities by vandals, government agencies, hoodlums, and cybercriminals. National Security Adviser Mallam Nuhu Ribadu expressed deep concern over these threats, which extend beyond telecommunications to other critical infrastructure such as banking platforms, power grids, and national databases. Ribadu emphasized the significant economic damage and tarnished international reputation resulting from these attacks.
Another major issue is the fragmented Right of Way (RoW) pricing regime. The lack of harmonization between state and federal government policies has hindered broadband deployment in 2024, leading to increased operational costs for telecom operators. Despite repeated requests, the government has refused to adjust tariffs, leaving operators to bear the brunt of multiple adjusted taxes and levies over the past eleven years.
The financial health of major players like MTN and Airtel has deteriorated, with both companies reporting substantial losses. A report from The Whistler indicated that MTN Nigeria and Airtel Africa collectively lost N271 billion in market capitalization in November 2024. This decline reflects shifting investor sentiment, with speculators redirecting funds in search of higher profits. Increased interest in fixed-income securities has also negatively impacted equities, particularly in the telecommunications sector.
Airtel Africa’s share price fell from N2,200.00 on October 31 to N2,156.90 per share by the end of November, reducing its market capitalization by N162 billion. Similarly, MTN Nigeria’s share price dropped from N175.10 in October to N170.00, resulting in a market capitalization decline of N109 billion.
The sector began 2024 with promise, attracting $191.5 million in capital inflow in the first quarter, a 769% increase compared to the $22.05 million recorded in the first quarter of 2023. However, this momentum was short-lived as structural challenges soon overshadowed initial gains.
Former OPay CEO and ex-Chief Marketing Officer at Airtel, Olu Akanmu, pointed out that telecom companies have refrained from investing due to foreign exchange (FX) losses that have eroded accounting profits over the last two years. He also criticized the regulator's refusal to adjust tariffs to reflect rising costs, making the situation untenable for operators.
A fresh crisis is looming between telecom operators and the banking sector over the lingering USSD debt, which has now exceeded N250 billion. The Chairman of the Association of Licensed Telecommunications Operators of Nigeria (ALTON), Gbenga Adebayo, revealed that banks have not complied with the agreed repayment plan. He warned that if banks fail to honor the agreement, telecom operators may withdraw USSD services, severely disrupting online banking operations.
To address the sector's challenges, stakeholders are urging regulators and policymakers to prioritize long-term sustainability. They advocate for measures to create a conducive investment environment, including tariff adjustments to counter FX and inflation-driven cost increases.
Economist and telecom sector enthusiast, Demola Akinbo, highlighted broader macroeconomic issues affecting the sector, such as multiple naira devaluations, persistent inflation, and an unstable exchange rate. These factors have significantly eroded the value of foreign investments, making investors hesitant to commit capital.
For a more stable 2025, stakeholders recommend several measures:
1. Strengthening Nigeria’s ability to export locally produced goods to stabilize the naira and attract foreign investments.
2. Encouraging the consumption of locally produced goods to cut reliance on imports.
3. Setting a fixed exchange rate ceiling for foreign transactions to make the investment climate more predictable.
Chief Deolu Ogubanjo, President of the National Association of Telecom Subscribers (NATCOMS), emphasized the need to address the high cost of doing business in the telecom industry. He pointed out that FX rates have soared, interest rates have climbed, and the cost of diesel, crucial for maintaining telecom infrastructure, has become significantly more expensive. Yet, tariffs remain at 2018 levels, making it nearly impossible to sustain operations and invest in network expansions.
The Nigerian telecommunications sector is at a critical juncture, facing immense challenges that threaten its sustainability and growth. Immediate and decisive action is needed to address these issues, including tariff adjustments, regulatory reforms, and measures to stabilize the macroeconomic environment. Without these changes, the sector, which plays a vital role in Nigeria's economy, risks further decline and potential collapse.
Stakeholders in the telecommunications sector argue that Nigeria must restructure her economy or face the collapse of the sector because of the harsh economic environment confronting the sector.
The Nigerian telecommunications sector, once a beacon of economic growth and technological advancement, is now grappling with severe financial challenges as 2024 draws to a close. The sector, which has significantly contributed to Nigeria's Gross Domestic Product (GDP) over the past decade, is experiencing unprecedented financial strain.
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