TUC president links 50% telecom tariff hike to FX crisis

• Published On: 09 February 2025 at 18:48

Festus Osifo, President of the Trade Union Congress, has linked the recent 50% increase in telecom tariffs to the continued depreciation of the naira.

Speaking on Arise Television's Prime Time, Osifo stated that rising foreign exchange costs are increasing telecommunications companies' operational expenses, forcing them to adjust their tariffs.

Osifo recalled that the TUC had previously warned about the potential effects of fluctuating foreign exchange rates on Nigeria's essential services.

He used Zimbabwe's historical hyperinflation as a cautionary example, warning that unchecked currency depreciation could cause severe economic distress.

"Last year, we addressed a World Press Conference and identified the root cause that would result in a significant increase in social services: our FX—or exchange rate. When the naira depreciates significantly, businesses' operating costs rise. To remain profitable, businesses must adjust their revenue, and the simplest way to do so is to raise the prices of their goods and services', he stated.

The TUC president emphasised that rising operational costs for telecom companies, caused by currency fluctuations, are being passed on to customers.

He explained that as the Naira falls, expenses in foreign currencies, such as network equipment and software licenses, become more expensive.

"The cost of their [telcos'] operations in naira equivalent is increasing. The reason costs are rising is that they need to adjust revenue to remain profitable. If a company's expenses exceed its revenue, it will operate at a loss. To avoid this, they raise prices, shifting the financial burden to consumers'', Osifo stated.

Osifo urged the federal government to take immediate action to stabilise the naira and mitigate the impact of foreign exchange volatility on businesses and consumers.

He warned that if the trend continues, it will raise the cost of living and reduce Nigerians' purchasing power.

"When our naira was devalued, we argued that if this was left unchecked, it would affect everything. Today, we're seeing that prediction come true, with telecom tariffs being the most recent example," he said.

The telecom industry relies heavily on foreign components, such as infrastructure, network equipment, and software, which are typically priced in dollars.

Because of their reliance on foreign exchange, telecom operators are highly vulnerable to exchange rate fluctuations, which forces them to raise prices in order to remain profitable.