Telcos face investment decline amid dwindling economy
Nigeria's telecommunications industry is experiencing a significant drop in investment as the country's deteriorating economic conditions put it under strain.According to The Punch, the industry, which is critical to Nigeria's digital transformation and economic growth, is struggling to attract and retain investments as revenues decline and costs rise.
Adeolu Ogunbanjo, President of the National Association of Telecom Subscribers, stated, "Most telecom components, such as base stations, are largely imported and require dollars."
Nonetheless, he insisted that a minor tariff adjustment would allow telecom operators to maintain service quality while managing the rising cost of imports.
According to PricewaterhouseCoopers, the naira has depreciated by approximately 98% against the dollar since May 2023, falling from around N420 to N1500 per dollar.
The elimination of petrol subsidies and the consolidation of numerous foreign exchange windows into a single import and export window were the driving forces behind this.
The exchange rate fell to 1579.89/$ on Friday, from N1,586.04 on Wednesday.
Gbenga Adebayo, Chairman of the Association of Licensed Telecommunications Companies of Nigeria, expressed doubts about the telecom sector's viability in Nigeria, citing the country's current financial situation.
Adebayo cited a lack of government concessions and incentives as one of the industry's major issues, as well as a lack of investment motivation.
"If operators can get some form of concessions and incentives from the government to stimulate investment, then that's good, but with that not happening, it makes it difficult," said Mr. Smith.
The ALTON chairman emphasised that, while the industry had long discussed solutions to ensure sustainability, the situation was deteriorating.
"We are beginning to see some signs of distress," he told us.
Recently, telecom stakeholders gathered in Lagos for a town hall event hosted by Financial Derivatives Company to discuss the future of the telecommunications industry and its impact on the Nigerian economy.
Carl Cruz, Chief Executive Officer of Airtel Nigeria, emphasised how the naira's depreciation has affected the telecom sector, stating that it has reduced value and pushed businesses to the breaking point over the last 18 months.
He revealed that discussions were ongoing about the timing of future investments in the country, with concerns about return on investment. Despite the challenging operating environment, Cruz expressed confidence that investments would continue, albeit at a slower pace.
"Digital investment is extremely important. It is an enabling industry. We enable other industries to have a greater impact on society. We help people improve their connectivity and participate in financial and digital inclusion. "That won't stop," Cruz stated.
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