…total investment since 2001 is $75.6bn
…Nigeria’s telecoms need more investment – ALTON
The continuous decline in investment in the telecommunications industry have made stakeholders in Nigeria to be worried.
They are worried that the decline may continue for years to come if measures are not put in place by the government to stem the tide.
The decline has also been limiting the operators’ annual capital expenditure and expansion of service, thus impacting the quality of services being delivered.
According to the stakeholders, the current situation around forex may further worsen the situation as investors are still uncertain about the government’s policy.
Besides, the telecom operators are disturbed that the current scarcity of forex would hamper 5G rollout in the country as licensed operators would have to import all the equipment required to expand the service.
The telecom industry report for 2022 which was recently released by the Nigerian Communications Commission (NCC) shows that total investment inflow to the industry last year stood at $399.9 million.
This represents a 47% decline when compared with the $753 million recorded in 2021.
While the $753 million recorded in 2021 came as an increase compared with the $417.4 million recorded in the preceding year, the growth came because of the effect COVID-19 pandemic in 2020, which saw economic activities reduced drastically across the globe.
Before that, capital inflow into the telecom industry stood at $942.8 million in 2019, which made the 2021 inflow a decline, when compared with the pre-COVID-19 year.
Due to the declining investment, the operators have been slowing down their capital expenditure (CAPEX) even though maintaining telecommunications requires consistent investment in infrastructure for network expansion and optimization.
The industry data shows that despite the rollout of new 5G technology by MTN last year, the industry’s CAPEX declined by 30% in 2022.
According to the report, the operators spent a total of N785 billion as CAPEX in 2022 compared with N1.1 trillion in 2021.
Telcos’ performance impacted
Speaking on the development, the Association of Licensed Telecommunications of Nigeria (ALTON) Chairman, Engr. Gbenga Adebayo said the situation is more worrying because Nigeria’s telecom requires more investments.
“As you can see with last year’s report by NCC which shows a decline in FDI, we are worried that that will continue. If you look at the dynamics of the exchange rate, it is affecting a lot of things. What we are now seeing in terms of investment figures speaks to the issue in the industry. This is impacting the expansion of network infrastructure, and we are worried that the FDIs may continue to go down. This will continue to affect the performance of the operators,” he said.
Adebayo said aside from the dwindling investment, the lack of access to forex is also affecting the operators’ ability to expand.
“Even though they did say that forex will be made available, we are still in a long queue for forex. We know that the government of the day is trying all kinds of policies. They are giving an assurance of equal access for everybody. The bottom line is that it is not available as promised.”
“We are not in the best of times, I must say, but we are hopeful that things will get better given the policy consistency of the government,” he said.
Broadband policy threatened
The declining investment also casts a shadow over the country’s broadband policy through which the government is targeting 70% broadband penetration by 2025. The implementation of the Nigerian National Broadband Plan (NNBP 2020-2025), which started 3 years ago has been slow because of the lack of investment in infrastructure that is required to expand broadband service across the country.
While broadband penetration in the country stood at 47.01% as of June this year with some 89.7 million Nigerians recorded to be having access to high-speed internet.
As of March 2020, when the current broadband plan was unveiled, penetration stood at 39.85%, which means that the county had managed to achieve only a 7.16% increase in penetration in the last three years.
Amid the dwindling investment, industry experts have said that the telecom industry would require, at least, $3.4 billion in investments in fibre infrastructure to meet the 70% target in the next two years.
Factors discouraging FDI
While blaming the past years’ investment downtrend in the sector on several challenges confronting players in the sector, the immediate past President of the Association of Telecommunications Company of Nigeria (ATCON) Engr. Ikechukwu Nnamani said the government needs to make the industry attractive by creating a very conducive and stable environment.
According to him, a stable environment would mean that the government is consistent with its policies.
Nnamani also observed that instability in the country’s forex market has been a major discouragement for many foreign investors who are interested in the country’s telecoms.
“It has been estimated that the country would require $100 billion in investments in the next 10 years to bridge the existing infrastructure gap in the telecom sector, but where is the money going to come from? The exchange rate situation in Nigeria is of serious concern for foreign investors, they are not sure of what the situation would be by the time they want to repatriate their returns. Their returns on investments could be halved due to the fluctuations in the exchange rate. If we want to see the investors, we have to first address the foreign exchange situation,” he said.
Total investments in telecom since 2001
Notwithstanding the current decline, the NCC recently disclosed that total investments in the country’s telecom industry since it was liberalized in 2001 reached $75.6 billion in 2021.
According to the regulator, this comprised comprising foreign direct investment (FDI) and local investment.
The Executive Vice Chairman of the Commission, Prof Umar Danbatta, who disclosed this to newsmen in Lagos said data from the Central Bank of Nigeria (CBN) showed that investments in the industry rose to $68 billion in 2018.
He added that this increased to $70.5 billion in 2019 and $72 billion in 2020 before hitting $75.6 billion in 2021.
Danbatta, however, admitted that the industry needs to attract a lot more investments to build more infrastructure especially as the country aims to deepen broadband penetration.Follow us on social media