The telecommunications sector in Nigeria is facing a serious threat to the economy

Nigeria’s economic growth faces a potential setback due to the declining share of telecommunications in gross domestic product. This decline is due to the deteriorating financial results of the sector.

The telecommunications sector has long been one of the pillars of the Nigerian economy, which is largely dependent on the services sector. “The telecommunications sector is a major contributor to Nigeria’s economy and underpins the digital transformation process,” said GSMA, the global industry body for telecommunications companies.

Telecommunications was one of the sectors that helped the country recover from the recession in the fourth quarter of 2020. The mobile telecommunications sector accounted for 13.5% of total GDP in 2023, GSMA noted.

However, in Q1 2024, the telecom sector’s real contribution to GDP declined by 12.60% quarter-on-quarter to US$2.67 trillion due to sustained losses suffered by telecom operators.

The information and communication sector, dominated by the telecommunications sector, also recorded a real decline of 9.89% on a quarterly basis. Although it achieved a year-on-year growth rate of 5.43 percent, it still recorded a decline of 4.89 percentage points compared to the same period in 2023.

“In total, the real GDP sector generated 17.89% in the first quarter of 2024, higher than in the same quarter of the previous year, when it amounted to 17.47%, and higher than in the previous quarter when it amounted to 16.66 percent.” – notes NBS. .

The ICT sector includes activities such as telecommunications and information services, publishing, film, sound recording and music production, and broadcasting. Of the sector’s contribution of $3.27 trillion, telecommunications accounted for 81.50%.

The country’s GDP in the first quarter of 2024 was mainly influenced by the services sector (including the ICT sector), which, according to the Central Statistical Office, recorded an increase by 4.32%. and had 58.04 percent. share in total GDP.

Nigeria’s GDP increased by 2.98% in real terms. in the first quarter of 2024 on a year-to-year basis, which is a rate higher than 2.31%. recorded in the first quarter of 2023 and lower than in the fourth quarter of 2023, in which the growth rate was 3.46 percent.

The decline in telecom sector performance is attributed to a confluence of factors. MTN Nigeria and Airtel Africa posted a combined loss of $511.27 billion in the first quarter, mainly due to a nearly 30 percent devaluation of the naira.

This financial burden is also likely to impact tax revenues as the sector previously contributed N2.4 trillion to the government’s 2023 tax revenues.

“The permanent reduction in industry revenues has consequences not only for service providers… The industry’s direct contribution to the country’s total GDP is also reduced,” the GSMA said. “The slowdown in the mobile industry will have a further negative impact on the country’s GDP… If the industry suffers, it will translate into lower digital adoption rates and the country will miss out on the potential GDP growth it could deliver.”

The recent decline in subscriber base due to the NIN-SIM merger may be another contributing factor, Afrinvest Consulting noted.

“The entire ecosystem is grappling with a number of challenges that need to be addressed,” emphasized Gbenga Adebayo, president of the Association of Licensed Telecommunications Operators of Nigeria (ALTON).

He emphasized that these challenges center around rising operating costs. If the impact of these challenges is not mitigated, it will impact space operators and innovation, he continued.

“This is a key moment for the industry. How we approach this problem and how we solve it will determine the future of Nigeria’s digital economy,” he added.

Recognizing the importance of this sector, Bosman Tijani, Minister of Communications, Innovation and Digital Economy, recently established a committee to review operational conditions and propose fiscal measures to mitigate the impact of macroeconomic pressures on telecommunications operators.

“The telecommunications industry, which is a major contributor to our country’s GDP, is critical to the development of our nation as it helps spur innovation and promote digital inclusion among Nigerians,” he said.