Experts lament the economic challenges facing the telecommunications sector

The Chairman of the Technology Committee of the Business Law Section of the Nigerian Bar Association, Ikemesit Effiong, has expressed concerns over the sustainability of the Nigerian telecommunications sector in the face of continued economic challenges.

In an article titled: “The Imperative of Maintaining the Telecom Lifeline in Nigeria,” Effiong delved deeper into the sector, highlighting its crucial role as both an economic driver and a social enabler. He said with approximately 15,000 direct workers and a significant 16 per cent contribution to Nigeria’s GDP, health in the sector is critical to the well-being of the nation.”

He highlighted various obstacles facing the telecommunications industry, including frequent cutting of fiber optic cables due to road construction and vandalism, numerous taxes and challenges in acquiring rights of way. He said these problems, compounded by exploitative rent-seeking practices, persist despite efforts to address them.

“It is essential for the sustainability of any industry to have a favorable economic environment that allows for sustainable growth and innovation,” writes Ikemesit. However, regulatory constraints that limit tariff adjustments make it difficult for the sector to adapt to market dynamics unlike other industries.

“The latest data from the National Bureau of Statistics (NBS) indicate an increase in inflation to 33.20 percent. in March 2024, compared to 31.7 percent in February 2024. This poses significant challenges for companies trying to manage employee well-being and make necessary investments in economically stressed conditions.

“Inflationary pressures have led to price increases across sectors including agriculture, beverages and services. “Companies like Nigerian Breweries Plc and Netflix have adjusted prices multiple times this year to cope with rising costs,” he said. He noted that service quality has recently become a significant issue for subscribers across the country.

According to him, available data indicate that this problem may persist for the foreseeable future. “The 70% broadband penetration target set by Nigeria’s Minister of Communications, Innovation and Digital Economy, Dr. Bosun Tijani, in 2023 has been seriously breached, recording a decline of 14.2% from a high of 48.28% in March to 41.87%. percent in November.

“With operators reporting financial losses in 2023 and a difficult outlook for 2024, it is clear that financing will pose a significant challenge to the necessary investment needed to transform the sector.”

Additionally, our members continue to bear the burden of multiple taxes and forced compliance with tax demands and fees that have no legal basis on the part of lower-level citizens. This threatens investment, sustainable development and industrial development.

“Cases include: exorbitant right-of-way charges, increases under the Finance Act 2023 (such as the increase in higher education trust fund tax from 2.5% to 3%, imposition of value added tax on cell towers (base stations) ), imposition of an import fee on goods, abolition of capital allowance on telecommunications goods and services in accordance with Article 32 of the amended Corporate Income Tax Act), among others.”

Over the last 10 years, telecom operators have maintained the same call and data charges despite the increase in inflation from 8.05% in 2014 to 33.20% in 2024 and the increase in the dollar exchange rate from N185 in 2014 to about N1,000 naira in 2024

Considering that the sector supports 221.7 million active voice subscriptions and 160.2 million data subscriptions in Nigeria, which has enormous economic and social value, if it is left to solve problems on its own or face collapse, this poses a serious threat to socio-economic stability of Nigeria.

Sector stakeholders are calling on the government to invest in the sector where needed or adopt a cost-reflective tariff to facilitate the necessary investment.