Nigeria’s telecommunications industry is preparing for a challenging year amid a scarcity of U.S. dollars, increasing diesel prices, and devaluation of the naira, all of which are straining operating margins.
Should the naira continue to depreciate, many infrastructure projects, including the 5G rollout, may be delayed. This could impact companies like Mafab Communications, which is hoping to launch its 5G network this year but is encountering setbacks due to the foreign exchange crisis.
Telecom equipment, which is mostly imported, is highly subject to currency swings. Despite MTN and Airtel having launched their 5G networks, significant infrastructure investments are still required to provide quality service across the whole country.
The current foreign exchange issue is affecting every operator, but smaller ones are being hit the hardest, according to Tony Emoekpere, president of the Association of Telecommunications Companies of Nigeria (ATCON).
Moreover, these difficulties could also have repercussions on Nigeria’s goal of achieving 70% broadband penetration. As it stands, the industry is about 28% short of this 2025 target.
In addition, the telecom industry has struggled to secure investment and maintain peak GDP contributions. Investments in telecoms declined by more than half from $753.04 million in 2021 to $399.9 million in 2022, while the industry’s contribution to the GDP fell by 17.3% in Q3 2023.
The rising diesel prices, a crucial factor in powering the base stations of the telecom industry, also poses a challenge. Although most of the power costs are not borne directly by telcos as they’re often outsourced to infrastructure companies, costs are eventually transferred to the telcos, who must then adjust consumer prices.
Notwithstanding, telcos cannot increase prices independently without the Nigerian Communications Commission’s approval. Added to this, the industry must also deal with consumer advocacy groups, such as the National Association of Telecom Consumers of Nigeria (NATCON), which recently took the industry to court over a 5% data and airtime tariff increase.
