The Nigerian telecom sector has seen an improvement in foreign direct investments this year as it attracted a total of $304 million in the first six months of this year.
Going by the National Bureau of Statistics (NBS) data, the sector has more than doubled the $134.75 capital importation recorded in the full year 2023 with the six-month record of 2024.
This is coming after years of consistent decline in investments even with a gaping infrastructure gap requiring billions of investments to bridge.
The NBS data showed that the sector attracted a $191.5 million capital inflow in the first quarter of this year, marking a significant 769% increase compared with $22.05 million received in Q1 2023.
In Q2 2024, FDIs in the sector stood at $113.4 million. While this is lower than the inflow recorded in the preceding quarter, it represents a whopping 339% increase over the $25.81 capital inflow recorded in the same period last year.
No cause for celebration yet
However, stakeholders in the telecom sector are not excited by the development yet. According to them, a lot still needs to be done by the government on the policy front to sustain the current trend and reverse the losses of the past years.
Specifically, Mr.Wale Babalola, a consultant in the telecoms market, reported investments in the first six months of the year are still quite insignificant to drive the growth sector currently needs.
“Yes, it’s good that the sector is doing better than last year and to an extent, the last two years, but that is not enough to bridge the existing infrastructure in the sector.
“Besides, many investors are still watching to see how the government will handle several policy issues still hanging. one of which is tariff regulation. Any country that wants to attract investors should be able to assure returns on investments.
I don’t think that exists right now in the telecom market with the regulator preventing the telecom operators from reviewing their pricing to adjust for inflation and the rising operating costs,” he said.
For the Executive Secretary of the Association of Licensed Telecommunications Companies of Nigeria (ALTON), Mr Gbolahan, Awonuga, the issue of forex instability is still a major problem that needs to be addressed to encourage more investments in the telecom sector.
“Whatever we are seeing now may be a flash in the pan until the industry challenges are addressed. Issues of Right of Way charges are still there, likewise multiple taxation and above all the forex instability that continues to affect the operators’ ability to import equipment,” he said.
- The CEO of Digital Reality and immediate past President of the Association of Telecommunications Company of Nigeria (ATCON) Engr. Ikechukwu Nnamani hopes that the government will 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.
Records of investment decline
The telecom industry report for 2022 published last year by the Nigerian Communications Commission (NCC) shows that total investment inflow to the industry in that year stood at $399.9 billion.
- 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 $417.4 million recorded in the preceding year, the growth came as a result 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.
- This much was confirmed in the 2022 report, which showed that the industry’s CAPEX declined by 30% in the year.
- According to the report, the operators spent a total of N785 billion as CAPEX in 2022 compared with N1.1 trillion in 2021.
Government in search of $2 billion for telecom infrastructure
Meanwhile, realizing that investments into the sector have not been coming it ought to be, the government is now spearheading a national fibre project aimed at bridging the infrastructure gap and enhancing broadband access across the country.
- This followed the government’s launching of a Special Purpose Vehicle (SPV) for the delivery of an additional 90,000km of fibre optic cable to complement existing connectivity for universal access to the internet.
- According to the Minister of Communications, Innovation, and Digital Economy, Dr. Bosun Tijani, the government has been in talks with financiers including the World Bank to bring the fibre project to reality.
- It is unclear yet how soon the funding will come but the Minister in a recent media chat hinted that the delivery of the project may take two to three years.