In a landscape marked by economic uncertainty, Nigeria’s Information and Communications Technology (ICT) sector, long heralded as a beacon of growth, is now grappling with unprecedented challenges that threaten its stability and future trajectory.
Amidst a backdrop of government policies and economic downturns, the once robust sector is showing signs of strain, prompting concerns from industry leaders and experts alike.
Steady Growth to Sudden Decline
For over a decade, the ICT sector has been a pivotal contributor to Nigeria’s Gross Domestic Product (GDP), driven primarily by the telecommunications sub-sector.
Beginning in 2012, telecoms’ contribution surged from 7.7% to a peak of 17.5% by 2020, reflecting a robust expansion that helped steer the economy through various challenges. However, recent years have witnessed a sharp reversal in fortunes.
Economic Factors and Policy Impact
The decline in the ICT sector’s fortunes can be attributed to a confluence of factors, including harsh government policies such as the removal of fuel subsidies, currency devaluation, and the floating of the naira.
These policies have exacerbated the sector’s woes, leading to significant drops in revenue for telecom operators, declining Average Revenue Per User (ARPU), and a reduced contribution to GDP.
Renowned economist Bismarck Rewane highlighted these concerns, noting that the sector’s growth rate, which once stood at a robust 32% annually, has now stagnated at a mere 6%, barely above the population growth rate.
This stagnation comes amidst rising operational costs, limited access to foreign exchange, and a burdensome regulatory environment.
Operational Challenges and Financial Losses
Recent financial reports paint a bleak picture for major telecom operators in Nigeria. MTN Nigeria reported a staggering pre-tax loss of N575.69 billion, a sharp contrast to previous profitable years.
Similarly, Airtel Africa posted a loss of US$89 million for the fiscal year ending March 31, 2024, attributing these losses to exchange rate fluctuations and reduced consumer spending power.
Impact on Consumers and Market Dynamics
The declining purchasing power of Nigerian consumers has further exacerbated the situation. Many subscribers, grappling with inflation and economic hardship, have shifted towards lower recharge denominations, impacting telecom revenues and ARPU metrics.
This shift has also affected smartphone sales across Africa, including Nigeria, where demand has dipped amidst rising device costs.
Calls for Government Intervention
Industry stakeholders, including the Association of Licensed Telecom Operators in Nigeria (ALTON) and the General System for Mobile Communications Association (GSMA), have called for urgent government intervention to mitigate the sector’s decline.
Suggestions include revisiting forex policies, addressing regulatory burdens, and fostering an enabling environment for telecom investment and innovation.
Future Prospects and Digital Economy
Despite the current challenges, experts agree that the ICT sector remains integral to Nigeria’s economic future. Beyond its direct economic contributions, ICT plays a pivotal role in digital transformation and socio-political activism, empowering Nigerians to participate in governance and societal discourse.
Conclusion
As Nigeria navigates through economic uncertainties, the fate of its ICT sector hangs in the balance. The sector’s resilience in the face of adversity will depend largely on proactive policy measures and collaborative efforts between government, industry players, and stakeholders.
In summary, while the road ahead appears fraught with challenges, there remains optimism that strategic interventions and a renewed commitment to sectoral revitalization could yet steer Nigeria’s ICT sector back on a path to sustainable growth and prosperity.
