The Nigerian telecommunications sector, long hailed as a cornerstone of economic growth and technological advancement, is now facing a deepening crisis as 2024 winds down.
Once a magnet for foreign investments and a model of resilience, the industry is now grappling with unprecedented financial strain.
From the over N250bn debt owed the sector by the banking sector, on Unstructured Supplementary Services Data, USSD, to the rising operational costs, stagnant tariffs, and unfavourable macroeconomic conditions, the sector, which in the last ten years has posted handsome returns to the Gross Domestic Products, GDP, appears in a storm, prompting industry operators and stakeholders to sound the alarm.
MTN Nigeria CEO, Mr Karl Toriola, at a recent event in Lagos, admitted that "The telecoms sector is now in the Intensive Care Unit, ICU, and sooner than later, the breath will finally cease".
The sector also has been haemorrhaging, no thanks to multiple attacks on its facilities by vandals, government agencies, hoodlums and cybercriminals.
A worried National Security Adviser to President Bola Tinubu, Mallam Nuhu Ribadu, confessed to the reality and lamented the harm the menace is doing to the aggregate economy: "We are now confronted with heightened threats of attacks on our telecommunications systems, banking platforms, power and energy grids, military networks, transportation systems, national databases, elections, digital systems, and other critical assets. We are also confronted with threats of online financial scams and fraud perpetuated by nefarious individuals and groups within and outside the country, which is persistently denting our economy and indeed our international image."
The fragmented Right of Way, RoW price regime, which the states and the Federal Government have failed to harmonise, also limited the pace of broadband deployment in 2024 even as the little operators said they could cover, didn't come cheap.
This is amid the refusal of the government to yield to their demand for tariff adjustment.
The telcos say they have operated on the same tariff band for eleven years even when they have paid several adjusted taxes and levies within that time.
All these, according to them, are putting a lot of pressure on their operating costs and the resultant effect is loss of revenue.
Major players like MTN and Airtel, which once epitomized growth and profitability, are now reporting losses, a stark indicator of the sector's declining health.
A recent report from The Whistler said MTN Nigeria Plc and Airtel Africa collectively lost N271bn in market capitalization in November 2024 following sell pressure on their shares.
The losses, according to the report, reflected the impact of shifting investor sentiment as speculators redirect funds in pursuit of higher profits.
The sell-off reflects broader market dynamics, where increased interest in fixed-income securities has weighed heavily on equities, particularly in the telecommunications sector.
The report said Airtel Africa closed its final trading session in November at N2,156.90 per share, down from N2,200.00 on October 31. The decline reduced the company's market capitalization from N8.267trn to N8.105tn, representing a loss of N162bn or 1.96 per cent month-to-date.
Meanwhile MTN Nigeria also faced significant losses, with its share price dropping from N175.10 in October to N170.00 at the end of November. The telecom giant's market capitalization fell from N3.676tn to N3.569tn, marking a N109bn or 2.96 per cent decline.
Declining foreign direct investments
Although the sector started 2024 on a promising note, attracting $191.5 million in capital inflow in Q1 - a 769% increase compared to the $22.05 million recorded in Q1 2023, it however, was not able to hold the momentum for too long.
The latest report by the National Bureau of Statistics, NBS, paints a bleak picture.
Foreign investments in the telecom sector plummeted by 87% in Q3 2024, recording just $14.4 million in capital importation - a sharp drop from $113.42 million in Q2 2024.
Year-on-year, this represents a 77% decline compared to the $64.05 million recorded in Q3 2023.
Industry players attribute this downturn to structural challenges
Former OPay CEO and ex-Chief Marketing Officer at Airtel, Olu Akanmu, said: "The telecom companies are not investing because FX losses have wiped out their accounting profits in the last two years. The regulator's refusal to adjust tariffs to reflect rising costs has also made the situation untenable," he added.
Deepening USSD crisis
Meanwhile, a fresh trouble is looming between telecom operators and their banking sector counterparts over the lingering debt on USSD, debt banks owed the telcos.
The telcos claim the debt has risen above N250 billion and accused the banks of not complying with the repayment plan.
The Chairman, Association of Licensed Telecommunications Operators of Nigeria (ALTON), Gbenga Adebayo, who revealed this, threatened that the only option, if the banks failed to honour the agreement, would be to withdraw the services.
USSD, commonly known as 'bank transfers', is done through short codes on mobile phones. The support is provided by the telcos.
When the matter brewed heavily a few years ago, the National Assembly, Central Bank of Nigeria, CBN, and the Nigerian Communications Commission, NCC, waded in and generated a gentleman's agreement, which gave the banks leverage to defray the debts gradually.
However, Adebayo said the banks reneged and allowed the debt to rise. The USSD saga between the banks and telcos has lingered since 2020, rising from below N40 billion in 2020 to N57 billion by the end of 2021 and N80 billion in 2022. Now it has risen to over N250 billion and according to ALTON, the only way to recover the debt would be to withdraw the support that gives the USSD platform life.
What this means is that all short code services may be suspended any time and users will not be able to carry out some online banking services from the comfort of their homes.
Resolving the problems in 2025
For a better 2025, all the stakeholders who spoke to Vanguard urged regulators and policymakers to prioritize long-term sustainability by implementing measures to create a conducive investment environment.
Akanmu said: "The telecom industry's woes stem from interrelated challenges. Forex losses have eroded accounting profits over the last two years. Meanwhile, the regulator has resisted tariff adjustments needed to counter FX and inflation-driven cost increases.
This combination of factors reflects the financial health and investment attractiveness of the industry and to stem the tide in 2025, a critical look at these factors is highly necessary."
Similarly, an economist and telecom sector enthusiast, Demola Akinbo added: "The myriad of problems plaguing the telecom sector reflect broader macroeconomic challenges plaguing Nigeria, including multiple naira devaluations, persistent inflation, and an unstable exchange rate.
"These factors erode the value of foreign investments. For instance, an investor bringing 100 million naira into Nigeria today faces a significant risk that returns will fail to match the initial value due to currency depreciation.
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"Investors are profit-driven. When faced with devaluation risks and economic volatility, they hesitate to commit capital," he said.
In 2025, your government perhaps needs to boost export capacity by strengthening Nigeria's ability to export locally produced goods to stabilize the naira and attract foreign investments.
It may also have to reduce import dependency, encouraging Nigerians to consume locally produced goods to cut reliance on imports.
He also recommended reconsidering Nigeria's reliance on market forces for exchange rate determination, advocating an administrative approach, such as setting a fixed exchange rate ceiling for foreign transactions, to make the investment climate more predictable.
For the President of the National Association of Telecom Subscribers, NATCOMS, Chief Deolu Ogubanjo, "The cost of doing business in the telecom industry must be addressed in 2025. FX rates have soared, interest rates have climbed, and diesel, a critical input for maintaining telecom infrastructure--has become significantly more expensive.
"Yet, tariffs remain stuck at 2018 levels. This discrepancy makes it nearly impossible to sustain operations, let alone invest in network expansions needed for quality service delivery.
"Publicly listed companies like MTN and Airtel have reportedly declared losses due to these challenges.
"The ripple effects are evident in the sharp decline in Foreign Direct Investment, FDI, in the telecom sector.
Urgent need for action
Highlighting the urgency of the situation, Ogubanjo stressed the need for a tariff review to align with rising operational costs.
According to him: "No business can sustain losses indefinitely. Tariffs must reflect today's realities. Without this adjustment, the telecom industry, which plays a critical role in Nigeria's economy, faces the risk of collapse," he warns.
