The Information and Communications Technology (ICT) sector in Nigeria has been a steady contributor to the nation's Gross Domestic Product (GDP), showcasing remarkable resilience despite economic difficulties. However, recent trends indicate emerging weaknesses that industry operators find concerning.
Despite contributing significantly to Nigeria's GDP, the ICT sector, especially the telecommunications sub-sector, is now showing signs of stress. Experts attribute these issues to several factors, including government policies such as the removal of fuel subsidies, currency devaluation, and the floating of the naira. These policies have led to reduced revenue for sector players, declining average revenue per user (ARPU), and weakened consumer purchasing power.
Notable figures such as Bismarck Rewane, Managing Director of Financial Derivatives; Engr Gbenga Adebayo, Chairman of the Association of Licensed Telecom Operators in Nigeria (ALTON); and Chief Deolu Ogubanjo, Chairman of the National Association of Telecom Subscribers of Nigeria (NATCOMS), have expressed concerns about these developments.
Over the past decade, the ICT sector has shown consistent growth, becoming a crucial part of Nigeria's economy. From a 7.7% contribution to GDP in 2012, the sector grew to 14.3% by the second quarter of 2020, representing significant economic progress. This growth trajectory continued, with the sector contributing 17.92% to GDP in 2021 and 18.44% in the second quarter of 2022.
However, the sector's growth has recently slowed. In the first quarter of 2024, ICT's contribution to GDP dropped by 12.60% quarter-on-quarter to N2.67 trillion. This decline is mainly due to financial performance issues within the sector and decreased consumer purchasing power, exacerbated by economic hardships and high inflation.
Telecom operators have reported substantial financial losses. MTN Nigeria recorded a pre-tax loss of N575.69 billion in April 2024, a stark contrast to the N162.9 billion profit reported the previous year. Similarly, Airtel Africa reported a post-tax loss of US$89 million for the fiscal year ending March 2024, primarily driven by exchange rate depreciation.
Deolu Ogubanjo of NATCOMS highlighted that many consumers now opt for lower recharge denominations due to economic constraints, affecting operators' revenues. He called for government intervention, particularly in forex and petroleum pricing policies, to alleviate the sector's struggles.
The declining purchasing power of consumers has also affected the smartphone market. In Q1 2023, Africa's smartphone market saw a 3.4% decline in shipments, the lowest since the COVID-19 pandemic began. Rising inflation and local currency depreciation against the US dollar were significant factors in this decline.
Experts like Bismarck Rewane warn that the sector's downturn could have severe consequences for Nigeria's overall economy. He stressed the need for measures such as tariff increases and price deregulation to restore the sector's health. Without immediate intervention, the ICT industry could face a significant downturn, impacting other sectors due to its interconnected nature.
The GSMA echoed these concerns, emphasizing the ICT sector's critical role in Nigeria's digital transformation and overall economic health. A sustained reduction in industry revenue would have broader implications, including slower digital adoption and reduced GDP growth.
The ICT sector has been instrumental in Nigeria's development, driving economic growth and social activism. However, the current economic policies and conditions threaten its stability. Industry leaders call for urgent government intervention to address the challenges and ensure the sector continues to contribute positively to Nigeria's economy.
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