Information, Communication, and Technology firms in Nigeria, including telecommunications companies, owe Deposit Money Banks a total of N1.69 trillion as of September 2024.
The PUNCH reported that this debt marks a slight decrease of N68.04 billion, or 3.9%, compared to N1.77 trillion owed in September 2023.
Despite this, there was a slight month-on-month rise of N31.61 billion, or 1.9%, from the N1.66 trillion recorded in August 2024.
The drop in the overall debt reflects the tightening of monetary conditions, attributed to the Central Bank of Nigeria’s successive interest rate hikes, which have led to reduced borrowing in the sector.
Throughout 2024, the borrowing trend in the ICT sector has shown mixed results. Credit to the sector was N2.47 trillion in January 2024, marking a dramatic year-on-year increase of N1.23 trillion, or 99.3%, compared to January 2023.
However, this growth was not sustained, as credit declined to N2.35 trillion in February and continued to fall in subsequent months, reaching N1.67 trillion in August, marking a reduction of N107.37 billion, or 6%, compared to the previous year.
By September 2024, the sector’s debt had fallen to N1.69 trillion, which was N68.04 billion less than the same period in 2023.
This trend highlights the caution among ICT firms in borrowing due to persistent economic uncertainties and high interest rates.
The CBN’s interest rate hikes have been a significant factor in this decline. The Monetary Policy Rate increased multiple times throughout the year, starting with a rise of 400 basis points in February, pushing it from 18.75% to 22.75%, followed by further hikes in March, May, July, and September.
By November, the MPR had reached 27.50%, reflecting the CBN’s ongoing efforts to control inflation and stabilize the economy. These rate increases have directly impacted borrowing costs, especially for capital-intensive sectors like ICT.
Despite these challenges, the ICT sector remains a crucial part of Nigeria’s economy, contributing significantly to the nation’s Gross Domestic Product.
In Q3 2024, the sector accounted for 16.35% of real GDP, a slight decrease from 19.78% in Q2 but still an improvement over 15.97% in the same quarter of 2023.
The telecommunications sub-sector, in particular, contributed 13.94% to the GDP, making it the third-largest contributor, behind only crop production and trade industries.
However, foreign investment in the Nigerian telecommunications sector has significantly declined.
In Q3 2024, the sector attracted only $14.4 million in capital inflows, a staggering 87% drop compared to the previous quarter.
This represents a 77% year-on-year decline, highlighting the sector’s struggle to attract the much-needed foreign investments despite previous gains.
In contrast, the sector experienced a major surge in investments earlier in the year, with a $191.5 million capital inflow in Q1 2024, marking a 769% increase compared to Q1 2023.
The investment decline has had a direct impact on telecom companies’ capital expenditure.
For instance, MTN Nigeria’s core capital expenditure dropped by 27.79% to N217.64 billion, while Airtel’s capex fell by 36.59% to $149 million between January and September 2024.
This decline is attributed to the N514.93 billion loss reported by MTNN and a 46.9% revenue drop to $755 million for Airtel Nigeria during the same period.
In response to these tough economic realities, telecommunications companies have renewed their calls for higher tariffs, which they have been advocating for the past 11 years.
According to the Association of Licensed Telecom Operators of Nigeria and the Association of Telecommunication Companies of Nigeria, the need for cost-reflective tariffs has become even more urgent due to the ongoing challenges, including high inflation (34.6% in November 2024) and losses from foreign exchange fluctuations.
The Federal Government has finally approved a tariff hike, contingent upon telecom companies increasing investments in the sector.
The Minister of Communications, Innovation, and Digital Economy, Bosun Tijani, confirmed this move, emphasizing that the tariff hike is necessary to ensure the sustainability of the industry.
He stated, “Tariff will go up,” stressing that the telecom sector must commit to expanding its investments to make this increase viable.
