In light of escalating operational costs, telecommunication operators in Nigeria are advocating for a hike in tariffs. Sonny Aragba-Akpore explains that the sector, burdened by nearly 46 different taxes and increased fiscal demands from state governments to enhance their internally generated revenue (IGR), finds itself in a precarious position. The operators argue that to maintain operational viability and quality service, they must consider raising tariffs soon.
The mobile telecommunications sector, which has invested over $76 billion, hosts major players like MTN, GloMobile, Airtel, and 9Mobile. These operators have collectively registered 318 million lines, of which 220 million are active. Recently, they informed the Nigerian Communications Commission (NCC) and their customers that tariff increases are imminent, citing the inflationary trends affecting consumer prices across various sectors over the past six years.
Despite the general rise in consumer prices, telecommunications tariffs have remained largely unchanged or even declined, contrasting sharply with other regulated industries like power and insurance, which have seen price increases of 200 percent and 240 percent, respectively, over the past year.
The operators are facing severe macroeconomic challenges, including a 30.37 percent drop in domestic capital expenditure and a 46.9 percent decrease in foreign direct investments between 2021 and 2022. These challenges are compounded by difficulties in sourcing foreign exchange and attracting foreign direct investment due to economic uncertainty.
The situation has deteriorated to the point where, without urgent interventions, maintaining high-quality service will become unsustainable. This notion was initially suggested in 2022 when economic conditions were relatively stable. However, factors like rising diesel prices, which affect the cost of operating base stations, and unstable foreign exchange rates have worsened, making it difficult to continue under the current financial framework.
The Association of Licensed Telecommunications Operators of Nigeria (ALTON) has highlighted multiple issues, including excessive taxation and insufficient infrastructure, which impede the delivery of robust services. Industry stakeholders have urged the federal government to enhance investment in telecommunications infrastructure to support the digital economy, emphasizing the need for both foreign and local investments, particularly in rural areas.
During a meeting in February 2024 with Communications, Innovation, and Digital Economy Minister Dr. Bosun Tijani, ALTON Chairman Gbenga Adebayo emphasized that the tariffs set by the NCC do not reflect the increased cost pressures faced by the telecom sector. He argued for a review of the pricing regulatory framework to align with local and global economic conditions to ensure the sustainability of telecom operations in Nigeria.
Recent inflation data from the National Bureau of Statistics (NBS) shows a jump to 33.20 percent in March 2024, up from 31.7 percent the previous month, signaling heightened economic challenges for businesses in managing operational costs and investments.
Effiong Ikemesit, Chairman of the Technology Committee of the Nigerian Bar Association (NBA) Section on Business Law, also voiced concerns about the viability of the telecom sector amid these economic strains. He highlighted additional challenges such as frequent fiber optic cable damages, pervasive taxation, and obstacles in acquiring rights-of-way, which are exacerbated by rent-seeking behaviors.
Ikemesit stressed that regulatory flexibility in allowing tariff adjustments is crucial for the telecom industry to remain competitive and adapt to market changes. He emphasized the need for a conducive economic environment that fosters sustainable growth and innovation in the sector.
As industry players await the outcome of cost-based studies by KPMG, commissioned by the NCC, the pressing need for tariff adjustments is clear. Operators note that while they earn revenue in Naira, a significant portion of their costs is in dollars, necessitating timely price revisions to sustain their operations amid economic pressures.
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