Stakeholders in Nigeria telecommunication sector are pushing for a tariff hike with signals the Nigerian Communications Commission may have begun consultations with relevant players on the proposed tariff increase in the telecoms sector. Could these deliberations yield an outcome that will be acceptable to both the operators and subscribers once and for all? Tajudeen Ibrahim, Director of Research and Strategy at Chapel Hill Denham joins CNBC Africa for more on this.
Stakeholders in Nigeria telecommunications sector are pushing for a tariff hike with signals the Nigerian Communications Commission may have begun consultations with relevant players on the proposed tariff increase in the telecoms sector. Could these deliberations yield an outcome that will be acceptable to both the operators and subscribers once and for all? Tajudeen Ibrahim, Director of Research and Strategy at Chapel Hill Denham joins me now for more on this discussion. Mr Ibrahim, thanks a lot for joining us on the show today. Now, one of the biggest conversations we have on the table is to raise tariff or not to raise at this point in time. But if we narrow down on one of the most recent developments, Starlink increasing its monthly subscription by 97% now, then other players in the industry are asking the question, why is it taking so long to have cost-reflective tariffs? When we are going by the 2016 models, when we are looking at the fact that we are yet to get a proper footing on the sort of action which you see around retail price and concessionary funding for the sector, your take on these deliberations so far and whether or not we can have an outcome that truly would satisfy the operators and then at the end of the day as subscribers being able to afford the sort of increases? Thank you for having me on the show. I think it is very important for all of us to be in mind that the telecommunication industry seems to be like the only industry that has not been able to respond to the macroeconomic challenges that we have seen so far within the past two years. Very key of them is the devaluation of the currency. We have seen inflation also go up significantly. We have equally seen some other elements, which is around tight monetary policy, which has resulted in higher interest rates in the economy. Of importance also is the fact that there is a regulatory directive by the NCC for mobile telecommunication network operators to remove from their networks all of the SIM cards that are not linked to NIN. Amid all of these sort of headwinds, the telecommunication industry has not been able to implement a tariff increase due to the sensitivity of that and also the interest that the government has in that sector. So all of these elements put together is negatively impacting the telecommunication sector. And one key way to my mind that the industry has to respond is to implement tariff increases. Because without tariff increases, we possibly are not going to see sustained growth of the telecommunication sector. And if that sector is not growing, what it means is that we are not going to see an increase in investment in this sector. So that sector, to my mind, is the only sector that is lagging behind in terms of responding to the current reality in the economy in terms of the cost of doing business. So I think it is right for tariffs to go up. And I reckon that consumers would just have to adjust accordingly in terms of purchasing airtime to be used on their phones. No doubt, those tariffs have to go up in my view. Exactly. And Mr. Ibrahim, just before your conversation, I was having a conversation with Bimini from ZCrest team and she was talking about the sort of investment appetite we have in the telecom sector and then also some players also returning to profitability. But going by the current macroeconomic headwinds now, what sort of forecast do you have for us, for the telecom sector? And in terms of the contribution to the GDP, how do you see the print, what sort of range? I think the contribution to the GDP will still remain in the high single digits because that is down from actually what previously used to be double digits, like 11% or even more, in terms of the contribution to the GDP. But because we are seeing several challenges in this sector and the sector has not been able to respond accordingly. If we take like two, three years' view of the telecommunication industry, I comfortably can tell you that that industry is one of the top three that contributes to the growth that we see in the Nigerian GDP. And this is, to my mind, one of the major reasons that the regulator and the government should also ensure that that industry is protected. If the particular industry is bringing one of the top three in terms of the accretion to your economic growth, then you should protect that industry. So I think going forward, we will see the industry remaining one of the top three to five in terms of contribution to the increase that will be seen in the Nigerian GDP going forward. But we need to ensure that the industry is able to increase its investment. Investment in the first nine months, for instance, was down by what looks like 28%, speaking to the capital expenditure of the industry. And that was likely because they did not have access to US dollars to import the materials they need in terms of expanding the capacity of their network. I think it is very important for the government to be supportive. Yes. Well, Mr. Ibrahim, we'll have to leave the conversation here for now. For the lack of time out, I'd love to have had your take on some of the talks we're having between the CBN and then the NCC over this lingering US$250 billion debt, but we'll have to leave the conversation here for now. Thank you so much for your time on the show today. That was Tajudin Ibrahim, Director of Research and Strategy at Chapel Hill.
Theme: Challenges and Opportunities in Nigeria's Telecom Sector Amid Calls for Tariff Hike
Nigeria's telecommunication sector is at a critical juncture as stakeholders push for a tariff hike to combat ongoing challenges. The Nigerian Communications Commission (NCC) has initiated consultations with industry players regarding a potential tariff increase, sparking debates on the feasibility and impact of such a move. Tajudeen Ibrahim, Director of Research and Strategy at Chapel Hill Denham, shed light on this contentious issue in a recent interview on CNBC Africa. The discussion centered around the delay in implementing cost-reflective tariffs, with the recent example of Starlink increasing its monthly subscription by 97% fueling concerns among industry players. Ibrahim highlighted the industry's failure to adapt to macroeconomic challenges, including currency devaluation, rising inflation, and regulatory directives such as the NCC's mandate to link all SIM cards to National Identification Numbers (NIN). Amid these challenges, Ibrahim emphasized the necessity of tariff hikes for the telecom sector to thrive and attract investments. He noted that the sector's growth is essential for economic development, as it historically contributed significantly to Nigeria's GDP. However, recent hurdles, such as limited access to foreign exchange impacting capital expenditure, have hindered the industry's potential. Despite facing obstacles, Ibrahim remained optimistic about the sector's future prospects, projecting a continued high single-digit contribution to the GDP. He underscored the importance of government support in fostering a conducive environment for telecom operators to thrive and meet evolving consumer demands. The interview also touched upon the industry's ongoing discussions with regulatory bodies like the Central Bank of Nigeria (CBN) regarding a substantial debt issue, hinting at broader financial challenges that could further impede sector growth. As Nigeria navigates these complex telecom sector dynamics, the decision on tariff hikes looms large, with implications for both operators and subscribers. The outcome of these deliberations will shape the industry's trajectory and its ability to harness technological advancements for socio-economic development.
"Without tariff increases, we possibly are not going to see sustained growth of the telecommunication sector."
Nigeria, telecom sector, tariff hike, NCC, macroeconomic challenges, GDP, investment, regulatory directives, industry growth, economic development, foreign exchange, consumer demands, financial challenges