By Chinenye Anuforo
[email protected]
In 2024, Nigeria’s telecom sector, dubbed the engine room of economic growth, literally sailed on tempestuous waters but managed to remain on course.
For industry watchers, the sector operated on a challenging landscape but leveraged emerging opportunities to drive growth and innovation.
It is noteworthy that the year witnessed remarkable progress in expanding broadband access, but these advancements were tempered by a decline in the subscriber base, largely attributed to regulatory challenges, persistent issues of affordability, widespread digital exclusion and the overarching impact of economic volatility. This dual narrative, many insist, flaunts both the sector’s potential for growth and the hurdles that must be overcome to achieve equitable and sustainable progress.
This piece carefully unpacks key developments, exploring how government policies, industry trends and shifting digital demands are shaping the future.
Subscriber base declines
The government’s mandatory SIM card-NIN linkage significantly impacted subscriber numbers in 2024. By September, major operators had disconnected 64.3 million lines due to unverified NINs, causing a 30% drop in the mobile subscriber base from 219 million in March to 154.6 million. This drastic decline, with some operators losing millions of subscribers and others facing substantial reductions, impacted their Q3 revenues.
While the NCC emphasised the security benefits of the initiative, it undeniably imposed a significant financial and operational burden on the telecom sector.
Broadband penetration
A key focus for Nigeria’s telecoms sector in 2024 was achieving widespread broadband access. The National Broadband Plan (2020-2025) set an ambitious target of 70% penetration by 2025. However, progress faced significant hurdles.
As of September 2024, broadband penetration stood at 41.56%, a decline from 43.71% in March. This shortfall underscores the challenges of expanding high-speed internet access across a vast and diverse nation.
A primary obstacle is the high cost of smartphones. 4G and 5G devices, priced between ₦120,000 and ₦2 million, remain inaccessible to a significant portion of the population, particularly the 88.4 million Nigerians living in extreme poverty. DataReportal estimates smartphone ownership rates between 11.8% and 18.9%, highlighting a stark disparity between demand and affordability.
The Chief Executive Officer of MTN Nigeria, Karl Toriola, emphasised affordability as the most critical barrier to smartphone adoption and broadband expansion. He advocated for local device assembly to reduce costs and eliminate customs taxes, coupled with financing options through platforms like MTN MoMo.
To address the connectivity gap, the Ministry of Communications, Innovation, and Digital Economy launched initiatives such as Project 774 LG Connectivity, aiming to connect all 774 local government areas to the internet. The government also established a Special Purpose Vehicle to expand Nigeria’s fiber-optic network by 90,000 kilometers, increasing the backbone from 35,000 to 125,000 kilometers. While these efforts aim to foster a more connected future, the speed of implementation will be crucial for achieving the desired outcomes.
Digital divide deepens
Despite progress in mobile internet access, a significant digital divide persists in Nigeria. According to the GSMA’s 2024 report, 120 million Nigerians remain offline. While 83% of the population has theoretical access, only 29% (58 million) are active users.
Rural areas lag significantly behind urban centers in smartphone penetration (26% vs. 59%). Affordability remains a major barrier, with entry-level smartphones costing 99% of the monthly income for the poorest 20%. Coverage gaps further exacerbate the issue, with 27 million Nigerians lacking any telecom services and 301 local governments entirely disconnected from the internet.
Addressing this requires more than infrastructure investment. The GSMA emphasises the need to bridge the “usage gap” by improving digital literacy, enhancing online safety, and providing relevant content. Closing this gap could add $3.5 trillion to the global GDP by 2030, with $900 billion benefiting Nigeria directly.
Economic headwinds
The Nigerian economy continues to pose significant challenges for the telecom sector. While FDI surged 537.26% in H1 2024, reaching $304.99 million, this has done little to mitigate long-term challenges like currency depreciation and rising operational costs.
The naira’s sharp depreciation, from ₦471 to over ₦1,600 per dollar, led to massive foreign exchange losses for operators like MTN and Airtel, totaling ₦1.29 trillion. This, coupled with soaring diesel costs (up 90% in 2024), has significantly impacted profitability.
MTN Nigeria, for the first time since its 2019 IPO, reported an annual loss in 2023 and continued to face losses in 2024.
Opportunities for reinvention
While challenges abound, opportunities exist. Renewable energy can significantly reduce operational costs, potentially saving operators ₦17 billion monthly. Renegotiated tower contracts are also helping to cut expenses.
However, the depreciating naira has slashed Average Revenue Per User (ARPU) for MTN and Airtel (by 58% and 46% respectively in dollar terms), forcing them to scale back investments.
Further complicating matters is the decade-long stagnation of telecom tariffs. With rising costs, operators are struggling to maintain profitability.
MTN Nigeria’s Chief Finance Officer (CFO), Modupe Kadri, has called for a policy reevaluation, emphasizing the need for sustainable pricing models to ensure the sector’s long-term viability.
Innovations and partnerships
Despite facing numerous challenges, the Nigerian telecom sector demonstrated resilience and innovation in 2024. Collaboration between government and private operators was a key theme. For instance, MTN Nigeria partnered with the Ministry of Communications to explore local device assembly and financing options.
The government’s 3 Million Technical Talent (3MTT) initiative, with 90,000 new participants in 2024, underscores the sector’s commitment to building a digitally skilled workforce. These initiatives align with Nigeria’s vision of becoming a global tech hub.
The Nigerian Communications Commission (NCC) also took steps to improve the operating environment. The planned limitation of tariff options to seven aims to simplify consumer choices and enhance transparency.
Furthermore, seven states (Zamfara, Katsina, Anambra, Kebbi, Nasarawa, Bauchi, and Adamawa) waived right-of-way (RoW) fees, a significant step towards reducing network deployment costs. However, the introduction of alternative levies by some states negated these benefits.
Chairman of the Association of Licensed Telecommunications Operators of Nigeria (ALTON), Gbenga Adebayo, criticized this practice, calling for a more coordinated approach to infrastructure development.
Future
While 2024 was marked by significant hurdles, the Nigerian telecoms industry also showed promise in overcoming them. However, stakeholders have highlighted several actions that are necessary to ensure sustainable growth:
For instance, in terms of device affordability, Toriola advocated for expansion of local assembly of smartphones and implementing financing schemes that can make devices more accessible to Nigerians, especially those in rural areas.
IT specialist, Jide Awe told journalists that for Nigeria to achieve broadband targets, there is need for the federal government to accelerate rollout of the 90,000-kilometer fibre-optic network, adding that it will help to achieve broadband targets and reducing coverage gaps.
Awe also called for more digital literacy, adding that, “Addressing the “usage gap” through education and community programs will be essential to ensuring that infrastructure investments translate into meaningful connectivity gains.”
On policy harmonisation, the chairman of ALTON, Gbenga Adebayo advocated for the need to streamline regulatory frameworks, particularly around RoW fees and levies. Thus can foster a more investment-friendly environment, Adebayo affirmed.
Adebayo also called for more economic support. “Revising tariff policies to reflect economic realities will help telecom operators maintain profitability and continue investing in infrastructure,” he added.
While regulatory mandates and economic pressures have revealed vulnerabilities in Nigeria’s telecom sector, they also present a unique opportunity to innovate and adapt. With the right strategies, the industry could emerge more resilient and sustainable, ensuring its role as a backbone of the nation’s connectivity and growth.