Some of Nigeria’s leading telecom companies, including Airtel, MTN Nigeria, and IHS Towers, are contemplating scaling back their investments in the country. The companies attribute this potential reduction to a combination of multiple taxation, worsening power supply, and ongoing losses driven by foreign exchange volatility.
During a panel discussion at the Telecom Townhall Forum hosted by Financial Derivatives Company (FDC) on Tuesday, Airtel Nigeria CEO Carl Cruz revealed that the telecom giant is reconsidering its investment strategy in Nigeria. “We are beginning to discuss with shareholders whether to maintain our investment pace in Nigeria because the capital invested here is being compared to investments in other markets,” Cruz stated.
MTN Nigeria’s CEO, Karl Toriola, emphasized the challenges posed by the government’s hesitation to approve a tariff hike, especially as inflation continues to rise. “The government needs to reconsider; if your input costs exceed your selling price, it’s a problem. We must separate ourselves from the political considerations of price control,” Toriola remarked.
Adding to the concerns, Kazeem Oladepo, Vice President at IHS Towers, noted that “Market dynamics and macroeconomic conditions have changed over the past five years, so there’s only so much value we can extract from these players.”
Bolaji Balogun, CEO of Chapel Hill Denham, provided data showing that over $70 billion has been invested in Nigeria’s telecom sector since the first telecom license was issued in 2001. Despite this, an additional $4.33 billion is needed to connect most Nigerians to the internet.
Maintenance costs are another significant burden. Gimba Mohammed, Director of Government and External Relations at IHS Towers, disclosed that ₦14 billion was spent fixing 59,000 fibre cuts between 2022 and 2023.
The challenging economic environment has led telecom companies to reconsider their investments, as losses have mounted over the past three quarters. Shareholders, concerned about the risks to their equity contributions, share the same worries.
Underinvestment in the telecom sector poses a serious risk. Data from the Financial Derivative Company indicates that a 1% decrease in telecom investment leads to a 1% drop in the industry’s GDP contribution. This is a decline Nigeria cannot afford, but regulators face a difficult decision. Approving tariff increases could worsen the cost-of-living crisis for Nigerians, putting regulators in a tough spot as they weigh economic needs against public sentiment.
Credit: TechCabal (Text Excluding Headline)
