Foreign investments

Telecommunications sector attracts $ 3.9 billion in foreign investment in five years | The Guardian Nigeria News

• Unstable macroeconomic environment impacting the potential of the sector
• NIN-SIM drives 6.3% drop in industry growth in Q1 2021

Between 2015 and 2020, Nigeria’s telecommunications sector attracted $ 3.9 billion in foreign investment (portfolio and direct). The 2021 Telecommunications Industry Report released by Agusto & Co, which revealed it, observed that this averaged seven percent of Nigeria’s total capital import during the same period.

He said the industry has consistently remained one of the top five economic sectors for foreign investment during the period.

Agusto & Co said it believes the imminent deployment of 5G technology and the Nigerian federal government’s broadband penetration target of 70% by 2025 will support substantial additional foreign investment in the short to medium term.

According to the company, due to the key connectivity support provided by the industry, telecommunications has been one of the few bright spots in the economy in 2020 (along with sectors such as financial institutions, agriculture and retailers). health services).

With the exception of the economic recession of 2016/2017, the real growth of the telecommunications industry has consistently exceeded the growth of the country’s GDP.

But despite the aforementioned positives, Agusto & Co said that the volatile macroeconomic environment in Nigeria poses a huge threat to successfully harness the vast potential of the telecommunications industry.

“In the span of five years (2016-2020), Nigeria has gone through two economic recessions as the naira has continuously lost value against the world’s major currencies, which has had a negative impact on the power of ‘purchasing and the ability to maintain quality network equipment and services.

“In addition to the fragile macroeconomics, the telecommunications industry has also had its fair share of adverse regulatory changes through onerous tax regimes, delayed approvals and heavy regulatory penalties,” he noted.

According to her, the regulatory changes, along with the launch of the NIN-SIM verification exercise, caused the industry’s growth rate to drop significantly to 6.3% in the first quarter of 2021 from 17.7% in the fourth quarter. 2020.

Agusto & Co said that in order to complete the NIN-SIM exercise, the NCC has mandated the suspension of SIM card activations and registrations, thereby slowing the rate of growth of the industry.

“In just four months of the NIN-SIM verification exercise, the sector’s active telephone subscriptions fell 7.7%, from 204.5 million at the end of December 2020 to 188.7 million at the end of April 2021. At the end of April 2021, Following the planned SIM deactivations for subscribers without a valid TIN, we estimate that the subscriber base will decline by three percent (year-on-year) by the end of 2021 to reach 198 million subscribers.

“However, due to the sustained adoption of mobile internet services and the increasing diversification of value-added services by telecom operators, we believe that revenues will increase, albeit at a lower rate of 5% in 2021 ( 2020: 14%). We anticipate that the logistics around the NIN-SIM verification exercise will be resolved by the end of 2021 and, therefore, double-digit revenue growth is expected to be restored by 2022, ”the report said. report.

In addition, the rating agency observed that the COVID-19 pandemic was an extraordinary test for the entire global community given several social isolation measures mandated to curb the spread of the coronavirus.

Because of this, the telecommunications industry, according to the report, has provided businesses and individuals with connectivity, which has fostered resilience as the world grapples with the pandemic.

The report observed that at the height of isolation, internet traffic in Europe increased by around 70% while demand for streaming services increased by at least 12%, with some of the streaming service providers having to lower the video quality to handle the increase. in Internet traffic.

He noted that in Nigeria, the proportion of mobile internet users to mobile phone subscriptions increased from 69.1% in January 2020 to 75.4% in December 2020. Agusto & Co expects to that the country’s telecommunications consumption model is maintained in the short term. given continuing concerns about the emergence of COVID-19 variants.

Going forward, Agusto & Co expects industry challenges to remain with high trading costs, especially given the constant devaluation of the naira, prevailing inflationary pressures and the negative impact of changes. regulatory.

“However, the outlook for the industry remains stable on the assumption that telecommunications will provide support for the recovery of key economic sectors after the pandemic. The efforts to diversify activities expected from operators will also support our outlook, ”he said.