As of the fourth quarter (Q4) of 2023, only 106 of the 252 licensed Internet Service Providers (ISPs) in Nigeria remain active, according to data from the Nigerian Communications Commission (NCC). These 106 active ISPs collectively serve 262,206 customers, a stark contrast to the 163.8 million internet subscribers across the four dominant mobile network operators—MTN, Airtel, Globacom, and 9mobile. Several factors have contributed to their decline in Nigeria, with high operating costs being a primary culprit. Other significant challenges include difficulties with right of way (RoW), low Internet Access in the northern regions due to Security concerns, standardization issues with state governments, and various taxes.
According to the 2022 year-end performance report, these providers generated a total Revenue of ₦92,079,251,596.26 but faced substantial expenditures. They spent ₦5,243,381,710.22 on acquiring, upgrading, and maintaining physical assets and a staggering ₦71,200,884,440.55 on operating costs. These financial pressures have forced many out of business. Chidi Ajuzie, the Chief Operating Officer of WTES Projects Limited, emphasized the survival challenges facing Nigerian ISPs. He urged them to broaden their operations and seek new growth opportunities. Highlighting issues such as vandalization, competition, tariffs, taxes, power availability and cost, Ajuzie called for regulatory support in licensing, spectrum availability and pricing, inter-sector policies, RoW intervention, and security.
Stakeholders’ perspective and importance of regulatory support.
“The past two years have been very challenging for ISPs, with significant damage to infrastructures, particularly in Lagos State,” Ajuzie stated. He stressed the need for federal laws to protect critical telecom Infrastructure and underscored the importance of governmental support at all levels to create an enabling business environment. Ajuzie also pointed out that they must innovate by offering Value Added Services and solutions on fiber infrastructure. He advocated for collaboration among ISPs to expand their serviceable footprints and reduce costs, urging them to monetize existing infrastructure and provide end-to-end solutions.
Martins Akingba, Chief Operating Officer of eStream Networks Limited, discussed the obstacles faced by service providers, including the reliance on imported equipment and the difficulty in accessing foreign exchange. He noted that local providers struggle to compete with international players who have access to better funding and expertise. “The federal government has recognized Broadband penetration as key to reducing data costs,” Akingba said, praising efforts to reduce RoW Tariffs to ₦150 per meter. However, he called on state governors who have not yet implemented this tariff reduction to comply with the federal directive.
Role of govt in preventing ISP failures in Nigeria.
Dr. Kenny Joda, Head of Sales at FibreOne Broadband, highlighted the federal government’s efforts to support internet service providers and boost broadband penetration. He noted that while some states have reduced RoW tariffs to ₦150 per meter, others, like Lagos, continue to charge as much as ₦1500 per meter. Joda appealed to state governors to comply with the federal mandate to ease the financial burden on service providers. “We need protection from harassment by area boys, police, and estate agents. Reducing taxes on imported equipment would also be beneficial,” Joda added.
Over the years, several notable internet service providers in Nigeria have ceased operations due to the challenging business environment. One of the early ISPs, Mweb Nigeria struggled with financial Sustainability and eventually shut down operations in the early 2000s. Another was Starcomms. Once a leading player in the market, Starcomms faced severe financial difficulties and was unable to compete with larger mobile network operators, leading to its exit from the market. Next, Hyperia was a pioneer in the Nigerian ISP market but couldn’t sustain its operations amidst rising costs and competitive pressures. Then, known for its internet services in the early 2000s, Disc Communications could not survive the financial strain and market competition, leading to its closure.
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For these providers to thrive in Nigeria, several strategic measures are essential. There must be regulatory reforms. The government must continue to address issues such as RoW tariffs, taxation, and infrastructure protection. Policies that ease the financial burden on them and promote a fair competitive environment are crucial. Service providers should also collaborate to share infrastructure costs, reducing capital and operational expenditures. This collaboration can lead to more extensive and efficient service coverage. As well, providers need to go beyond basic connectivity services. Offering value-added services, such as cloud computing, cybersecurity solutions, and digital content delivery, can open new revenue streams. Others include public-private partnerships as well as local Manufacturing and sourcing.