In the year 2023, Nigeria experienced a sharp decline in Foreign Direct Investments (FDIs) in the telecommunications industry, with a notable decrease in capital inflow. According to the most recent report from the National Bureau of Statistics (NBS), the sector only received a total of $134.75 million in FDIs in 2023, indicating a significant drop from the $456.83 million reported in 2022. Quarterly data analysis continues to show a decline in the sector’s capital inflow.
Foreign direct investment in the sector experienced a significant decline from the first quarter of 2022 to the first quarter of 2023, dropping from $57.79 million to $22.05 million. Similarly, there was a drastic decrease in the fourth quarter of 2023, with capital inflow amounting to $22.84 million compared to $168.27 million in the same period of 2022. To accurately measure the decrease, we calculate the percentage drop in FDIs from 2022 to 2023. The decrease from $456.83 million to $134.75 million is equivalent to roughly a 70.5% drop.
Nigeria is actively pursuing a boost in foreign investment.
The decrease in foreign investment in Nigeria’s telecommunications sector highlights the potential obstacles facing the country’s broadband penetration goals. This trend is particularly concerning as Nigeria works towards achieving a 70% broadband penetration rate by 2025 through the implementation of the National Broadband Plan (NBP 2020-2025). The correlation between the reduction in foreign investment and the broadband penetration target underscores the importance of addressing these challenges to ensure the success of the NBP. Nigeria is actively pursuing a boost in foreign investments in order to reach its ambitious goal.
Experts suggest that meeting the goals set by the NBP would demand a minimum of $3.4 billion in funding for fibre infrastructure. In the wake of these investment necessity, it should be noted that there has been an overall decrease in Foreign Direct Investment across Nigeria’s economy, a trend that originated with the emergence of the coronavirus (COVID-19) pandemic in 2020. In particular, the telecommunications industry has witnessed a steady decline in investments for the last six years. Industry stakeholders attribute this downward trend to a mix of different factors.
Government partners the World Bank to address the situation.
One major challenge faced in the sector is the burden of dealing with multiple taxes, leading to complex financial planning. Furthermore, the unpredictable nature of Nigeria’s foreign exchange market is a major worry for foreign investors. The constant changes in exchange rates create doubts about the possibility of retrieving profits, diminishing Nigeria’s appeal as an investment destination. In response, the Nigerian government has revealed a new partnership with the World Bank to address the declining foreign investment in the industry and the growing need for financial support to improve broadband infrastructure.
This strategic move aims to address the challenges and boost the sector’s development. It aims to secure a $3 billion investment in Nigeria’s broadband infrastructure, which will involve laying down 120,000km of fibre optic cables. This project is expected to enhance internet connectivity nationwide. The announcement was made by the Minister of Communications, Innovations, and Digital Economy, Dr. Bosun Tijani, at a meeting in Abuja centred around the goal of achieving widespread broadband access in Nigeria. Tijani expressed hope that the necessary funds would be raised in the upcoming two to three years.
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Dr. Tijani stressed the importance of private sector involvement in the project, aiming for completion within three years. He underscored the crucial nature of the initiative, noting the pressing requirement for investments in Nigeria’s digital infrastructure. The objective is to make digital services accessible and affordable to all Nigerians, ensuring inclusivity in the digital sphere. This action is considered a crucial measure in boosting the country’s digital economy and promoting wider digital access for all.
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