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Telecom sector threatened by economic woes

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By Usman Oladimeji

Difficulties in obtaining rights-of-way among woes affecting the sector.

Amidst the ongoing economic difficulties, there have been rising worries about the sustainability of Nigeria’s telecommunications industry . In a thought-provoking piece titled ‘Maintaining Nigeria’s Telecoms Backbone,’ Effiong Ikemesit, the head of the Technology Committee in the Nigerian Bar Association’s Section on Business Law, explored the sector, highlighting its crucial importance as both a driver of economic growth and a facilitator of societal progress. The sector’s viability is paramount for the sustainability of Nigeria, given its substantial 16 percent share of the country’s GDP and a workforce of around 15,000 employees.

The Nigerian telecom industry is known for its innovative and connected environment, showcasing high performance in the country. Despite this positive, there are numerous obstacles that hinder its growth. Ikemesit pointed out several challenges such as road construction causing frequent fiber optic cable damages, increased taxes, and difficulties in obtaining rights-of-way. He claimed that despite attempts to address them, these problems, worsened by greedy exploitation of rents, have continued to exist. The key to keeping any sector thriving is having a favourable economic setting that fosters ongoing progress and innovation.

Subscribers are increasingly worried about services offered.

Ikemesit pointed out that the sector is facing difficulties in responding to market changes due to regulatory restrictions on tariff adjustments, unlike many other industries. The latest statistics from the National Bureau of Statistics (NBS) show a significant increase in inflation to 33.20 percent in March 2024, up from 31.7 percent in February 2024. This increase presents major obstacles for businesses looking to support their employees and invest in the midst of ongoing economic challenges. Price hikes in sectors like agriculture, beverages, and services have been a result of inflationary pressures. To offset the escalating costs, companies like Nigerian Breweries Plc and Netflix have made several adjustments to their prices throughout the year.

For Nigeria, subscribers are increasingly worried about the levels of service they receive. Data suggests that this concern is unlikely to improve anytime soon. Nigeria’s Minister of Communication, Innovation, and Digital Economy, Bosun Tijani, set a target of 70 percent broadband penetration, which suffered a significant setback in 2023. The rate dropped by 14.2 percent from its peak in March to November, falling from 48.28 percent to 41.87 percent. In 2023, operators faced financial losses and anticipated a difficult year in 2024, highlighting the funding challenges that will hinder the sector’s transformation efforts.

ALTON members are burdened with various taxes and levies.

Engr. Gbenga Adebayo, the chairman of Association of Licensed Telecoms Operators of Nigeria (ALTON), highlighted the difficulties in the industry for 2023. He mentioned that ALTON members are burdened with paying 49 various taxes and levies. Not only that, but they also face the challenge of dealing with excessive taxation and being forced to comply with illegal tax and levy requests from local authorities. These issues put investment, sustainability, and industry expansion at risk, Adebayo added. As per reports, a fresh issue has arisen within the domain of interconnection agreement settlements, which involves the contractual arrangements between telecommunications companies to link their networks and share telecommunications traffic.

Settlement fees in telecommunications are often determined by factors such as call origin and destination, duration, and connection times. These fees usually pertain to interconnection agreements between operators, primarily considered as B2B matters unrelated to subscribers. However, there are rare instances where subscribers may become involved in these settlements. The warning from the Nigeria Communications Commission (NCC) regarding the possibility of allowing a telecom operator to disconnect users from a different provider has raised concerns among subscribers.

Advancements in regulations, the issue remains with enforcement.

Regulatory framework complexity in the sector has presented numerous challenges when it comes to resolving interconnection charges. Even though there have been advancements in establishing regulations to facilitate interconnection agreements, enforcing these agreements is met with difficulties. While interconnection agreements are essential for promoting cooperation among telecom operators, they also have the potential to spark disputes. At the same time, the NCC consistently emphasizes the significance of following the terms and conditions specified in interconnection agreements. They urge Mobile Network Operators (MNOs) and telecommunications industry license holders to maintain these guidelines.

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