According to a new report by Agusto & Co., Nigeria’s telecommunications industry attracted $3.9 billion in foreign portfolio and direct investments between 2015 and 2020.
The credit rating agency, in its 2021 Telecommunications Industry report, said, “Between 2015 and 2020, foreign investments (portfolio and direct) attributable to the telecommunications industry amounted to $3.9bn, an average of seven percent of Nigeria’s total capital importation during the same period.
“The industry has consistently remained one of the top five ranking economic sectors for foreign investments during the period.”
The agency added that the imminent deployment of 5G technology and the Federal Government’s target broadband penetration rate of 70 percent by 2025 would increase foreign investments in the sector in the near to medium term.
Agusto & Co said it expects 5G technology to be commercially available in Nigeria by mid-2022.
According to the company, the proportion of mobile Internet users to mobile phone subscriptions in Nigeria increased from 69.1 percent in January 2020 to 75.4 percent as at December 2020.
“We expect the country’s telecommunication consumption pattern to be sustained in the near-term, given lingering concerns around the emergence of COVID-19 variants,” it said.
However, the unstable macroeconomic environment in Nigeria was a huge threat to successfully harnessing the vast potential in the industry, the agency noted.
It said, “In the span of five years (2016-2020), Nigeria has gone through two economic recessions while the naira has continuously lost value against the world’s major currencies, negatively impacting purchasing power and the ability to maintain quality network equipment and services.
“In addition to the fragile macroeconomy, the telecommunications industry has also had its fair share of unfavourable regulatory changes through onerous tax regimes, delayed approvals and heavy regulatory penalties.”
The report noted that regulatory changes, with the initiation of the NIN-SIM verification exercise, drove a considerable decline in the industry’s growth rate to 6.3 per cent in the first quarter of 2021 from 17.7 percent in Q4 2020.
It said, “In order to complete the NIN-SIM exercise, the NCC mandated the suspension of SIM card activations and registrations, thereby slowing the industry’s growth pace.
“In only four months of the NIN-SIM verification exercise, the industry’s active telephony subscriptions reduced by 7.7 per cent from 204.5 million as at the end of December 2020 to 188.7 million at the end of April 2021. On the back of anticipated SIM deactivations for subscribers without valid NINs, we estimate that the subscriber base will shrink by 3 per cent (year-on-year) by the end of 2021 to 198 million subscribers.
“We anticipate that logistics around the NIN-SIM verification exercise will be resolved by the end of 2021 and thus, double-digit top line growth should be restored by 2022,” it added.
According to the company, the challenges of the industry, which include high business costs, prevailing inflationary pressures, and the adverse impact of regulatory changes, will continue to impact the industry in 2021