Amid telcos’ demands for an increase in the rate that users must pay for data and voice calls, information, communication, and technology companies—including Nigerian telecommunications companies—owed Deposit Money Banks N1.69 trillion as of September 2024.
In comparison to the N1.77 trillion owed in September 2023, the debt of the telecoms and other ICT companies has decreased by N68.04 billion, or 3.9%, year over year, according to data taken from the Central Bank of Nigeria’s quarterly statistical bulletin.
Recurring interest rate hikes by the CBN have tightened monetary conditions and deterred borrowing in the sector, which is reflected in the fall.
However, compared to the N1.66 trillion recorded in August 2024, there was a minor growth of N31.61 billion, or 1.9%, month over month.According to the year-over-year research, credit to the ICT sector showed a range of patterns in 2024.
Credit was N2.47 trillion in January, which was a substantial rise of N1.23 trillion, or 99.3%, above N1.24 trillion in January 2023.
But by February, credit had dropped to N2.35 trillion, which was still an 88.4% year-over-year rise and N1.10 trillion less than in February 2023.
By March, credit had dropped to N1.67 trillion, substantially slowing the rate of borrowing. Compared to March 2023, this was a 30% increase, or N385.24 billion, on an annual basis.
The pattern persisted into April, when credit was comparatively steady at N1.66 trillion, up N241.90 billion, or 17%, from the previous year.
Credit increased marginally to N1.68 trillion in May, representing a gain of N308.38 billion, or 22.4%, over the same time in 2023.
Year-over-year numbers started to show a drop in June. In June, credit to the industry fell to N1.64 trillion, a decline of N81.59 billion, or 4.7%, from June 2023.
July saw a further drop to N1.69 trillion, which was N48.93 billion (2.8%) less than July 2023.
Credit dropped to N1.67 trillion in August, a decrease of N107.37 billion, or 6%, from the N1.77 trillion reported in August 2023.
By September, the year-over-year decline of N68.04 billion highlighted the cautious approach to borrowing that businesses have taken in reaction to ongoing economic uncertainty and rising interest rates.The CBN’s strict monetary policies, which have increased borrowing costs, are to blame for the fall in credit to the ICT sector throughout 2024.
In an effort to reduce inflation, the apex bank has raised interest rates on a regular basis; throughout the most of the year, the monetary policy rate was at a record high.
Since taking office in September 2023, CBN Governor Yemi Cardoso has presided over six interest rate increases in 2024.
The Monetary Policy Rate had its biggest increase of the year in February, rising 400 basis points from 18.75 percent to 22.75 percent.
In March, there was an additional increase to 24.75%. By May, the rate had increased to 26.25%, and by July, it had risen to 26.75%.
The rate increased to 27.25 percent in September as part of the tightening cycle, and it reached 27.50 percent in November after the most recent boost.
The 875 basis point rise is part of a larger effort to stabilize the economy and fight inflation.Businesses’ ability to borrow money has been directly impacted by this, especially those in capital-intensive industries like ICT.
Additionally, macroeconomic issues like fluctuating exchange rates and growing operating expenses have made financing even more difficult.
Notwithstanding these obstacles, the ICT industry continues to be a vital engine of Nigeria’s economy, making a substantial contribution to employment and GDP growth.
ICT-related activities dropped from 19.78% of Nigeria’s real GDP in the previous quarter to 16.35% in the third quarter of 2024.
This was revealed by the National Bureau of Statistics in the Q3 2024 GDP report.However, the contribution was greater than the sector’s 15.97% contribution during the same time last year.
The four activities of telecommunications and information services—publishing, film, sound recording, music production, and broadcasting—are included in the ICT sector, according to the NBS.
In real terms, the industry grew 5.92 percent year over year in the third quarter of 2024.
Activities in the telecommunications subsector, which made up 13.94% of the GDP in real terms, were primarily responsible for this.
In Q3 2024, the telecom sector was the third-largest contributor to the real GDP, behind the trade and agricultural production sectors, which contributed 14.78 and 26.51%, respectively, according to NBS.
Numerous operations in every other area of the economy are also fueled by the telecom sector, which is dominated by mobile network carriers such as MTN, Globacom, Airtel, 9mobile, and Internet service providers.
Broadcasting was the ICT sector’s closest subsector to telecoms in terms of contribution, contributing 1.37 percent.
Additionally, the NBS data showed that in the third quarter of 2024, the ICT sector provided 11.30 percent of the total nominal GDP, which was less than the rate of 11.57 percent in the same quarter of 2023 and less than the 14.19 percent it contributed in the previous quarter.
The industry grew nominally by 14.51 percent (year-over-year) in the third quarter of 2024, which was 2.65 percentage points higher than the rate in the previous quarter and 25.75 percentage points lower than the 40.27 percent pace in the same quarter of 2023.
The Nigerian telecoms industry saw a severe reduction in foreign investments for the third quarter of 2024, falling 87% from the previous two quarters, despite being a large contributor to the country’s GDP.
According to NBS capital importation data, the sector only brought in $14.4 million in capital imports in Q3, a significant drop from the $113.42 million in investments in Q2.
In comparison to the $64.05 million reported during the same period previous year, the Q3 2024 capital importation for the telecom sector similarly marks a 77% decrease year over year.
The telecom industry has seen better foreign investments this year than in prior years, notwithstanding the third-quarter dip.
According to NBS data, the sector got a capital inflow of $191.5 million in the first quarter of this year, which is a notable 769 percent rise over the $22.05 million received in the same period in 2023.
The sector’s total investments for the entire year 2023, which came to $134.75 million, were exceeded by the investments made in the first quarter alone.
Even though there was a huge infrastructure vacuum that would require billions of dollars to close, this occurred after years of steadily declining investments. FDIs in the sector totaled $113.4 million in Q2 2024.
This is a 339 percent increase over the $25.81 million capital influx reported during the same period last year, even if it is less than the inflow recorded during the previous quarter.
MTN Nigeria’s core capital expenditure decreased 27.79 percent to N217.64 billion between January and September 2024, while Airtel’s capex decreased 36.59 percent to $149 million.
This decrease in investment is linked to MTNN’s N514.93 billion loss from January to September 2024 and Airtel Nigeria’s income falling 46.9% to $755 million during that time.
This year, carriers redoubled their efforts to raise tariffs in order to cope with these difficult economic realities.
For the past 11 years, telecom operators have pushed for increased charges, according to the Association of Licensed Telecom Operators of Nigeria and the Association of Telecommunication Companies of Nigeria.
In light of negative economic headwinds such as high inflation of 34.6% in November 2024 and losses from foreign exchange fluctuations, the telecoms emphasized the necessity of cost-reflective rates.
However, after 11 years of lobbying, a tariff raise was approved, and Nigerian telecom companies were required to increase their investments in network infrastructure.
This comes after Minister of Communications, Innovation, and the Digital Economy Bosun Tijani stated that tariff increases would take place for the industry’s sustainability. “Tariff will go up,” he declared.
The telcos’ pledge to boost their investments in the industry has been linked to this growth.