By PUNCH Editorial Board
Nigeria’s telecom industry is at a crossroads. The recent approval of a 50 per cent tariff hike by the Nigerian Communications Commission has drawn sharp criticism from stakeholders, especially the Nigeria Labour Congress, National Association of Nigerian Students, consumer advocacy groups, and civil society. They have threatened protests and lawsuits. It is a difficult moment for the industry.
Initially, the operators sought a 100 per cent increase, but the NCC settled for 50 per cent, citing the need for industry sustainability amid challenging economic conditions.
Given the climate of rising inflation, diminished purchasing power, and economic hardship, Nigerians are understandably outraged. The proposed increase threatens to amplify the struggles of millions of citizens, many of whom depend on communication services to conduct business, access education, and stay connected with loved ones.
Even as economic realities dictate the necessity of the tariff hike, there is a need to balance sustainability in the industry with consumer affordability.
Defending the ministry’s 2025 budget proposals before a joint House of Representatives and Senate Committee on Communications on Tuesday, the Minister of Communications, Innovation, and Digital Economy, Bosun Tijani, pinned the hike on rising inflation and operational costs.
He argued that tariff increases aligned with broader economic trends, where rising tariffs result in higher consumer prices due to additional costs on imported goods.
However, the resistance to the hike is in the magnitude. Consumer advocacy groups believe a 10 per cent hike is more appropriate given the current privations consumers have had to endure. This argument might not be realistic since all other sectors have hiked prices. The cancellation of petrol subsidies has seen a 500 per cent hike in 18 months in petroleum products prices.
Telecom companies in Nigeria contend with various operational challenges. Forex shortages, rising operational costs, and regulatory burdens top these. The exchange rate volatility has exacerbated the financial strain on these companies, as a substantial portion of their capital expenditure and in some cases, services, are dollar-denominated.
For an industry heavily reliant on importing equipment, software, and other technical components, the devaluation of the naira has made it increasingly difficult to maintain infrastructure and roll out new services. In addition, the skyrocketing costs of diesel and energy needed to power telecom towers in a country with unreliable electricity compound the financial strain.
Forex pressures on telecom operators have been devastating. MTN Nigeria, the biggest operator with almost 80 million subscribers, recorded a loss after tax of N514.9 billion for the first nine months of 2024, primarily attributed to naira depreciation. Airtel Africa reported $151 million in forex losses due to naira depreciation in the same period. Operators argue that tariff hikes are essential to ensure profitability and long-term viability.
Yet, the timing and magnitude of these tariff increases are particularly troubling for most Nigerians. With inflation hovering around 36 per cent and basic household items becoming unaffordable for many, higher telecom costs will disproportionately affect low-income households.
High tariffs risk excluding millions of Nigerians from participating in this transformation and widen the digital divide. It could also reverse some of the gains of leveraging telecoms to drive economic growth.
Access to affordable communication services is no longer a luxury but a necessity, as it facilitates business including financial services and agriculture, education, healthcare, and social interactions.
For small businesses and entrepreneurs, who depend on reliable and affordable telecom services to conduct their operations, the tariff hikes threaten to squeeze already thin profit margins and dampen economic activity.
The decision to increase tariffs however raises questions about how the NCC will balance the interests of operators with those of consumers. The NLC has accused the NCC of prioritising corporate profits over citizens’ welfare. This means that while the NCC must ensure that telecom operators can remain viable, it also has a responsibility to protect consumers from exploitative practices.
This underscores the importance of government intervention in addressing the structural challenges facing the telecom sector. The industry is a major contributor to Nigeria’s economy, accounting for 16.22 per cent of GDP in the first quarter of 2024. From fostering financial inclusion through mobile money to enabling remote work and e-learning, the industry has become indispensable.
It is therefore essential that this vital sector is nurtured and protected. The forex crisis requires urgent attention. The government must improve access to foreign exchange for telecom operators, address energy infrastructure deficits, and foster a more conducive operating environment.
Similarly, investments in alternative and renewable energy sources should be fast-tracked to mitigate the reliance on costly diesel generators.
The regulatory environment needs to be more conducive. A situation where telecom operators are forced to pay 39 different rates and charges to federal, state, and local governments is ridiculous.
For consumers, the tariff hikes present a painful but necessary reminder of the cost of an unsustainable economic model typified by rent-seeking and oil dependency while productivity remains low.
While Nigerians will undoubtedly feel the pinch, there is also an opportunity for innovation and adaptation. Companies could explore affordable data bundles, and value-based pricing models, and work to improve operational efficiencies.
Telcos need to be more transparent in the pricing structure while consumers may need to adjust their usage patterns to maximise value.
Nevertheless, this should not absolve policymakers and industry stakeholders of their responsibility to find long-term solutions.
The high cost of energy has been a key cost driver even before the deregulation of fuel prices. The government needs to recognise the strategic role of the industry and intervene to ensure its sustainability by ensuring exchange rate stability and investing to boost the power sector and ultimately lower energy prices.
Ultimately, the conversation around telecom tariffs must extend beyond the immediate price hikes to a broader discussion on digital inclusion and the future of Nigeria’s digital economy. A healthy telecom industry is essential not only for the provision of basic communication services but also for powering the country’s transition to a digital-first economy.
To strike the right balance, all stakeholders must come to the table. The NCC, telecom operators, consumer advocacy groups, and the government must collaborate to chart a path forward that ensures sustainability for operators while keeping services accessible to the average Nigerian.
One potential solution could be the implementation of a tiered pricing system that offers reduced rates for low-income households. Additionally, encouraging local manufacturing of telecom equipment could help reduce the industry’s reliance on imports, easing the pressure of forex fluctuations.
Currently, only 16 per cent of telecom equipment is manufactured in Nigeria, mostly cables but Morrocco already has several chip factories including a gigafactory due to open next year.
Ahead of the anticipated discussions about the tariff hike, it is essential to remember that the telecom industry is a lifeline for millions. Decisions about tariffs must be made with a clear understanding of their broader implications for consumers and the economy.
While operators need to remain financially viable, this cannot come at the expense of worsening the economic hardships of ordinary Nigerians.
The goal must be to create a telecom ecosystem that is both sustainable and inclusive, ensuring that no one is left behind on the road toward a more connected future.
