Tariff Hike Looms As Telecos, ICT Firms Deal with Rising Debt
Tariff Hike Looms As Telecos, ICT Firms Deal with Rising Debt

Tariff Hike Looms As Telecos, ICT Firms Deal with Rising Debt

1 week ago
1 min read

Technology and telecom companies in Nigeria are dealing with significant financial difficulties as they collectively owed N1.69 trillion to banks as of September 2024. Despite this hefty debt, these companies are pushing to increase charges for data and phone calls.

A report from the Central Bank of Nigeria (CBN) revealed a decrease in the debt by N68.04 billion, a 3.9% reduction compared to September 2023, when the debt stood at N1.77 trillion. This decline is attributed to the Central Bank’s stringent monetary policies, which have made borrowing costlier. However, from August to September 2024, the debt saw a slight rise of N31.61 billion, a 1.9% increase.

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CBN’s Interest Rate Hikes Impact Borrowing

The reduction in borrowing throughout the year was primarily influenced by the Central Bank’s continuous hike in interest rates. The new CBN Governor, Yemi Cardoso, implemented six rate increases in 2024, starting with a significant jump from 18.75% to 22.75% in February. This was followed by subsequent increases to 24.75% in March, 26.25% in May, 26.75% in July, 27.25% in September, and finally reaching 27.50% in November.

These hikes, totaling 875 basis points, were aimed at controlling inflation and stabilizing the economy. However, they have also made borrowing more expensive for companies, particularly for tech firms that require substantial capital for operations and expansion.

READ ALSO: Electricity Tariff Hike Looms As Gas Prices Surge

Fluctuations in Borrowing Patterns Throughout the Year

The borrowing trends in 2024 showed considerable fluctuations. January started with a high borrowing figure of N2.47 trillion, almost double the amount from January 2023. However, by March, borrowing had slowed to N1.67 trillion.

From June onwards, there was a noticeable decline in borrowing compared to the previous year. By September, the N68.04 billion decrease highlighted companies’ cautious approach towards borrowing, driven by economic uncertainties and the high cost of credit.

Impact on Tech Stocks and Future Outlook

MTN, one of the major telecom companies, saw its stock rise by 21% following the confirmation of the tariff hike. This increase reflects investor optimism about the potential for higher revenue despite the challenging economic conditions.

The future outlook for tech and telecom companies remains uncertain. With the continued pressure from high-interest rates and the need for substantial capital, these companies may find it increasingly difficult to sustain their operations without significant changes in their financial strategies or external economic improvements.

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Emmanuel Ochayi is a journalist. He is a graduate of the University of Lagos, School of first choice and the nations pride. Emmanuel is keen on exploring writing angles in different areas, including Business, climate change, politics, Education, and others.

Emmanuel Ochayi is a journalist. He is a graduate of the University of Lagos, School of first choice and the nations pride. Emmanuel is keen on exploring writing angles in different areas, including Business, climate change, politics, Education, and others.

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