Emmanuel OchayiForeign investments in Nigeria’s telecommunications sector fell sharply to $14.4 million in the third quarter of 2024, representing an 87% drop from the $113.42 million recorded in Q2 2024. This sharp decline was revealed in the latest Capital Importation Report released by the National Bureau of Statistics (NBS) on Friday.
The report highlighted that the Q3 2024 figure also reflected a 77% year-on-year decrease when compared with the $64.05 million recorded in the same period of 2023. Analysts have linked the fall in foreign investments to persistent challenges in the sector, including foreign exchange scarcity, regulatory uncertainties, and high operating costs.
Join our WhatsApp ChannelCapital Importation: What It Means for the Telecoms Sector
Capital importation refers to the inflow of foreign funds into Nigeria for investment purposes. In the telecommunications sector, it includes investments used to develop infrastructure, enhance technology, and support the expansion of telecom services.
The NBS report reveals that the sector has been experiencing fluctuating investment levels throughout 2024. In Q1 2024, the sector received a significant $191.5 million in capital inflows, which was a 769% rise compared to $22.05 million in Q1 2023. The momentum slowed in Q2 2024 with $113.42 million, but the Q3 figure of $14.4 million is the lowest of the year so far.
Sector’s Challenges: Cost of Operations and Policy Uncertainty
The drop in foreign investments has been attributed to several pressing issues. Chief among them are the high costs of operating in Nigeria’s telecom sector, driven by inflation, forex scarcity, and energy expenses.
Gbenga Adebayo, Chairman of the Association of Licensed Telecom Operators of Nigeria (ALTON), warned that telecom companies could face severe challenges if the government does not address the rising costs.
“Our current pricing structures are inadequate and unsustainable. Service providers cannot continue to operate under these conditions, especially when the cost of delivering services is far higher than what is being charged,” Adebayo said.
He explained that some operators have been forced to subsidise services, but this strategy is not sustainable in the long run. Without government intervention, he warned, the industry’s survival could be at risk.
The Association of Telecommunication Companies of Nigeria (ATCON) echoed this sentiment. They called on the government to address policy inconsistencies and provide a clear regulatory framework that supports sustainable growth.
Impact of Declining Foreign Investments on the Telecoms Sector
The drop in foreign investments could have serious implications for Nigeria’s telecom industry. The sector has been a key contributor to the country’s GDP, providing employment and supporting the digital economy.
According to the Nigerian Communications Commission (NCC), telecoms contribute about 16% to Nigeria’s GDP, making it one of the most vital sectors of the economy. The fall in capital importation may slow down ongoing infrastructure expansion projects, especially those related to 5G network development.
An industry expert, Kemi Adegbite, noted that the decrease in foreign investments could lead to delays in service upgrades. “The telecom sector is capital-intensive. Reduced foreign investment means that operators may have to slow down projects like 5G deployment, rural connectivity, and expansion of broadband services,” she said.
NBS Report Highlights Sharp Decline in Foreign Investments
The NBS report reveals that foreign investments in telecoms for Q3 2024 are just a fraction of the sector’s capital inflow for the entire year. While Q1 2024 witnessed a significant inflow of $191.5 million, the Q3 figure of $14.4 million is concerning.
This decline comes as Nigeria’s telecom sector battles regulatory bottlenecks and the rising cost of operation. The forex crisis has made it difficult for telecom companies to import critical equipment and technology needed for service delivery.
“There’s no doubt that forex scarcity has had a negative impact on our ability to import equipment,” said an executive of a leading telecom firm who preferred anonymity. “We are forced to delay expansion projects, which ultimately affects our ability to meet demand.”
The Way Forward for the Telecom Industry
The telecom sector remains one of the fastest-growing industries in Nigeria. To maintain this growth, industry stakeholders have called on the government to prioritise reforms aimed at stabilising the operating environment.
Gbenga Adebayo of ALTON has suggested a review of telecom tariffs as one possible solution. “We cannot keep charging the same rates while costs continue to rise. It is a simple economic reality,” he said.
Meanwhile, the Nigerian government has promised to address the sector’s challenges. The Minister of Communications and Digital Economy recently stated that efforts are being made to attract more foreign investments by simplifying regulatory procedures and addressing forex issues.
If successful, these measures could restore investor confidence in Nigeria’s telecom sector, ensuring a rebound in capital inflows in subsequent quarters.
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.
