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Nigeria: Too low on ICT local content

By Adeyemi Adepetun
13 November 2016   |   3:41 am
Indeed, before she left office, the former minister of Communications Technology, Johnson did disclose that the ministry was working to achieve 50 per cent growth in local content in Nigeria by 2017.
ICT wares

ICT wares

For years, one of the major challenges to growing Nigeria’s Information and Communications (ICT) sector has largely been apathy for indigenous products and services. ADEYEMI ADEPETUN, examines this limitation and sought stakeholders view on way forward.

Earlier in the year, there was a staggering revelation from the Office for Nigerian Content Development (ONC) in Information and Communications Technology (ICT) that the preference for foreign ICT products and services is causing Nigeria a loss of over N1 Trillion in foreign exchange yearly.

Besides, the non-adherence to local content laws in the sector is also hindering Federal Government from creating employments from the sector, as the country is said to be losing about 70 per cent of the jobs in the industry to foreign elements.

Worst still, dominance of foreign ICT products in the sector is equally robbing Nigeria the ability to develop a knowledge economy, as it has become increasingly difficult for ingenuity and creativity to be discovered and nurtured timely, owing essentially to lack of funds and insensitivity on the part of the sector’s handlers.

The challenge of non-patronage of locally made ICT goods and services had bedeviled the business of indigenous players in the country, from hardware to software and to services; the story remained the same.

Interestingly, while the Federal Government is singing the ‘Buy Made-in-Nigeria’ brands song, its officials and agencies are looking the other way. Most government officials and Ministries, Departments and Agencies (MDAs) still prefer foreign ICT wares, including software and PCs.

For emphasis, local content is aimed at achieving the development of indigenous skills, technology transfer, use of local manpower and manufacturing. It is defined as the amount of incremental value added or created in Nigeria through the utilisation of Nigerian human and material resources for the provision of goods and services in the ICT industry within acceptable quality and standards, to stimulate the development of indigenous capabilities.

An industry data claimed that Nigeria might have ceded about 70 per cent of the country’s technology market to the foreign brands due to apathy for locally made products.

Arguably, an ONC source told The Guardian that the figure has even gone up. According to him, from their recent investigation, only about 10 per cent of ICT is locally sourced in Nigeria, meaning the foreign brands enjoy 90 per cent of the country’s market.

Speaking on the Value Added Service (VAS) of the telecommunications market, the ONC official said the players are being ripped off.

“They have been made to sign an agreement with big foreign companies for them to cede about 90 per cent of their operations to them. In other words, while they own the IT and service, but because they roll out on these foreign brands’ network, they are told to take 10 per cent while the companies take 90 per cent. This is a terrible thing for Nigerians. It is something the ONC is worried about and it’s making efforts to address it. The fact remains that Nigerians are smart and creative, but they are been undercut by these big firms, which ordinarily should not be. This country is being ripped off and raped because of that,” he said.

He explained that when Nigerians pay for any software or hardware that is not produced in Nigeria, the money goes to some foreign government or company, where such product was produced.

He said, for example, all the social media applications have little or no Nigerian content in them, yet Nigeria is one of their biggest markets. “We don’t have our own Nigerian Yahoo and other social media in spite of the fact that we are the most populous country in Africa,” he argued.

According to him, local content is the composite value either added to or created in the Nigerian economy through a deliberate utilisation of Nigerian human, material and services in the development of ICT.
Worth of Nigeria’s ICT market

The Nigerian ICT hardware and services industry was estimated to worth $39.7 billion in 2014 and forecast to grow to $144 billion by 2020, documents from the Ministry of Communications revealed that foreign brands have continued to make huge money from Nigeria without measures.

According to it, major multinational ICT hardware manufacturers such as Samsung, Acer; HP; Dell; Asus; Toshiba and Lenovo among others currently account for 70 per cent of sales in the market, which has not been reciprocated.

However, the document revealed that a handful of indigenous brands including Zinox Computers; Omatek Computers; Brian Integrated Systems, make up the remaining 30 per cent.

Early 2015, the country was seen to have lost to the continued importation of ICT hardware and services about $2 billion (N320 billion) in capital flights.

Operators want government to stimulate local production While the challenge of capital flight in the sector persist, during his visit to Omatek Ventures in Lagos, the Minister of Communications, Adebayo Shittu, did mention that local content development would be a major focus of his administration, with a plan to unveil a blueprint that will see to its implementation.

Shittu said the blueprint, which was unveiled earlier in the year would focus on further developing the ICT sector, with special attention on local content growth.

The minister said there wouldn’t be much departure from some of the foundations already laid by the former minister, Dr. Omobola Johnson.

While commending the efforts of indigenous ICT players, including Omatek for what he described as a pioneering role in the sector, Shittu promised that all efforts would be channelled towards ensuring that their products and services get patronage in the country.

Indeed, before she left office, the former minister of Communications Technology, Johnson did disclose that the ministry was working to achieve 50 per cent growth in local content in Nigeria by 2017.

Shittu assured that a local content development policy would be implemented to protect indigenous players in the industry.

According to him, the ministry would also galvanise right policies that would see to the need of Small and Medium scale Enterprises (SMEs), stressing that government’s role is to provide enabling environment within a free market economy.

Giving statistics of the improvement in the telecommunications sector as at August, Shittu said there has been increase in the number of subscribers in the telecoms sector, which has grown from 148.70 million in August 2015 to 152.28 million as at August this year, which is an increase of 5.9 per cent.

“In the same vein, Teledensity rose from 107.67 per cent in August 2015 to 109.14 per cent in August 2016, thus recording an increase of 1.47 per cent. This has led to Foreign Direct Investment (FDI) in the sector from $32 billion in 2015 to $38 billion this year. With all these growth, Nigeria has become the second largest telecom sector after South Africa. This is an area the country needs to invest in so as to allow the youths to get equipped in this sector,” he added.

According to him, the next big revenue earner for the country apart from oil, and perhaps agriculture is the telecoms sector, stressing that the sector for the first time in six years, is contributing as much as 9.8 per cent of the nation’s GDP.

Speaking, the Chief Executive Officer of Omatek, Florence Seriki, reiterated the need for government to encourage patronage of local products, stressing that this was key to ensuring economic growth. Seriki urged Shittu to carry stakeholders along in the drive towards achieving sustainable ICT sector in the country.

She stressed that it was also important to see how indigenous IT players can be more involved in major IT projects by the government.

In a chat with The Guardian, the Director-General, Delta State Innovation Hub, Chris Uwaje, the issue of local content development in the country must be taken with all seriousness.

Uwaje, a former president of the Institute of Software Practitioners of Nigeria (ISPON), stressed that Nigeria should not remain a consuming nation, but productive and exports its products and services to other countries. “Nigeria should not be a dumping ground for all forms of technologies, Nigerians are good intellectually, we can also export our inventions and innovations abroad, but government factor is key in achieving this objective.”

Speaking on percentage of ICT that could be said to be locally sourced statistically, Uwaje said hardware in general including telecoms is perhaps about seven per cent; Software to SMEs is above 50 per cent, to banks is about nine per cent, to education is above 50 per cent; manufacturing is below six per cent and health care is around 10 per cent.

When reminded that in 2002, there was a directive by then President Olusegun Obasanjo that MDAs should patronise local ICT products and service, but there was partial or no compliance, Uwaje said President Obasanjo meant well then, “but there have been an international conspiracy to kill local software at that time. Engineer Simeon Agu of blessed memory and Jim Ovia of Zenith Bank fought to give software-Nigeria a little oxygen to survive. To date, the compliance for local software content has been treated like leprosy.”

The Group Chief Executive Officer, Teledom International, Dr. Emmanuel Ekuwem, noted that Nigeria depends on ICT to develop; he however, maintained: “Current business environment is discouraging because if you produce your IT products locally with all the challenges and there is no market, there is no incentive to continue such business.”

According to Ekuwem, who stated that local content policy was not being enforced by the government: “Most directives and policies in this industry are not being properly enforced. So, we need enforcement of those beautiful policies, especially one setting percentage of local content that should be attained by players in each sector in the area of local IT content patronage.”
Dangers ahead

While it has been established that on a yearly basis, Nigeria’s economy loses about N1 Trillion to preference for foreign brands in the ICT sector, the ONC source disclosed if this trend remained unabated, that from the study carried out by agency, by 2020, Nigeria would have spent about N3.5 trillion on importing foreign products and 75 per cent of that amount will leave Nigeria.

“Nigeria is in big trouble if nothing is done to arrest this growing influence of foreign products buying at the expense of the local products,” he stated.

According to him, there is urgent need for IT businesses to begin to follow processes in terms of following international standards with their accounting procedure, proper registration with the Corporate Affairs Commission, ensure payment of taxes and follow due diligence.

The ONC source suggested a more proactive regulation. “I want to suggest that anybody/company that seeks to get contracts from any government parastatals by the Bureau Public Procurement and others, part of the requirement should be a notice of Evidence of Compliance with the Regulatory Guidelines of the Nigerian Content in ICT 2013. It should be mandatory.

“At the rate we are going, there will be an implosion, naira will completely lose its value, our citizens would not have place to work, and insecurity would increase because of our pourous networks. There is need for strong government attention on this issue,” he stated.

According to Uwaje, another danger is the poor curriculum teacher knowledge, capability and youth empowerment for software engineering and development in the country.

“Those challenges are why our e-readiness index is at the rock bottom level. Nigeria needs to inject massive funding into innovation, science and technology – especially Software/IT, if we must regain our lost glory as a Nation,” he stated.

Uwaje said there is need for a national legislation on software, which, according to him, is the most critical element of the ICT value chain/ecosystem and by extension, is the survivability of Nigeria’s future.

“I am surprised why we can’t see this…..Please tell the President and, Minister of Information and Culture, Lai Mohammed that the real change is Software-Nigeria,” he stressed.

To the Chief Executive Officer, Precise Financial Systems Limited, Yele Okeremi, over dependence on foreign software is costing Nigeria about $50 b yearly on importation of software used in the banking, telecommunications, oil and gas, manufacturing and public sectors.

He stressed that wholesale acceptance of foreign software as superior to indigenous solutions in the economy has created an uneven ground for competition, thus giving foreign software vendors an edge in the Nigerian market.

How to overcome these challenges
To overcome these challenges, the ONC sources, said firstly, there was need to get Nigeria’s infrastructure right and ensure it is world class, adding that standard must also be scaled up in the production process and support services, among others.

“For us at ONC, content does not mean patriotism of buying ‘Made in Nigeria’, it goes beyond that. We need some things, including the human skill capital for sustainable manufacturing; world-class infrastructure for high standard; funding is also another critical factor for investment. We don’t want in the next 20 to 30 years the emergence of what you will call local companies with foreign capital. It will be a new form of colonisation that people have not taken strong note of,” he stated.

Getting a world class infrastructure and building entrepreneurship, he said there are some idle funds in Nigeria that can be seeded to entrepreneurs that are genuine, stressing that the Bank of Industry, NEXIM banks have idle funds that Nigerians, who are venture capitalists or fund managers can source and develop for entrepreneurial and technology development.

According to him, it won’t be just foreign capital only because it’s dangerous. “When foreign capital dominates our market or technology space, what we have is that our people’s ID will be taking away by foreign stakeholders. So, we are looking for a balance, where foreign investments are matched by local investments so that the value is retained within the country. So the drive towards increasing FDI should be done with caution.

“I’m not against FDI, but I believe strongly that there is so much money(s) in this country, I am not talking about the budget, but some institutions, including the BOI, the CBN, among others, including pension fund that can be creatively used. More importantly, we can use it to develop the sector. So, the mix of infrastructure, human capital and standard are what we considered critical for local content development. So, when MDAs are buying or when we want our software developed locally to be bought, we equally want them to buy quality products. So, our job at ONC is to help increase the capability of Nigerian companies so that they can play big in the global market, even when they are still local.

“Our goal is to develop a local industry that is viable and trustworthy. After sales service repair and support centres is also key to this. These are areas we see jobs being created because ordinarily, they should have offices in all the state capitals and major cities,” he stated.

From the perspective of the founder, Chams Plc, Sir Demola Aladekomo, there is need for Nigerian businesses to build institutions, stressing that, aside this, there was a need to institutionalise lobby and be persistent about it.

“All over the world, lobby has been institutionalised as a tool for keeping an industry very virile. In Nigeria, there is a need to do the same thing by ensuring that we seek advocacy as a business tool, rather attaching negative connotation to it,” he stated.

For the improvement to come, Okeremi said there is need to look at the entire value system. “The ability to come up with a strong case for software is different from having a business case. We need to develop software entrepreneurs who will establish software companies, or else, if we develop software programmers, they will be snapped up by advanced nations once they are flashed green cards and better pay. Remember the yam pounder machine was developed in Ife, Osun State, but Japan, which doesn’t eat pounded yam snapped the inventor and commercialised the technology.”