Boosting FG’s revenue drive via telecoms regulations
ADEYEMI ADEPETUN takes a look at how some regulations in the telecom sector have boosted industry’s contribution to Federal Government’s coffers.
Apart from the telecom sector’s rising contribution to Nigeria’s Gross Domestic Product (GDP), some regulations and oversight activities of the Nigerian Communications Commission (NCC), have equally been boosting economic expansion.
Although, NCC is categorised as a self-funding organisation (SFO) of the Federal Government, not primarily a revenue-generating agency, its efforts in boosting revenue through yearly remittances, especially spectrum sales and surplus budgets have become an added stimulus. Amplifying this in an interview at a recent programme in Abuja, the Executive Vice Chairman of NCC, Prof. Umar Danbatta, said: “although, NCC’s primary role is not to generate revenue for the government, but to nurture and regulate the industry. Figures obtained from the Commission show impressive remittance of funds to the coffers of the consolidated revenue of the Federal Government, especially in the last five years.”
Danbatta disclosed that from its yearly audited accounts, NCC contributed about N362.344 billion of its remittances into the Federal Government’s Consolidated Revenue Fund (CRF), in accordance with the Fiscal Responsibility Act of 2007. Further, it also decided to make payments on accounts as revenues are generated.
Earnings from spectrum management
This is the process of regulating the use of radio frequencies to promote efficient use and gain a net social benefit. Spectrum is a scarce national resource for telecommunications services. It is described as the oxygen that keeps the telecom sector going.
Across the globe, spectrum auctions and sales have remained one of the most viable sources of revenue generation in the telecoms industry. From USA to China, Germany to Australia, Bahrain to UK, contributions from spectrum sales have been enormous.
Indeed, the various spectrum auctions done by the NCC since the telecoms revolution started in Nigeria almost two decades ago have fetched the Government huge revenues as well. For instance, in 2001, MTN and Airtel (Econet) paid $285 million for their cellular licences. Globacom, and Etisalat also paid in 2002 and 2008, respectively before they commenced commercial services. In the first five years of the revolution, the report shows that over $400 million have accrued to the Government coffers from spectrum sales alone.
Fast-forward to 2016, MTN Nigeria bided and won spectrum in the 2.6GHz band. The South African telecoms firm paid N18.96 billion.
To ensure effective spectrum management, the Danbatta administration introduced Spectrum trading, where unused frequency bands can be sold among the operators. While this has been commended for ensuring optimum and efficient use of scarce resources, it has also contributed to the revenue generation drive of the Commission. This led to the recent transfer of the licence of 2 x 10MHz in the 900MHz E-GSM Spectrum band from Intercellular Nigeria Limited to Airtel Networks Limited.
According to the trading guidelines, 60 per cent of the net proceeds are to be paid to the NCC as a regulatory fee by the spectrum sellers. This, however, applies only to the trading of spectrum acquired through the administrative process, which is much cheaper than those obtained through the process of auction. In line with the guidelines, Intercellular was said to have paid about N8.9 billion to the Commission.
Regulations and Fines
As much as fines are seen to some extent as a disincentive to investments, it helps to bring sanity to the sector. Indeed, as part of measures to ensure stability in the sector, and as empowered by the Nigeria Communications Act, the NCC has wielded the big stick on erring operators.
In October 2015, NCC sanctioned MTN for violating the SIM registration rules. The telecoms firm was slammed with N1.04 trillion. The total sum was based on a fine of N200,000 for each unregistered subscriber, put at about 5.1 million lines.
However, after prolonged negotiation between the governments of Nigeria and South Africa, which even led to the visit of the former President, Jacob Zuma, to Nigeria, the fine was reduced to N330 billion. With the resolution mid-June 2016, there was an agreement for settlement over a three-year period. MTN completed the payment of the fine last year. Other telecom operators have also at one time or the other had to pay fines for contravening the industry regulation. All these contributed to the revenue drive.
5G Licence and Revenues
While there are about 92 commercial launches of 5G networks in 38 countries across the world, spread from regions to regions as at July 2020, including the Netherlands, USA, UK, China, Canada, Romania, Taiwan, South Africa, Qatar, and Australia, Nigeria is expected to join this league hopefully before 2025.Currently, Nigeria is making consultations on the technology, and the Federal Government is expected to give a final decision on the deployment.
Be that as it may, revenues are expected to be generated through 5G spectrum sales. Countries that have started deploying the service are already reaping the benefits from spectrum auctions. Taiwan, for instance, had early this year realised about $4.61 billion from the first phase of its 5G auction, according to its telecoms regulator. The amount, which was about 4.6 times more than the floor price, was the world’s third-highest. Before that, Italy had also raised €6.55 billion ($7.31 billion) in its first 5G auction in 2018, while Germany raised €6.5 billion in its auction last year.
Cascading this development to Nigeria, NCC is expected to take the country’s broadband project a notch higher with 5G deployment.Danbatta at a function in Abuja recently, said the socio-economic benefits of the expansion in telecommunications capabilities embarked upon by the Commission would be of immense benefit to Nigeria, especially with the rollout of the 5G technology, which is currently being test-run in about 40 countries.
He added that this would be a significant upgrade for networks and will be the backbone for the ICT industry post-pandemic recovery. “According to the ITU, the 5G technology is expected to connect people, things, data, applications, transport systems, and cities in smart networked communications environments. 5G is meant to seamlessly connect a massive number of embedded sensors in virtually everything through the ability to scale down in data rates, power, and mobility – providing extremely lean and low-cost connectivity solutions.
Contributions to GDP
As a start-performer, the telecoms sector has demonstrated resilience, and impacted the national economy favourably. As at the second quarter (Q2) of this year, economic data released by the National Bureau of Statistics (NBS), the Information and Communications Technology (ICT) sector of the economy had contributed by 17.83 per cent in the second quarter. This was boosted by activities in the telecommunications sub-sector, which share of the GDP contribution stood at 14.30 per cent in the quarter under review.
At a period when most sectors came out negative, the ICT sector instead recorded a growth rate of 15.09 per cent in real terms, year-on-year. Compared to the rate recorded in the corresponding period of 2019, this was an increase of 6.09 per cent. According to the NBS data, the sector recorded a growth of 20.32 per cent in real terms quarter-on-quarter.
The telecommunications contribution to the economy in Q2 translates to N2.272 trillion, up from N1.821 trillion in Q1. Experts note that telecommunication’s performance was not unexpected, as it remained the only active sector when the economy was shut down in the Q2 due to the coronavirus (COVID-19) pandemic. Interestingly, it is expected that the growth will be sustained, as telecommunications remains a major driver of the economy despite the pandemic.
While attributing the sector’s performance to the sound regulatory environment enthroned by the NCC, stakeholders have called for strategic policy measures to sustain the growth.
Specifically, the Chairman of the Association of Licensed Telecoms Operators (ALTON), Gbenga Adebayo, hinged the growth on many factors, including the investor-friendly policy and regulatory environment championed by the leadership of NCC, the commitment of all stakeholders, consistent investment in network maintenance and expansion, and sacrifice by sector operators.
To the President of National Association of Telecoms Subscribers of Nigeria (NATCOMS), Deolu Ogunbajo, the proactive regulatory approach of NCC lately, has helped make telecoms “the oxygen that keeps economic activities afloat during the lockdowns. And, consumers are appreciative of the fact that the Commission, working with its supervising Ministry, didn’t allow consumers to suffer serious disruption to quality of service and quality of experience.”