FG tasks operators on local equipment production to check $2.16b capital flight
Worried by rising capital flight in the telecommunications sector, estimated to be about $2.16 billion yearly, the Federal Government has unveiled a policy targeted at reversing the ugly trend.
The policy, named: National Policy for the Promotion of Indigenous Content in the Nigerian Telecommunications Sector, was recently unveiled by the President, Muhammadu Buhari and Minister of Communications and Digital Economy, Dr. Isa Pantami.
As sighted by The Guardian, the Policy seeks to improve and increase indigenous content in the telecommunications sector.
The Federal Government, in the policy document, noted “much as there has been a lot of progress in the sector, it is still useful to identify the areas where much progress can be made. One of such is the area of capital flight, which has also been significant.
In the document, the Federal Government said it was committed to reducing the $2.16 billion significantly, in line with the mandate of President Muhammadu Buhari that “we produce what we eat and consume what we produce.”
Making reference to statistics from the Association of Telecommunications Companies of Nigeria (ATCON), the Policy revealed that a breakdown of the forex spending in the telecoms sector showed that $750 million is spent on capital expenditure (CAPEX) yearly, $250 million on Network Software Licensing; $800 million on Management Fees; $157 million on Managed Services (Tier 2 & 3 Support); and $200 million on Miscellaneous (International circuits, roaming and terminations reconciliations among others).
“The statistics were based on the average yearly reports of a sample of industry players in the telecommunications space over a five year period. This is a significant portion of our average yearly budget and it is critical that this trend is reversed,” the policy stated.
To bridge some of these gaps, the policy addresses the pertinent areas, including manufacturing, services, people, research and development.
On manufacturing of some telecoms equipment, the Ppolicy directed that telecoms operators with foreign participation need to prepare and present to the regulator plans for local manufacturing of foreign-sourced software, equipment and devices. It stressed that there was a need to begin the implementation of the National SIM Policy to manufacture locally with immediate effect.
The policy said the end-to-end value chain of the telecommunications industry is highly reliant on the availability of the right equipment. For example, it said the equipment likes witches, base transceiver stations, fibre optic cables, multiplexers, modems, connectors, equipment racks and mobile phones are used across the value chain to provide, amongst other things, switching, transmission, and they also serve as customer service equipment, which also includes the assembly and fabrication of equipment masts and tools.
The document noted that a significant portion of expenditure in the telecoms industry is on such equipment, most of which are manufactured outside the shores of the country.
Further, Federal Government claimed that only a small percentage of the need for telecoms equipment is met by indigenous providers even though global manufacturers source raw materials from the country.
The policy noted that as part of the activities to promote the local manufacturing of telecommunication products, ancillary sub-sectors like the fabrication, telecommunications raw materials and components, circuit board design and manufacture, battery manufacture and other sub-sectors need to be actively developed.
“Generally, telecommunications equipment manufacturers and suppliers are classified into broad categories such as Consumer Premises Equipment (CPE) and Network Equipment category. The CPE segment is characterized by high volumes, less complexity, lower shelf-life and low maintenance. Conversely, the latter is characterised by low volumes (mainly Business2Business), higher complexity, higher shelf-life and higher maintenance. As such, this Policy prioritizes the manufacturing of CPEs,” the Policy stressed.
MEANWHILE, the objectives of the manufacturing focus area include the following: to stimulate the design, development, production, sales and utilization of high-quality telecoms equipment and services developed by indigenous companies; to develop indigenous telecommunication companies to become world-class manufacturers service providers; to incentivise the production of cables, connectors, masts and telecom tools in a way that meets global minimum and certification standards; to support local manufacturing through relevant institutions, such as the Universal Service Provision Fund (USPF), Central Bank of Nigeria (CBN), among others; to encourage the establishment of vocational training institutes focused on the design, fabrication and assembly of telecom equipment; and; to encourage partnerships and collaboration between global Original Equipment Manufacturers (OEMs) engaged in the manufacturing of telecommunications equipment and indigenous players.
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