ICT sector struggled with recession in 2016
ADEYEMI ADEPETUN reports that despite some growth recorded in the Information and Communications Technology sector (ICT) in 2016, the industry also felt the impact of recession. This is just as stakeholders have canvassed a workable policy for the sector in 2017.
The year 2016 has some 72 hours left to reach its destination. Without mincing word, it has been a tough year for both the economy and citizens.
The economy under President Muhammadu Buhari is experiencing a lull, moving at a snail speed, with negative impacts felt across all the sectors. The recession has spared not one industry, even the much-celebrated Information and Communications Technology (ICT) industry has also been touched.
It has been a gale of complaints across board.
That is not to say there were no notable positive developments, but to a large extent, they have been overshadowed by the pangs of recession.
This development has prompted industry watchers to opine that driving economic advancement requires strong leadership with the political will and proper framework to leverage opportunities still inherent in the sectors, especially ICT for socio-economic growth.
To start with, while the ICT sector’s contribution to Gross Domestic Product (GDP) increased to 9.8 per cent, the telecommunication sector’s investment has climbed to $68 billion, with $35 billion coming from indigenous operators. This was confirmed at the 2016 International Telecommunications Union (ITU) Telecoms World conference in Bangkok, Thailand.
Recall that as at 2001, when the government libralised the telecommunications sector, aggregate industry investment stood at $50 million.
According to Nigerian Communications Commission (NCC) Executive Vice Chairman, Prof. Umar Danbatta, this development was due to the huge potential and the resilient nature of the sector despite the present economic situation in the country.
Interestingly, while about 10.7 million telephone lines were disconnected across the networks last year due to the failure of the quartet of MTN, Globacom, Airtel and Etisalat to deactivate some faulty Subscribers Identification Module (SIM) cards, this resulted into fall in the country’s teledensity.
As at today, the country can boast of about 110 per cent teledensity from about 90 per cent in January, while total mobile subscription is in excess of 230 million, about 155 million have been active despite the toughness of the economy. Internet subscriptions also increased to about 100 million from about 93 million in the course of the year.
The sector’s contribution to the country’s GDP fluctuated in the course of the year. It witnessed for the first time since the liberalisation, a short fall.
According to available data from the National Bureau of Statistics (NBS), in the first quarter, spanning January through March, the sector contributed N1.41 billion and N1.58 trillion in second quarter. By the end of third quarter, it fell to N1.398 trillion as a result of the recession.
Also, the GDP for telecommunication as at Q3 of 2016 under Information and Communication contracted at 0.95 per cent in Q3 2016 from 1.49 per cent in Q2 2016 and 4.69 per cent in Q3 2015.
Impact of recession
Many might not know that in the course of the year, mobile phones sales dropped by 80 per cent.
Accordingly, The Guardian investigation showed that rather than buy new ones, most Nigerians either maintain their damaged phones, go for refurbished ones or buy low-end devices available in the market because of the economic situation.
Some of the leading mobile phone vendors, who spoke to The Guardian, confirmed that there has been a lull in the mobile device market, which they blamed on lack of liquidity and inability to access foreign exchange.
Also, in the course of the year, the auction in the 2.6GHz spectrum, which could have added about N44 billion to government coffers was also impacted by the pangs of recession.
The NCC, which had targeted both local and international investors, was disappointed. The Director of Spectrum Administration at NCC, Austine Nwaulune, at a post-event briefing in Lagos, said the commission was disappointed when it discovered that operators that had shown interest in bidding later on withdrew from the race. Most of them complained bitterly about the huge cost of the spectrum and most especially, their inability to access foreign exchange because of the policy of the present government.
On the long run, only MTN bided and got six of the 14 slots after paying about $96 million to the NCC.
The economic situation also affected some Internet Service Providers (ISPs) in the country. From about 120 licenced ISPs, the figure has dwindled to 37. The 37 operators compete to service 390, 794 subscribers in the country.
The collapse in the number of smaller players in the industry has been attributed to many factors, including the intense competition from the bigger operators and the current economic situation.
The Guardian learnt that intense competition, increase in capital expenditure (CAPEX) and operational expenditure (OPEX), coupled with the problem of accessing foreign exchange and poor financial muscle worsen smaller operators’ survival in Nigeria’s highly-competitive telecoms market.
Unfriendly government policies
While countries including Ghana, Kenya and even South Africa have either reduced taxes on ICT or mulled the plan, the Federal Government of Nigeria has expressed its readiness to tax Nigerians who use ICT through what it called Communication Service Tax (CST). The bill, which is about to pass second reading at the National Assembly, if it becomes a law will see ICT users pay extra nine per cent tax on calls, SMS, MMS among others.
To make things worse for the sector, the Central Bank of Nigeria’s Governor, Godwin Emefiele, also suggested telephone calls above three minutes should be surcharged, all in the wake of the recession. The target, according to Minister of Communications, Adebayo Shittu and Emefiele, was to generate revenue for government to cushion the effect recession on the economy.
Already, there have been strong oppositions against these moves, which telecoms operators, industry associations and subscribers said would raise the cost of accessing telecoms services by consumers, and further deny about 20 million Nigerians from accessing ICT services.
Stakeholders’ perspective of the year
Speaking to The Guardian, the President, Association of Telecommunications Companies of Nigeria (ATCON), Olusola Teniola, said sector at large witnessed a very mixed set of circumstances in Nigeria in 2016.
Teniola said the impact of devaluation of naira to the dollar, changes in NITDA leadership, rise in inflation, delay in implementation of 2016 budget and loss of jobs characterised 2016 and also created some opportunities.
He said the sector contributed almost 9.9 to GDP in 2016 despite all the headwinds and against a slow-down in the overall economy.
The ATCON president listed the release of 2.6GHz and 5.4GHz spectra by NCC; government’s commitment to accelerate digital migration and 4G/LTE roll outs by some of the operators as some of the landmark achievements of the year.
To the Director-General, Delta State Innovation Hub (DSIHUB), Chris Uwaje, ICT Nigeria is currently greedily directionless!
Though, Uwaje listed the appointment of what he described as a listening, ready-to-learn and proactive Minister of Communication, as one of the achievements for the year, he lamented the sector’s inability to establish a National IT Framework Bill and enactment of various enabling Acts for the empowerment of IT-Nigeria…with particular reference to National Software Board, policy, strategy and operational direction as well as the establishment of the Office of the IT General of the Federation.
A telecoms expert, Kehinde Aluko, wants Shittu and Danbatta to go beyond just coming up with sector’s blue print and eight point agenda, “we have gotten to a stage where policies must be matched with actions. Danbatta promised ubiquitous broadband for Nigerians, yet the NCC and operators are bent on increasing data prices. That is a typical example of policy summersault.”
To the Chief Executive Officer, MainOne Cables, Funke Opeke, 2016 has been a tough one for the economy, “but I believe going forward technology can play a big role in increasing productivity, marketing what we have not only to Nigerians, but foreigners as well. I am hoping that as we enter into 2017, domestically, we leverage technology value chain very well and reduce our foreign consumptions so that we can boost our economy. Technology should dominate the economy.”
According to Uwaje, ICT Nigeria is erroneously growing but not developing. He explained that there is a distinct difference between “Growth and Development”.
“Our focus for 2017 should be to retool Computer Science education, sharpen up our curriculum, Lecturers and concentrate on building massive quality capacity on software engineering and development for the mobile knowledge economy, e-Learning, e-Government, entertainment and national security. Indeed, Nigeria is still ICT backward in terms of IT creativity and Innovation. This fact is vividly demonstrated in our global ICT status rating and international e-readiness index. Regrettably, we are myopic champions in terms of ICT product consumption – most of which amount to colossal waste,” he stated.
For Teniola, government’s focus next year should be in unlocking ‘local content’ in the industry and ensuring a level playing field exists to bring about increased employment for the growth in the skills set required to generate a digitally transformed industry.
According to him, the ecosystem will bring about new players from the OTT space and regulation that balances the interests of these players versus the investments already made by the Telco players will need to be addressed.
The ATCON president posited that the investments required to fund the mobile broadband revolution must be addressed, “so all incentives and an enabling environment is put in place by the Federal Government, so that investors’ confidence is not eroded any further.”