Sector’s challenges and impacts on FDIs

That Nigeria’s telecommunications industry is the largest and fastest growing sector in Africa is no longer news. However, sustaining this achievement remains a concern considering expectations from customers and investors.

The rapid growth of the industry from about 400,000 telephone lines in 2001 to nearly 155 million voice customers as of August according to figures released by the regulator is attributable to many reasons. Perhaps, the most critical of the reasons is the dogged determination of the operators to grow telecoms services across Nigeria, using a combination of aggressive measures, despite odd business climate, unfriendly policies, witch-hunting from some government quarters and tough competition.

All the major operators deserve full marks in this area, as they have all since the commencement of GSM service in Nigeria continued to improve on their investments in the country.

Agreed, the fact on ground showed that the services are still not perfect, especially when it comes to getting a call through or surfing the Internet, a challenge, which is not limited to the country alone, but also observable in other climes, even the develop economies.

Worrisome is the fact that even with their claims of 4G/LTE service offerings lately, the quality of service has not improved. This will however, not take away the quantum of investments by the players, which is now put at about $68 billion, with $35 billion coming through Foreign Direct Investments (FDIs).

Besides, the second quarter report of the National Bureau of Statistics (NBS) showed that in the quarter, the sector contributed N1.58 trillion to the country’s GDP, putting its growth at about 9.8 per cent. This is even as the country’s teledensity increased to 109 per cent.

Embattled telecommunications firm, MTN Nigeria, claimed that it has contributed over N1.8 trillion to the Nigerian government by ways of taxes, levies and sundry regulation payments, since it commenced operations in Nigeria in 2001. It added that the firm directly and indirectly has employed over 500,000 Nigerians.

Globacom too has increased its investment in the sector, especially with the recent launch of its 4G/LTE services, which is running on its massive 10,000 kilometres $800 million Glo 1 submarine cable system. Other operators including Airtel, Etislat, Smile, Spectranet, ntel, Intercellular have boosted their investments in the sector by over 60 per cent. However, there are still limitations.
Challenges

Indeed, despite all these investments and additions brought to the economy, the sector and players are seriously challenged. These include attacks from social miscreants, who willfully destroy telecommunications facilities in the country to multiple taxation from government agencies at all levels, erratic power supply, multiple regulation, refusal of right of ways, and lately accusation from the Upper Legislative Chamber. The Senate recently alleged that, one of the operators, MTN in this case, of repatriating illegally about $13.9 billion out of Nigeria to South Africa, its origin from 2006 to 2016, without obtaining Certificate of Capital a Importation (CCI).

The upper legislative chamber, according to a motion moved by Dino Melaye, the senator representing Kogi West in the Senate, alleged that the telecommunications firm beat the nation’s financial regulatory laws by failing to obtain a CCI as authorised by Central Bank of Nigeria (CBN) Financial and Miscellaneous Act within 24 hours between 2006 and 2016 before moving the money out of the country. He alleged that this was done in connivance with the Minister of Industry, Trade and Investment, Okechukwu Enelamah, and four commercial banks in the country.

Response from operator
Commenting on the point of CCI before the Senate Committee on Banking, Insurance and other Financial Institutions in Abuja, Moolman said that no dividends were declared or paid until the CCIs were issued and finalised.

Moolman added that MTN Nigeria only requested for CCIs for foreign capital that was imported into Nigeria and dividends were externalised on CCIs.

“Often for various reasons (such as not having all the required documentation for instance), it is not possible to issue a CCI within 24 hours, and the CBN’s Forex Manual contemplates such situations by asking that the banks refer to the apex bank for approval. Besides, the requirement to issue a CCI within 24 hours of conversion is an administrative requirement. As such, the CBN has the authority, and indeed we believe, approved the banks’ applications to issue CCIs outside the recommended time frame,” Moolman said.

He said MTN Nigeria remains committed to global best practices which include paying dividends to its foreign investors as provided under the Nigerian law.

Investments and the Act
The Nigerian Investment Promotion Council (NIPC) Act and Foreign Exchange (Monitoring and Miscellaneous Provisions Act) are very clear on what the right of an investor is in Nigeria. Section 24 of the NIPC Act states: “… A foreign investor in an enterprise to which this Act applies shall be guaranteed unconditional transferability of funds through any authorised dealer in freely convertible currency of (a) dividend and profits (net of all taxes) attributable to the investment…”

Section 15 of the Foreign Exchange (Monitoring and Miscellaneous Provisions Act) states, similarly, in addition to spelling out whose responsibility it is to issue the CCI, “Foreign currency imported into Nigeria and invested in any enterprise pursuant to subsection (1) of this section shall be guaranteed unconditional transferability of funds, through an authorised dealer in freely convertible currency, relating to— (a) dividends or profits (net of taxes) attributable to the investment…”

Analysts view
Economist at Lagos Business School, Opeyemi Agbaje, who spoke on the MTN issue, said the telecommunications firm has been investing in Nigeria since 2001, and that the telecoms company showed respect for the laws of the country guiding repatriation of money.

He said it is worrisome that the same company that has invested so much in the country is being heavily criticised and investigated by the Senate for repatriating its profit.

“In my view the action of MTN in generating and repatriating its revenue from 2006 to 2016, was legal and acceptable because the money we are talking about is MTN’s profit and the company has legal right to repatriate its profit to its parent company in South Africa,” Agbaje said.

He explained that four banks were legally involved in the transfer of the said money and that the banks must have gotten the approval of the Nigerian Investment Promotion Council (NIPC) before the money was repatriated, irrespective of whether the CCI was issued or not.

Possible impact on FDIs
Financial Management Consultant, Bisi Ogunwale, called on the Senate to be cautious in its investigation in order to save MTN’s business in Nigeria that is benefiting millions of Nigerians and the Nigerian economy.

He said the action of the upper legislative chamber negates the spirit of promoting ease of doing business by the federal government and that such an action is capable of discouraging foreign investors from investing in Nigeria.Already, the latest report released by the World Bank ranked Nigeria in the 169th position out of 190 countries on the ‘Ease of Doing Business index for 2017.

The bank stated this in its Ease of Doing Business report titled: ‘Doing Business 2017: Equal Opportunity for All’.Though in the report the country moved up by one point from 170th position on the 2016 ranking to 169th position for the 2017 ranking, many analysts feel it is still a far cry from where it should be.

Also, a KPMG’s report claimed that Kenya, South Africa record 20 per cent increase in FDIs ahead of Nigeria.It claimed that challenges on the continent, issues such as corruption, poor infrastructure and onerous business conditions, tough business climate scare off investors.

Earlier in May, when the Nigerian Communications Commission (NCC) auctioned the 2.6GHz spectrum, where it targeted both local and foreign investors, the surprise of the industry, only MTN bidded. It paid $96 million for six of the 14 slots of the frequency.

This, according to analysts, showed that investors are sceptical about the Nigerian business environment, as such, they urged caution, especially on the side of regulations.