Weighing economic implications of SIM card blockage

COVID-19 has further revealed the importance of the information and communications technology (ICT) sector in Nigeria, and across the globe.

As revealed by the National Bureau of Statistics (NBS), the IT sector in Nigeria thrived tremendously, despite the challenges witnessed by other sectors of the economy. It not only contributed significantly to the country’s Gross Domestic Product (GDP), the industry to a large extent bridged the gap created by the forced lockdowns induced by the corona virus pandemic.

With the pandemic going into about 15 months now, and with no sign of slowing down; people, businesses, churches, schools, government institutions, among others discovered, adopted, and adjusted to the new normal, where it became possible to conduct classes, services, meetings, and seal deals online without physical interactions. This has been enabled by the power of Internet, and mobile numbers.

Although there are still some 114 access gaps with some 25 million Nigerians yet to be served telephony services, it is worthy of note that as at November 2020, the Nigerian Communications Commission (NCC) said Nigeria had about 208 million active subscribers from 285 million connected lines. There were 154.8 million Internet users via the narrowband, while broadband users were 86 million.

However, analysts believe strongly that this growth trajectory is seriously under threat should the Federal Government make good its plan to block SIM cards not linked to their NIN by April 6.

According to them, the gains already witnessed in the sector will definitely be eroded. This is simply because many Nigerians, who have been unemployed and underemployed now depend more on eCommerce, leveraging apps like WhatsApp, Facebook, Instagram, snapchat, among others as new business platforms.

Instructively, statistics from the NBS put Nigeria’s unemployment rate at the end of second quarter of 2020 at 27.1 per cent, indicating that about 21.7 million Nigerians remain unemployed. The country’s unemployment and underemployment rate (28.6 per cent), combined was put at 55.7 per cent. But findings showed that many of the unemployed Nigerians have gone into eCommerce and other online businesses to stay afloat, and eke out a living.

Hinging his decision on rising insecurity in the land without any empirical data to back it, the Minister of Communications and Digital Economy, Dr. Isa Pantami, on December 15, 2020, called for the suspension of registration of new SIM cards in the country. He also directed that after December 30, 2020, all SIMs not registered with valid NINs on telecommunications networks would be blocked.

The directive was later extended following widespread opposition against the earlier announcement and three weeks’ extension was given for subscribers without NIN from December 30, 2020, to January 19, 2021.

It also gave six weeks’ extension for subscribers without NIN from December 30, 2020, to February 9, 2021, but many organisations had called for further deadline extension or outright suspension of the NIN registration process due to the large crowds, of those yet to have their NINs, but gather daily in their hundreds at NIMC offices and outlets in the country amidst the second wave of COVID-19.

The minister, yesterday, after a meeting with stakeholders on Monday, in Abuja, ordered the extension by eight weeks. This means that after April 6, unlinked telephone lines will be blocked.

Although the minister’s intention must have been to ensure that Nigeria has a credible central database, an initiative that has eluded the country for years, the timing, and process without adequate preparation has left much to be desired.

There are concerns that Nigerians in the village, those in hospitals, the elderly ones, who use phones to communicate with their loved ones may eventually be cut off from their networks because they have no NINs.

So far, the operators have collected about 56.18 million NINs, which have been sent to the NIMC database for verification, exposing over 150 million lines, if the multi-SIM nature of the country must also be factored in.

Looking at this exposure, industry watchers are worried that the proposed blockage of SIM cards could be counterproductive for an economy that is battling to remain afloat from recession, and may not solve the problem of insecurity in the land.

Slump in growth of telecoms subscribers
IN 2001, Nigeria only had a meagre 400,000 lines from the defunct Nigeria Telecommunications Limited (NITEL). But almost 20 years later, the country can boast of over 208 million active lines. Analysing this figure in the context of the years, it showed almost on a yearly basis that about 10.8 million lines were being activated, while monthly, on the average, some 907,896 lines come on board. This growth has shown the resilience of the telecoms sector in Nigeria.

Invariably, these statistics have shown that since the directive by the Ministry of Communications and Digital Economy stopping telecoms operators from activating and registering new lines, some 1.8 million lines have not come on board in the last six weeks, and subsequently, there might have been no new business. Within this period as well, kidnappings and other vices have not abated.

It must be noted that the 2.5 per cent Annual Operating Level (AOL) paid by the telecoms sector comes from increase in subscriptions growth.

More job losses imminent
BETWEEN 2017 and 2020, the Global System of Mobile Communications Association (GSMA), disclosed that the mobile communication industry created nearly half a million jobs in Nigeria, and contributed $21 billion to the country’s gross domestic product (GDP), or 5.5 per cent of the total GDP. But analysts believe that this growth would be hampered by the planned directive.

Already, the Arewa Telecom Operators Agents and SIM card Dealers Association (ATOASDA) has claimed that some two million Nigerian youths have been rendered jobless by the suspension of sale, registration and activation of SIM cards by the ministry’s directive.

President of ATOASDA, Hassan Yakubu, said: “As a registered association under Corporate Affairs Commission of the Federal Republic of Nigeria, we are fully in support of the FG measures to protect the life and property of citizenry.”

He, however, observed that the Federal Government must tread carefully considering that all available research works on the causes of insecurity across the country have been linked primarily to youth unemployment.

Yakubu said the income of telecoms business partners, staff and the agents, majority of who are within the age bracket 20 to 40 years in the value chain is determined by the number of activations/SIM registration carried out within the month.

Drop in telcos’ revenue and cut in tax payments to govt
INDUSTRY watchers are also worried that the fall in subscriptions will negatively impact operators’ revenue and consequently affect their tax payments to the Federal Government. An official of one of the operators told The Guardian that it is an economic loss for any service provider to block SIM cards. He stressed that almost on a daily basis operators raked in about N3 billion.

The GSMA report informed that the digital economy contributed $1.8 billion in tax, equivalent to 16 per cent of Nigerian government’s tax revenue.

In 2020, the Company Income Tax (CIT) report by the NBS revealed that telecommunications in Nigeria paid a total of N148 billion as income tax in the first three quarters.

According to the NBS report, the company income tax from telecoms and professional services represented 23.5 per cent of the total CIT paid to government in nine months, which stood at N628.6 billion. The amount, which also included tax paid by professional services, represented the largest paid by any sector in the period under review.

A breakdown of the payments for the three quarters showed that N28.8 billion was paid as CIT by the companies in the telecoms sector in the first quarter of 2020. In the second quarter, N63.8 billion was paid, while payment for the third quarter stood at N55.5 billion.

Industry’s perspective
SPEAKING on the issue, Chairman, Association of Licensed Telecoms Operators of Nigeria (ALTON), Gbenga Adebayo, said there is need to handle the matter with care.

“I feel so because, if the right decision is not made and information is not passed by government and government is led to take the wrong decision, it can destroy the good of the industry. So, at our level as a stakeholder, we are working with government. We are on the Ministerial Committee.

“The advice to government is that we should continue to thread with caution because telecoms today is the driver of the economy. If you put the subscribers at risk, a significant one for that matter, the risk is on the entire economy,” he stated.

Adebayo believed that such challenge will also send wrong signals to investors and those, who may be willing to do business in Nigeria.

Of course, Adebayo said Nigeria deserves a reliable and credible national database, and the industry is committed to working with all the stakeholders to get this done.

From his perspective, the Nigeria National Coordinator, Alliance for Affordable Internet (A4AI), Olusola Teniola, said the worst case is a potential loss of 51 per cent of industry revenue for all MNOs and service providers that rely on SIMs to access their services until a NIN can be linked to the SIM.

According to him, the economic impact will also be evident considering that most SIMs are prepaid and amounts may have to be refunded if an operator disconnects/blocks a SIM, adding that the financial services and other sectors reliant on the SIM will be impacted.

Founder, Jidaw Systems, Jide Awe, said in the digital age, there is certainly need for digital identities to improve efficiency and transparency across all sectors for citizens and governments. And that the NIN-SIM exercise is certainly helpful for boosting security, he stressed.

However, he said there must be balance in implementing digital identities for security with the need to ensure growth of critical aspects of the digital economy is not stifled.

Awe explained that many digital processes – ecommerce, Fintech, digital education, digital health, digital agriculture, among others, are dependent on the use of SIM cards.

He said: “Bank accounts, digital wallets, bank transfers and even new digital processes can unlock new value, build intelligence and develop solutions to address our developmental challenges.

Furthermore, existing digital disparities are already a concern exposed during COVID-19 lockdowns. This has made digital inclusion particularly important in the new normal, post-COVID era. We must ensure no one is left behind and everyone can participate meaningfully in the age of cyber. The weak level of digital education and inclusion affects the nation’s preparation for the fourth industrial revolution (4IR).

“So while enhancing security through digital identities is imperative, we need to adequately consider the economic impact of such security measures and the need to accelerate digital inclusion.”

Tackling insecurity
AWE noted that various options are available but government has all the facts and details it used for choosing the NIN-SIM option.

According to him, no option is perfect but options are assessed in terms of functionality and capacity.

He said concerns have additionally risen in view of the nature of processes as well as the present spread of COVID-19 cases in the country.

“So it’s a question of re-examining the processes to make them more efficient and as contactless and compliant with COVID-19 protocols as possible. Digital can certainly be extremely useful in this regard. The realities of COVID have revealed the significant cost savings and efficiency gains that the re-imagination and digitization of systems and processes can bring,” he stated.