Dwindling Telecom investments: NIGCOMSAT proposes strategic partnerships to cushion effects

The Nigerian telecommunications industry has been experiencing a significant downturn, characterized by a sharp decline in investments over recent years. This downturn is largely due to the naira’s devaluation, which has driven up the cost of importing essential telecom infrastructure.

Key players in the industry, such as MTN and Airtel, have faced substantial losses attributed to foreign exchange issues. The high cost of acquiring dollars for operational needs has hindered their ability to expand networks and enhance service quality.

For instance, MTN, which had a subscriber base of 79.7 million as of December 2023, reported a loss after tax of N137 billion in 2023, its first since listing on the Nigerian Stock Exchange in 2019. The company experienced foreign exchange losses amounting to N740 billion ($815.79 million at an exchange rate of N907.1/$).

Airtel Africa, with 50.9 million subscribers in Nigeria as of March 2024, reported a loss after tax of $89 million for the year ending March 2024, primarily due to foreign exchange challenges in Nigeria and Malawi. The company incurred $1.26 billion in losses from derivative and foreign exchange exposures, with $770 million linked to the naira’s devaluation.

The Association of Licensed Telecoms Operators of Nigeria (ALTON) has issued a warning about potential network disruptions if the situation does not improve, as operators struggle with soaring operational costs.

To address the crisis, the Nigerian Communications Satellite (NIGCOMSAT) has proposed forming strategic partnerships with telecom operators to mitigate the impact of dollar scarcity. NIGCOMSAT aims to use its procurement power to secure telecom equipment at more competitive rates through these collaborations.

In an interview during the KA-band VSAT Installation training in Lagos, Olufunke Fagbeja, head of marketing and stakeholders’ engagement at NIGCOMSAT, emphasized the importance of strategic partnerships. She stated, “We believe in partnering with telecom operators to deliver service and value to Nigerians. Although we are under the Ministry of Communications, Innovation and Digital Economy, our efforts to form partnerships are crucial for the sector’s progress.”

Fagbeja noted that while NIGCOMSAT is not an Original Equipment Manufacturer (OEM) and does not produce equipment, it has established partnerships with manufacturers to purchase equipment at discounted rates. This approach enables NIGCOMSAT to offer better prices to telecom operators for essential equipment.

Additionally, NIGCOMSAT is exploring local manufacturing opportunities through its accelerator program. This initiative aims to support startups and foster technological innovation in Nigeria, enhancing the country’s position in the global tech landscape.