In 2023, telecommunication companies in Nigeria faced tough times, with their operating expenses increasing by nearly 51%. This spike in costs highlights the challenges these companies are experiencing as they try to keep their network services running amid rising inflation and the declining value of the Nigerian currency.
According to a report from the Nigerian Communications Commission (NCC), the total operating costs for these companies jumped from about 2.09 trillion naira (₦) in 2022 to approximately 3.16 trillion naira in 2023. This indicates that telecommunications operators are really feeling the financial pressure.
Despite these rising costs, the companies also saw their revenues grow. Revenues increased by over 37%, climbing to about 5.3 trillion naira from around 3.86 trillion naira the previous year. The growth in revenue is largely due to an increasing demand for voice calls and internet data services among consumers.
The report provides some key figures as of December 2023, including:
- Domestic investment by the companies was around 990.55 billion naira.
- Operating costs totaled approximately 3.16 trillion naira.
- Overall revenue reached about 5.3 trillion naira.
Additionally, the report noted that mobile phone operators (GSM providers) were the largest contributors to the industry’s financial status, incurring around 2.52 trillion naira in operating costs and generating about 4.01 trillion naira in revenue. Internet Service Providers also reported their operating costs at 96.81 billion naira but only made revenue of around 89.81 billion naira.
Investments to improve infrastructure in the telecommunications sector rose by over 26% in 2023, with operators spending roughly 990.55 billion naira compared to 785.77 billion naira in 2022. This investment is aimed at improving and expanding services like 5G networks and broadband services.
In terms of infrastructure growth, there were significant developments noted. The number of mobile network base stations increased by 8.4%, bringing the total to about 137,992. Additionally, the deployment of fiber optic cables on land reached about 83,254.5 kilometers, and telecom towers installed by operators numbered 39,356. These figures show that the companies are working hard to enhance connectivity throughout Nigeria.
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However, it’s worth mentioning that the percentage of people with broadband access slightly fell from 47.36% in 2022 to 43.71% in 2023. This decline was related to updated population figures that affected the calculations. Despite this, the number of active broadband subscriptions grew to about 94.76 million, which aligns with Nigeria’s national goal of achieving 70% broadband coverage by 2025.
The dramatic rise in operating costs can be attributed to several factors. The cost of energy has increased significantly, with rising prices for diesel fuel and electricity affecting operators who depend on power to keep their networks running. Inflation and the drop in the naira’s value also added to the companies’ difficulties, leading to higher prices for imported telecom equipment and maintenance services.
To meet the growing demand for data—which increased by almost 38% year-over-year to over 713,200 terabytes in 2023—telecom operators are investing more in their services to improve quality, bandwidth, and capacity.
The telecommunications industry continues to be a crucial part of Nigeria’s economy, contributing about 14% to the country’s Gross Domestic Product (GDP) in the last quarter of 2023, a slight increase from 13.55% in 2022. Active voice service subscriptions rose slightly by just under 1% to 224.71 million, while internet subscriptions grew by about 5.81% to 163.84 million. However, a measure called teledensity (which looks at how many phone connections there are per 100 people) dropped from 116.6% in 2022 to 103.66% in 2023, largely due to a change in the estimated population figures used for this statistic.
Even with these hurdles, the telecommunications sector remains a key player in Nigeria’s digital economy, showing resilience despite various economic challenges.
In response to these financial pressures, the NCC approved a 50% adjustment in service tariffs for telecommunications operators. This decision was made as part of the NCC’s regulatory duties under Nigerian law. The increase is significantly less than the 100% or more that some telecom companies initially requested, and it was designed to balance the companies’ need to cover rising costs while protecting consumers from steep price hikes. The new tariffs will follow guidelines established in a cost study from 2013 as well as new rules for simplifying tariffs that will come into effect in 2024.
