Data, communication, and expertise companies, together with telecommunications corporations in Nigeria, owed Deposit Cash Banks N1.69tn as of September 2024 amid telcos’ requires a hike within the tariff payable by subscribers for information and voice calls.
Figures obtained from the Central Financial institution of Nigeria’s quarterly statistical bulletin point out that the indebtedness of the telcos and the opposite ICT companies represents a year-on-year lower of N68.04bn, or 3.9 per cent, in comparison with the N1.77tn owed in September 2023.
The decline displays the impression of the CBN’s repeated rate of interest hikes, which has tightened financial circumstances and discouraged borrowing throughout the sector.
Month-on-month, nonetheless, there was a slight improve of N31.61bn, or 1.9 per cent, from the N1.66tn recorded in August 2024.
The year-on-year evaluation reveals that credit score to the ICT sector skilled blended tendencies all through 2024.
In January, credit score stood at N2.47tn, marking a major improve of N1.23tn, or 99.3 per cent, in comparison with N1.24tn in January 2023.
Nevertheless, by February, credit score had declined to N2.35tn, although it nonetheless represented an 88.4 per cent improve year-on-year, with a distinction of N1.10tn in comparison with February 2023.
By March, the tempo of borrowing slowed additional, with credit score falling to N1.67tn. This represented a year-on-year improve of N385.24bn, or 30 per cent, in comparison with March 2023.
The pattern continued into April, the place credit score remained comparatively steady at N1.66tn, up N241.90bn, or 17 per cent, year-on-year.
In Might, credit score rose barely to N1.68tn, reflecting an N308.38bn, or 22.4 per cent, a rise in comparison with the identical interval in 2023.
From June, year-on-year figures started to point out a decline. Credit score to the sector dropped to N1.64tn in June, representing a lower of N81.59bn, or 4.7 per cent, in comparison with June 2023.
July noticed an additional decline to N1.69tn, down N48.93bn, or 2.8 per cent, from July 2023.
In August, the decline deepened, with credit score falling to N1.67tn, a discount of N107.37bn, or six per cent, in comparison with the N1.77tn recorded in August 2023.
By September, the year-on-year lower of N68.04bn drew consideration to the cautious borrowing stance adopted by companies in response to persistent financial uncertainties and excessive rates of interest.
The decline in credit score to the ICT sector all through 2024 will be attributed to the CBN’s tight financial insurance policies, which have raised the price of borrowing.
The apex financial institution has constantly hiked rates of interest in a bid to curb inflation, with its financial coverage fee standing at a document excessive for a lot of the yr.
CBN Governor Yemi Cardoso, who assumed workplace in September 2023, has overseen six rate of interest hikes in 2024.
In February, the Financial Coverage Charge elevated by 400 foundation factors, shifting from 18.75 per cent to 22.75 per cent, the most important single hike of the yr.
This was adopted by one other improve in March to 24.75 per cent. In Might, the speed was raised once more to 26.25 per cent, and by July, it reached 26.75 per cent.
The tightening cycle continued with a rise to 27.25 per cent in September, and the newest hike in November introduced the speed to 27.50 per cent.
These cumulative will increase, totalling 875 foundation factors, are a part of efforts to fight inflation and stabilise the financial system.
This has had a direct impression on the borrowing capability of companies, significantly these in capital-intensive sectors resembling ICT.
Additionally, macroeconomic challenges, together with alternate fee volatility and rising operational prices, have additional constrained borrowing exercise.
Regardless of these challenges, the ICT sector stays a crucial driver of Nigeria’s financial system, contributing considerably to Gross Home Product development and employment.
Actions within the ICT sector contributed 16.35 per cent to Nigeria’s actual GDP in Q3 2024, a decline from the 19.78 per cent it added within the earlier quarter.
The Nationwide Bureau of Statistics disclosed this within the Q3 2024 GDP report.
The contribution was, nonetheless, larger than the 15.97 per cent contributed by the sector in the identical interval of final yr.
In keeping with the NBS, the ICT sector includes the 4 actions of Telecommunications and Data Providers: Publishing, Movement Image, Sound Recording, and Music Manufacturing, in addition to Broadcasting.
Within the third quarter of 2024, the sector recorded a development fee of 5.92 per cent in actual phrases, year-on-year.
This was pushed largely by actions within the telecommunications sub-sector, which contributed 13.94 per cent to the GDP in the true time period.
In keeping with NBS, the telecom business was the third-largest contributor to the true GDP in Q3 2024, coming behind solely crop manufacturing and commerce industries, contributing 26.51 per cent and 14.78 per cent, respectively.
The telecom business, which is dominated by cellular community operators together with MTN, Globacom, Airtel, 9mobile, and Web Service Suppliers, can be driving quite a lot of actions in each different sector of the financial system.
The closest sub-sector to telecoms within the ICT sector by way of contribution was Broadcasting, which added 1.37 per cent.
The NBS information additional revealed that the ICT sector contributed 11.30 per cent to the whole Nominal GDP within the third quarter of 2024, decrease than the speed of 11.57 per cent recorded in the identical quarter of 2023 and decrease than the 14.19 per cent it contributed within the previous quarter.
In nominal phrases, within the third quarter of 2024, the sector development was recorded at 14.51 per cent (year-on-year), a 25.75 share factors lower from the speed of 40.27 per cent recorded in the identical quarter of 2023 and a pair of.65 share factors larger than the speed recorded within the previous quarter.
Regardless of being a significant contributor to the nation’s GDP, the Nigerian telecommunications sector recorded an 87 per cent decline in overseas investments for the third quarter of 2024, marking a major downtrend from the earlier two quarters of the yr.
The NBS information for capital importation confirmed that the sector attracted solely $14.4m in capital importation in Q3, a pointy decline from the $113.42m investments recorded in Q2.
12 months-on-year, the Q3 2024 capital importation for the telecom sector additionally represents a 77 per cent decline in comparison with the $64.05m recorded in the identical interval final yr.
Regardless of the decline within the third quarter, the telecom sector has had higher overseas investments this yr than in earlier years.
The NBS information confirmed that the sector attracted a $191.5m capital influx within the first quarter of this yr, marking a major 769 per cent improve in contrast with $22.05m acquired in Q1 2023.
The investments recorded within the first quarter alone surpassed the whole investments recorded by the sector within the full yr 2023, which stood at $134.75m.
This got here after years of constant decline in investments, even with a gaping infrastructure hole requiring billions of investments to bridge.
In Q2 2024, FDIs within the sector stood at $113.4m. Whereas that is decrease than the influx recorded within the previous quarter, it represents a 339 per cent improve over the $25.81m capital influx recorded in the identical interval final yr.
Between January and September 2024, MTN Nigeria’s core capital expenditure dropped 27.79 per cent to N217.64bn, whereas Airtel’s capex fell 36.59 per cent to $149m.
This funding decline is tied to a N514.93bn loss between January and September 2024 for MTNN and a 46.9 per cent decline to $755m in Airtel Nigeria’s income within the interval.
To regulate to those harsh financial realities, telcos renewed their push for tariff hikes this yr.
In keeping with the Affiliation of Licensed Telecom Operators of Nigeria and the Affiliation of Telecommunication Corporations of Nigeria, telecom operators have advocated for larger costs for the final 11 years.
The telcos harassed the necessity for cost-reflective tariffs within the face of hostile financial headwinds like excessive inflation of 34.6 per cent in November 2024 and losses ensuing from overseas alternate fluctuations.
Nevertheless, telecommunications corporations in Nigeria have been mandated to extend their investments in community infrastructure following the approval of a tariff hike after 11 years of lobbying.
This follows an assertion by Bosun Tijani, the minister of communications, innovation, and digital financial system, that tariff hikes will occur within the pursuits of the business’s sustainability. “Tariff will go up,” he mentioned.
The situation of this improve has been tied to a dedication by telcos to extend investments within the sector.