The Nigerian telecommunications industry is facing a critical juncture, grappling with escalating operational costs that threaten its sustainability. Leading operators, including MTN Nigeria, have formally requested a substantial 100% tariff increase from the Nigerian Communications Commission (NCC), the industry regulator. This proposed hike aims to offset the significant financial pressures stemming from persistent inflation, fluctuating exchange rates, and the surging costs of essential operational inputs such as diesel, power generation, and raw materials. While acknowledging the potential impact on consumers, industry leaders argue that this increase is crucial for maintaining service quality, network expansion, and the overall viability of the telecom sector. The NCC, however, is yet to approve the request, given the current economic climate and its potential impact on consumers.
The precarious financial situation of the telecom industry is underscored by the stark warnings issued by industry representatives. Karl Toriola, CEO of MTN Nigeria, while acknowledging the likelihood of the NCC rejecting the full extent of the proposed increase due to the prevailing economic sensitivities, emphasized the urgent need for a tariff adjustment to ensure the industry’s long-term survival. He stressed the alignment between industry stakeholders, including policymakers and regulators, in recognizing the critical role of a sustainable telecom sector in driving economic growth and societal well-being. Gbenga Adebayo, Chairman of the Association of Licensed Telecommunications Operators of Nigeria (ALTON), echoed these concerns, describing the sector as being “under siege” due to the relentless rise in operational expenses.
The mounting operational costs, primarily driven by inflation and currency fluctuations, have significantly eroded the profitability of telecom companies, making it increasingly challenging to maintain existing services and invest in network expansion. The price of diesel, a crucial component for powering base stations, especially in areas with unreliable electricity supply, has skyrocketed, adding to the financial burden on operators. Similarly, the costs of other essential inputs, including power generation equipment and raw materials for network infrastructure, have seen substantial increases, further squeezing profit margins. Despite these escalating expenses, telecom tariffs have remained stagnant for over a decade, leading to a growing disparity between operational costs and revenue generation.
The industry’s plea for a tariff adjustment is not new. A similar call was made in April 2024, highlighting the growing urgency of the situation. However, no significant progress has been made since then, exacerbating the financial strain on operators. The continued inaction has prompted ALTON and the Association of Telecommunications Companies of Nigeria (ATCON) to issue a joint statement urging the Federal Government to intervene and facilitate a constructive dialogue between industry stakeholders. The associations emphasized the need for a balanced approach that addresses both consumer affordability and operator sustainability.
The potential consequences of failing to address the industry’s financial woes are dire. ALTON has warned of potential service disruptions, often referred to as “service shedding,” where operators may be forced to limit or even suspend services in certain areas due to the unsustainable cost of operations. This could have significant repercussions for businesses, individuals, and the overall economy, impacting access to essential communication services. The telecom sector plays a vital role in Nigeria’s economy, supporting various industries and enabling access to information and communication technologies. Disruptions in service could have a cascading effect, hindering economic growth and societal development.
The proposed tariff increase, while significant, is presented by industry players not as a profit-maximizing strategy but as a necessary measure to ensure the survival and sustainability of the sector. They argue that the current tariff structure, which has remained unchanged for over a decade, is no longer viable in the face of escalating operational costs. The industry seeks a collaborative approach with regulators and policymakers to establish a revised tariff framework that balances the need for affordable services for consumers with the imperative for operators to maintain financial viability. The overarching goal is to ensure the long-term health of the telecom sector, which is crucial for supporting Nigeria’s continued economic growth and development. The industry’s appeal is for a timely and decisive action before the situation deteriorates further, jeopardizing one of Nigeria’s most critical industries.
