Nigeria’s telecom sector is vibrant, but is the market open enough?

• Ostensibly, all is well with the sector, but beneath the surface problems lurk
• Nigeria has a very young population and a great chance to make its mark (and fortune) in the knowledge economy but…
• Investment is still below pre-pandemic levels and cash is getting scarcer 
• Meanwhile, Tier 1 operators could create an oligopoly if competition fails

According to the United Nations, as of 20 July, 2022, Nigeria had a population of 216,575,538 with a median age of just 18.1 years. The country is home to an ever-busy, occasionally over-exuberant and sometimes volatile telecoms sector. Recent years have seen strong growth in the sector and government figures forecast that it will continue to grow, within the healthy parameters, until at least 2025 – which is not so far away. But trouble may be brewing in what is Africa’s largest single telecoms market by subscriber numbers. 

The industry is expanding on the back of the country’s very young and rapidly increasing urban population and the ever-increasing adoption of smartphones, services and apps. The sector is also benefiting from uptake of IoT (internet of things) devices that connect with wired and wireless broadband. Some Nigerian 2G networks are already history, having permanently closed in recent years, whilst all 3G platforms are scheduled to be shut down by the end of 2025. The Federal Ministry of Communications and Digital Economy claims that, by 2029, the majority of mobile connections in Nigeria will be 5G. 

According to the very latest figures released by the regulator, the Nigerian Communications Commission (NCC), teledensity in Nigeria is now 108% and broadband penetration is 44.3%. Teledensity has a significant correlation with the per capita GDP of any given area and varies widely between urban and rural environments.  

Internet penetration grew from 143.5 million in January 2022 to 151 million by the end of June, and the service provider MTN upped its data subscribers by 4.2 million, from 59.6 million users at the beginning of 2022 to 63.4 mn at the end of the first half of the year. Globacom added 332,083 users to its data service rolls as its total grew to 39.9 million in June. Airtel too enjoyed an increase in data usage, adding 3.4 million new data subscribers over the period and ending the half year with 41.7 million in June. However, 9mobile lost 502,144 data service subscribers in six months to finish the first half of the year with 5.23 million.

MTN kept its coveted number-one position in the overall connectivity charts with 79 million subscribers and a 38.36% market share, while Airtel came in second place with 58.1 million users and a 28.21% share. They are followed by Globacom with 56.2 million customers and a 27.28% share, while 9mobile languishes in fourth place with just 6.14% of the market and 12.6 million customers.

Figures also show that over the first half of 2022, telcos added a further 8.9 million subscribers to their networks. On the face of it, the outlook is rosy on the Nigerian telecoms front – but things may not be all they seem. Mixed messages are being sent by different players, and the government is getting concerned given that investment into the telecoms sector has not yet recovered to anywhere near the levels that pertained in the days before the global Covid-19 pandemic.

For example, on closer examination, the 8.9 million new subscribers number trumpeted in the official statistics, while actually including some genuinely ’new’ new subscribers, doesn’t tell the whole story. The figure also includes returns from among the 75 million subscribers whose connectivity was barred back in April when the government, in an effort to compel individuals to link their national identity numbers to their subscriber identity modules, forced operators to prevent outgoing calls on all unlinked SIM cards. 

The Nigerian government, in an authoritarian spasm, cared nought for the effect its demands would have on service providers, but the telcos quickly came up with novel wheezes and schemes to ensure their revenues losses would be minimised. Service providers, including Airtel, Globacom and MTN, coaxed back refusenik subscribers by offering blandishments such as increased data limits and price cuts if they linked their SIMs to the national identity number database.
 

One insider analyst with a downbeat, not to say jaundiced, view of the state of Nigerian telecoms is Ayoola Oke, a barrister specialising in telecoms and regulation and a former special adviser to the regulator. He says that despite the fact Nigeria should have a vital and competitive telecoms market with lots of “homegrown” operators, when providing service throughout the country nothing can be taken for granted. Indeed, it is his contention that 90% of local operators will have given up and exited the market by 2027 – forced out by the big players.

Speaking at a conference in Lagos last week, Oke said the Tier 1 players (MTN and Airtel) are continuing to strengthen and consolidate their position at the top of the food chain, while Tier 2 telcos, the few of them that are left, are fighting for their very existence and the Tier 3 players are all but dead in the water. He pointed out that almost all the operators that were “active and vibrant” back in 2010 are now gone from the playing field or struggling to stay on it. He added that the Tier 2 space “is almost empty” because none of the local Tier 3 players have been able to move into the vacated spaces in Tier 2. As a result, the Tier 1 operators face minimal, if any, meaningful competition, nor do they have any incentive to improve. Thus, Oke claims, Nigeria will be left with a Tier 1 oligopoly that will be to the benefit of no-one other than the few big telcos left. Subscribers certainly won’t get anything out of a cosily carved-up, stagnant market.

“This is not a prophecy. If certain regulatory steps are not taken and things [are] not done the way they should [be], more than 90% of homegrown local telecom operators will probably all die out in the next five years, and that will be terrible for the country and consumers. From the way the industry is structured now, the bigger operators are suffocating the industry,” concluded Oke.