Nigeria’s telecommunications industry recorded a significant decline in capital importation in the first quarter of this year as total foreign investments for the quarter stood at $22 million.
Compared with the $168.3 million attracted by the industry in Q4 2022, this represents an 87% decline in foreign investment.
According to the Capital Importation data released by the National Bureau of Statistics (NBS), the Q1 2023 figure also represents a 62% decline year on year when compared with the $57,79 million investments recorded by the industry in Q1 2022.
The decline in investment is coming amid an ongoing implementation of the Nigeria National Broadband Plan (NBP 2020-2025) with a target of 70% penetration by 2025, for which the country is relying on more foreign investments. According to industry experts, the Nigerian telecom industry would require, at least, $3.4 billion in investments in fibre infrastructure to meet this target.
While there had been a general downtrend in FDI in the country’s economy since the outbreak of the coronavirus (COVID-19) pandemic in 2020, the telecoms sector had been recording a consistent decline in investments over the last 5 years.
Discouraging factors
Speaking with Nairmetrics recently, the Chairman of the Association of Licensed Telecommunications Operators of Nigeria (ALTON) Engr. Gbenga Adebayo has said that the challenge of multiple taxation in the telecom industry is one of the major factors discouraging further investments in the industry.
According to him, telecom operators are currently paying a total of 39 taxes and levies, and governments at different levels in the country keep coming up with different charges.
He said the undefined tax regime in the industry has made planning and projections very difficult for players in the industry, adding that potential investors are also on the lookout for these factors and are still watching.
Expressing a similar view, the President of the Association of Telecommunications Company of Nigeria (ATCON) another umbrella body of players in the telecom industry, Engr. Ikechukwu Nnamani also observed that instability in the country’s forex market has been a major discouragement for many foreign investors who are interested in the country’s telecoms.
“It has been estimated that the country would require $100 billion in investments in the next 10 years to bridge the existing infrastructure gap in the telecom sector, but where is the money going to come from? The exchange rate situation in Nigeria is of serious concern for foreign investors, they are not sure of what the situation would be by the time they want to repatriate their returns. Their returns on investments could be halved due to the fluctuations in the exchange rate. If we want to see the investors, we have to first address the foreign exchange situation,” he said.
Ghana
In Ghana, telcos are also faced with multiple taxes and in some cases even duplicate taxes. They have raised the issue several times for years but to no avail.
The Ghana Chamber of Telecommunications has for the many years reported that numerous taxes, levies and charges places on telcos every year comes to about 48% of their annual revenue, meaning for every GHS1 the industry makes, 48Gp goes to the governments.
Currently, it is only one telcos, MTN Ghana, which is really profitable and is able to pay some taxes like profit tax and the national stabilization levy. The other telcos are not making profit and are unable to meet some of their tax obligations.
Whereas it is not clear how how much the other telcos really invest into their networks, MTN in has always announced what its capital expenditure every years. In 2021 for instance, the company reported GHS1.45 billion capex, and in 2022 it went up to GHS2.1 billion (US$184.57 million), which brings the quarterly investment for that year to over GHS500 million (US$46 million).
