Nigeria’s telecommunications sector experienced a strong rebound in foreign direct investment (FDI) during the first half of 2024, drawing in $304 million.
This figure more than doubled the $134.75 million the sector attracted throughout the whole of 2023.
According to data from the National Bureau of Statistics (NBS), this represents a promising recovery following years of declining investment in the sector, despite a critical infrastructure gap requiring billions of dollars to bridge.
In the first quarter of 2024 alone, the sector attracted $191.5 million, marking a staggering 769 per cent increase compared to the $22.05 million recorded in the first quarter of 2023.
The second quarter saw a capital inflow of $113.4 million, lower than the first quarter but still representing a 339 per cent year-on-year increase over the $25.81 million received in the same period last year.
Despite this positive trend, industry stakeholders remain cautious.
Telecom consultant Wale Babalola remarked that while the sector is performing better than in previous years, the current investment levels are far from sufficient to drive the growth needed to close the infrastructure gap.
“Yes, the numbers are improving, but it’s still not enough to bridge the existing infrastructure deficit in the sector,” Babalola said.
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He also pointed out that investors are waiting for clearer policy directions from the government, particularly on tariff regulations.
“Investors need assurance of returns, and with the regulator capping telecom operators’ pricing adjustments, especially in response to inflation, that assurance isn’t there yet,” he added.
The Executive Secretary of the Association of Licensed Telecommunications Operators of Nigeria (ALTON), Gbolahan Awonuga, highlighted additional concerns over foreign exchange (forex) instability, which continues to deter potential investors. “Until challenges like forex instability, Right of Way charges, and multiple taxation are resolved, the current uptick in investments may just be temporary,” Awonuga noted.
Engr. Ikechukwu Nnamani, CEO of Digital Reality and former President of the Association of Telecommunications Companies of Nigeria (ATCON), emphasized that policy consistency is key to creating an investor-friendly environment.
He echoed the sentiment that the forex market’s volatility has discouraged many foreign investors from fully committing to the telecom sector.
The challenges of declining investment are well documented in the sector. The Nigerian Communications Commission (NCC) reported a steep 47 per cent drop in telecom investment in 2022, with inflows of $399.9 million compared to $753 million in 2021.
The industry’s capital expenditure (CAPEX) also reflected this downturn, falling by 30 per centin 2022, with operators spending N785 billion compared to N1.1 trillion the previous year.
In response, the Nigerian government has launched a national fibre project aimed at expanding broadband access by deploying an additional 90,000km of fibre optic cable.
The project, spearheaded by the Ministry of Communications, Innovation, and Digital Economy, is expected to improve universal internet access and is currently in talks with potential financiers, including the World Bank.
However, funding and execution timelines remain uncertain, with the project’s completion estimated to take two to three years.
While the recent rise in investment is a positive sign, experts caution that sustained and significant investment is crucial to ensuring the sector’s long-term growth and stability