Telecoms: FX Scarcity Continues to Bite Hard

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Monday, June 21, 2021 12:28 PM / by CSL Research/ Header Image Credit: Shutter Stock


In an interview with Punch media, the President of the Association of Telecommunication Companies of Nigeria (ATCON), Ikechukwu Nnamani, decried the impact of foreign exchange scarcity on the operations of many telecom operators in the country while seeking special intervention from the Central Bank of Nigeria (CBN). He stated that the association is in active collaboration with the Nigerian Communications Commission (NCC) to hasten the process of securing special consideration from the apex bank. The inability of the telecom operators to source FX from the official window is compelling operators to patronize the black market, leading to increased costs which, under normal circumstances should be passed on to consumers through price increases.

 

Despite the covid-19 induced economic headwinds which impacted many sectors negatively, the telecommunications sector proved to be a bright spot at the period of uncertainty and even beyond. The sector recorded real growth of 15.90% in 2020 (vs GDP growth of -1.92%) and 7.7% in Q1 2021 (vs GDP growth of 0.51%). This performance was driven by the increased use of digital channels for daily routine activities from telecommuting to social engagements. On the flip side, the sector has been plagued by several challenges including FX constraints, eroding consumer purchasing power, and insecurity.

 

While we acknowledge the need for the government to focus more on sectors that have been badly hit by the pandemic through various interventions, we believe the telecommunication sector should not be left out, given its growing contribution to GDP (11.66% as of Q1 2021). The telecommunications sector remains one of the fastest growing sectors in Nigeria's ailing economy. The lingering impact of FX scarcity may undermine investments by industry operators and players to enhance the quality of network infrastructure, thus limiting broadband penetration. Broadband penetration stood at 40.66% as of April 2021 when compared with the target of 70% by 2025.


 Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.

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