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Apparent Slowdown in Internet Expansion

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Monday, July 18, 2016 12:30PM /FBNQuest Research

The latest data released by the NCC, the industry regulator, show that internet subscriptions grew by 5% y/y to 92.3 million in May. This represents a density of 50%, placing Nigeria well above the African average of around 16% as estimated by McKinsey. In developed countries, increased internet penetration has driven businesses via e-commerce as well as bolstered economic growth.

A study carried out by the World Bank reveals that a ten percentage point increase in fixed broadband penetration would increase GDP growth by 1.38% in developing economies.
The latest subscriber statistics from the regulator show MTN and Globacom accounting for 36% and 29% of active internet subscriptions respectively.  

Recently, there has been a debate at the National Assembly over the passage of an information communications technology (ICT) tax bill. According to the bill, a 9% tax would be levied on communication services consumers. This tax would be collected alongside the existing 20% tax levied on subscriber identification module (SIM) cards.

It would increase the cost of internet connection across the country and slow down the progress of Nigeria achieving its 30% broadband penetration target by 2018; it is currently at 10%.

Last month MTN bid successfully for six out of the 14 slots auctioned by the NCC for the 2.6GHz spectrum. This should enhance internet access. However, given the prevailing macro challenges, investments in the sector have fallen. The absence of multiple bidders at the recent auction of the 2.6GHz spectrum illustrates this point.

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