As Nigerians bask in the new year, a 40 per cent hike in telecom tariffs approved by the Nigerian Communications Commission (NCC) is set to deepen the financial strain on consumers already grappling with soaring inflation at 39.93 per cent. Nosa Alekhuogie writes that this sharp increase in the cost of phone calls, SMS, and data bundles raises urgent concerns about affordability and access to essential communication services for millions across the country. NCC recently approved a 40 per cent increase in telecom service tariffs, set to take effect this month.

NCC recently approved a 40 per cent increase in telecom service tariffs, set to take effect soon. This hike is set to impact the cost of phone calls, SMS, and data bundles nationwide.

The new tariffs approved by the NCC include calls from N11 to N15.40 per minute (a 40% increase), SMS (N4 to N5.60; a 40% increase), and data (1GB bundle will rise from N1,000 to at least N1,400). Telecom operators argue that these increases are necessary to cover rising operational costs. However, for millions of Nigerians, these hikes may further strain already tight household budgets.

Feranmi Adewale, a small business owner in Ibadan, explained that he had to cut down on data bundles for his business because the cost had ?become unbearable.?

?It?s affecting my ability to connect with clients and run my business efficiently,? stated Adewale.

Similarly, Paul Kehinde, a graduate intern in Abuja, shared his frustration.

?I can?t afford the data I need for my online professional courses anymore,? said Kehinde. ?It is difficult to keep up, and the internet is essential for my education.?

The telecommunications industry has grown significantly over the last few years, playing a vital role in the country?s economic expansion. By mid-2024, the sector?s contribution to the national GDP had risen to 16.36 per cent, up from 10.30 per cent in 2019, according to the Nigerian Communications Commission (NCC). The sector is facing significant challenges due to a combination of economic factors. Inflation has surged to a near 30-year high of 34.6 per cent in November 2024, driven by escalating food prices and energy costs. This inflationary pressure has made it increasingly difficult for telecom operators to absorb rising expenses without adjusting their pricing structures. Additionally, the depreciation of the Nigerian Naira against major currencies has intensified financial pressures on telecom companies, particularly those reliant on imported technology.

Rising telecom fees could have significant broader economic implications, particularly for digital inclusion. Higher costs may widen the digital divide, making it more difficult for low-income individuals and rural communities to access essential services such as e-learning, healthcare, and job opportunities. The impact may also extend to economic activities, especially for small businesses, startups, and entrepreneurs. Increased connectivity costs could limit their ability to stay connected, stifling innovation and hindering overall business growth.

Trends in voice calls, data fees in Nigeria (2019-2024)

In 2019, Nigerians enjoyed a relatively stable telecom environment. The average price of mobile voice calls was ?11 per minute, and 1GB of mobile data cost about ?1,000. The market was marked by increased competition among telecom giants such as MTN, Airtel, GLO, and 9mobile. A notable decline in mobile data costs occurred in 2019, as high-usage bundles dropped by 142 per cent. According to the ICT Price Trends report, a typical mobile data and voice package cost fell from $16.34 in 2018 to $6.73 in 2019. However, despite this reduction, mobile services remained out of reach for many Nigerians, particularly those in lower-income brackets.

In 2020, the global pandemic altered telecom consumption patterns dramatically. As millions turned to online work and education, mobile data usage soared. However, telecom operators faced challenges related to inflation and currency devaluation, which made maintaining stable prices difficult. While there was a surge in demand for data and voice services, prices largely stayed the same as operators focused on retaining customers during a tumultuous time.

The NCC reported that in 2020, Nigerians spent ?1.77 trillion on national calls and text messages. Despite the increased use of telecom services, operators struggled with rising costs, particularly with the introduction of a 7.5 per cent VAT on telecommunications, further straining consumer finances.

In January 2021, Nigeria had 187.9 million mobile connections, reflecting a 10% increase of 17 million connections from the previous year. This number was equivalent to 90 per cent of the country?s population, underscoring the significant role of mobile technology in Nigeria?s communication and digital infrastructure.

The telecommunications sector demonstrated resilience despite economic challenges such as rising inflation?peaking at 18.77 per cent in March 2021?and foreign exchange volatility. MTN Nigeria, the nation?s largest telecom operator, reported a 45.5 per cent increase in profit after tax, reaching N298.7 billion in 2021, up from N205.21 billion the previous year. The company?s revenue also rose by 22.9 per cent to N1.7 trillion, marking its highest turnover in five years.

As inflation and rising costs continued to affect Nigeria?s telecom sector, the Association of Licensed Telecom Operators of Nigeria (ALTON) formally requested a 40 per cent tariff increase in 2022. ALTON cited escalating operational costs driven by inflation, foreign exchange issues, and rising energy prices. The request for tariff hikes was not just about keeping the industry afloat but ensuring the continued delivery of services. Despite strong opposition from consumer groups, the Nigerian government introduced new taxes, including a 12.5 per cent excise duty on telecom services, adding an extra financial burden on Nigerians.

Operators argued that they could no longer bear the costs of these taxes, with some, like Gbolahan Awonuga, Executive Secretary of ALTON, stating, ?We cannot subsidise the new excise duty; we will pass it on to subscribers.?

In 2023, Nigeria?s telecom operators faced intensified financial pressures, driven by a soaring inflation rate of 33.88 per cent and severe currency depreciation. MTN Nigeria and Airtel Nigeria, two of the country?s leading providers, reported significant financial setbacks. MTN Nigeria alone suffered losses of approximately ?137 billion, while Airtel Nigeria?s parent company, Airtel Africa, recorded a 15.55 per cent decline in Profit Before Tax (PBT), which dropped to ?1,034 million. The primary drivers were a 79.40 per cent surge in finance costs, largely attributed to foreign exchange and derivative losses.

Energy costs compounded the sector?s woes, with Airtel Africa incurring $245 million in energy-related losses across its operations, 88 per cent of which came from Nigeria. The country?s unreliable power supply and surging fuel prices were major contributors.

To mitigate these losses, telecom operators raised service tariffs. Voice call rates increased to an average of ?11 per minute, with data prices also climbing. Imposing a five per cent excise duty added further pressure on pricing, leaving operators with limited options to offset mounting costs. Subscribers began feeling the pinch as the cost of essential telecom services rose steadily, affecting accessibility and affordability.

The tariff hikes sparked widespread discontent among telecom subscribers. The National Association of Telecoms Subscribers (NATCOMS), led by Chief Adeolu Ogunbanjo, criticized the government?s policies and called for urgent intervention to prevent further strain on Nigerians.

In Q1 2024, the sector?s GDP contribution dropped by 12.60 per cent quarter-on-quarter to ?2.67 trillion, reflecting sustained financial challenges for telecom operators. Foreign investments in the telecom industry have also plummeted, exacerbating its economic challenges. According to the National Bureau of Statistics (NBS), capital importation into the sector fell by 87 per cent in Q3 2024, attracting just $14.4 million compared to $113.42 million in Q2. On a year-on-year basis, this represents a 77 per cent decline from the $64.05 million recorded in Q3 2023.

Contributing factors include the devaluation and scarcity of foreign exchange, inflationary pressures, high energy costs, and declining active mobile subscriptions. These challenges have hindered profitability and reduced investor confidence, as teledensity dropped from 102.49 per cent in October 2023 to 72.70 per cent in October 2024.

As the telecom industry grapples with these pressures, the real question is: What does this mean for the average Nigerian consumer? With 160 million mobile subscribers in Nigeria, the financial strain is far-reaching. Families, small businesses, and students who rely on affordable telecom services for work, education, and communication are now being forced to re-evaluate their spending.

Despite the challenges, telecom operators maintain that these increases are necessary to sustain the industry. Gbenga Adebayo, chairman of ALTON, stated, ?We are not in the business of increasing prices for the sake of it. The reality is, without these adjustments, the sector will collapse.?

For Nigerians, this rising cost of mobile communication represents the harsh reality of living in an increasingly digital world, where staying connected is more expensive than ever. The hope remains that the government and telecom companies can work together to ensure that communication remains accessible without compromising quality or affordability. (THISDAY)

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