Telecom tariff hikes: Should load shedding be an option?, By Zekeri Idakwo Laruba

While the 50 per cent tariff increase addresses economic realities, the telecom industry must prioritise innovation and efficiency to minimise consumer impact. Strategic investments in renewable energy, AI-driven traffic optimisation, and targeted operations can enhance service quality, while containing costs. Collaboration among stakeholders is essential to ensure a sustainable telecommunications ecosystem that balances industry growth with consumer welfare.

There are three basic needs for human survival: food, shelter, and clothing. However, as society progresses and technology evolves, our needs expand beyond these essentials. Today, electricity and telecommunications services have become indispensable for daily life.

As with basic needs, electricity and telecom services come at a cost. Service providers require revenue to sustain operations and remain competitive. While electricity has long been a necessity, leading to load shedding whenever there are operational challenges, telecom services, especially SMS, mobile calls, and data, emerged just a couple of decades ago and are now considered fundamental necessities.

Since the liberalisation of Nigeria’s telecom sector in 1999 under the Nigerian Communications Act (NCA) of 1992, the industry has witnessed remarkable growth. Investments exceeding $3 billion have transformed Nigeria into Africa’s fastest-growing telecommunications market. The introduction of GSM technology saw mobile phone subscribers rise from 500,000 in 2001 to over 108 million by 2012. This expansion bolstered economic development, improved communication, and enhanced quality of life across the nation.

Over the years, telecom operators have repeatedly called for tariff adjustments to fund infrastructure improvements and maintain service quality. These calls have intensified due to recent economic challenges, such as the removal of fuel subsidies, naira devaluation, and rising operational costs, following 11 years of lobbying efforts dating back to 2013.

Recently, the Nigerian Communications Commission (NCC) approved a 50 per cent increase in tariffs after rejecting telecom operators’ request for a 100 per cent increment. This decision reflects a delicate balance between ensuring industry sustainability and minimising consumer burdens, even though the average Nigerian does not take into account details of his/her regular spending on airtime, SMS, and data.

Economic Confidential reports that the newly approved tariff rates by the NCC have come into effect, reflecting significant increases across board. Under the new tariff structure, call rates have increased from ₦11 to ₦16.50 per minute, SMS charges from ₦4 to ₦6, and 1GB of data from ₦287.50 to ₦431.25. A comparative analysis shows substantial surges, with all rates rising by 50 per cent.

Nigeria’s telecommunications sector struggled with significant operational challenges in 2023, marked by a sharp 50.92 per cent rise in operating costs. Costs rose from ₦2.09 trillion in 2022 to ₦3.16 trillion in 2023, as operators faced inflation, a weakened naira, and rising energy expenses.

Despite these financial pressures, the sector achieved a 37.54 per cent increase in revenue, reaching ₦5.30 trillion, driven by the growing demand for voice and data services. Capital expenditure also grew by 26.06 per cent, with ₦990.55 billion invested to improve infrastructure, including the deployment of 5G and expanded broadband services.

The NCC’s 2023 Year-End Report revealed critical developments in the sector. GSM operators contributed the largest share, with ₦2.52 trillion in costs and ₦4.01 trillion in revenue, while Internet Service Providers reported operating costs of ₦96.81 billion against ₦89.81 billion in revenue. Infrastructure expansion was evident as base stations increased by 8.4 per cent to 137,992, fibre optics reached 83,254.5 kilometres, and tower deployments totalled 39,356.

Despite these advancements, broadband penetration dipped slightly to 43.71 per cent, attributed to revised population figures, though subscriptions grew to 94.76 million. The sector’s contributions to Nigeria’s GDP rose to 14 per cent in Q4 2023, up from 13.55 per cent in 2022. Operators also focused on service quality and capacity, as data usage surged by 37.58 per cent to 713,200.62 terabytes in 2023, affirming the telecommunications sector’s vital role in Nigeria’s digital economy.

This article focuses on data tariffs due to their critical importance to individuals and organisations for effective information and data management. Reliable and affordable data access drives productivity, supports communication, and fosters innovation in today’s digital world.

The cost of mobile data varies significantly across African countries, with Nigeria maintaining one of the lowest tariffs on the continent. According to the ITU’s ICT Services Affordability Report 2023, 2GB of data in Nigeria costs $2.35, compared to $2.66 in Ghana, $2.92 in Kenya, and $7.98 in South Africa. Despite these differences, Zimbabwe leads the continent in high data costs, with 2GB priced at $10.23. Additionally, a report by cable.co.uk ranked Nigeria as the 31st cheapest country globally for 1GB of data at $0.39, making it the most affordable in West Africa.

However, according to Economic Confidential, the low tariffs in Nigeria are often contrasted with the country’s economic realities. Despite affordability, Nigeria has the lowest GDP per capita among the compared countries, at $6,207.4 as of 2023, according to the World Bank. By contrast, South Africa, which charges $7.98 for 2GB, boasts a GDP per capita of $15,194.2. Similarly, Ghana ($7,543.0) and Kenya ($6,307.2) both exceed Nigeria’s GDP per capita, despite having higher data costs. This disparity accentuates the challenge of balancing affordability with the economic power of subscribers in different markets.

Dr Aminu Maida, executive vice chairman (EVC) and chief executive officer (CEO) of the NCC, justified the approved 50 per cent increase in telecom tariffs, citing rising operational costs. This decision, according to him, comes after telecom operators initially requested a 100 per cent tariff hike. The NCC settled for 50 per cent to balance sustainability with affordability, considering ongoing reforms in the industry.

According to minister of Communications, Innovation, and Digital Economy, Dr Bosun Tijani, the hike is necessary to balance industry growth with operational realities. Telecom investments have dropped significantly, with foreign investments falling to a six-year low of $14.74 million in Q3 2024, and major players like MTN Nigeria and Airtel Nigeria experiencing sharp declines in capital expenditure and significant losses.

Key stakeholders, including the Association of Licensed Telecom Operators of Nigeria (ALTON) and MTN CEO Karl Toriola, argue that tariff adjustments will restore investor confidence, fund network upgrades, and improve service delivery.

While operators justify the increase due to rising costs, critics argue that it unfairly shifts the burden of inefficiencies onto subscribers. Civil society groups and labour unions, including the National Association of Telecoms Subscribers (NATCOMS) and the Nigeria Labour Congress (NLC), have criticised the decision, calling it a direct assault on struggling Nigerian consumers.

Some have suggested implementing load-shedding practices for telecom services, similar to electricity companies. This would involve temporarily scaling back services or shutting down parts of the network during low-demand periods, such as selective network downtime, bandwidth reduction, and energy conservation.

While the 50 per cent tariff increase addresses economic realities, the telecom industry must prioritise innovation and efficiency to minimise consumer impact. Strategic investments in renewable energy, AI-driven traffic optimisation, and targeted operations can enhance service quality, while containing costs. Collaboration among stakeholders is essential to ensure a sustainable telecommunications ecosystem that balances industry growth with consumer welfare.

Zekeri Idakwo Laruba writes from Wuye District Abuja idakwozekeri93@gmail.com