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Economist Bismarck Rewane Charges Nigeria to Save the Telecom Sector from Collapse

Economist Bismarck Rewane Charges Nigeria to Save the Telecom Sector from Collapse

The Chief Executive Officer (CEO) of Financial Derivatives Company, Bismarck Rewane, has called on the Nigerian government to intervene in the telecommunications sector, warning that the collapse of this industry could trigger a broader economic fallout in Nigeria.

Rewane made these remarks during a breakfast session hosted by the Lagos Business School, Pan-Atlantic University, on June 5, 2024. The event, themed “Telecom Sector: The Fulcrum for Economic Dynamism in Nigeria,” brought together key figures from the private sector to deliberate on the critical role of telecoms in the nation’s economy.

As the keynote speaker, Rewane cautioned that without immediate government intervention, the repercussions could extend far beyond the telecom industry, potentially jeopardizing Nigeria’s economic stability. In his presentation titled “Nigerian Economy on the Brink: Adapt or Collapse?” he outlined numerous challenges facing the telecom sector, including rising inflation, high operating costs, limited access to foreign exchange, regulatory burdens, multiple taxations, and local government extortion.

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He cited MTN’s reported financial loss in 2023 as a stark indicator of the sector’s struggles.

Rewane stressed the significant impact these challenges are having on the growth and development of the telecoms sector, warning that this could lead to a decline in revenue potential from telecoms, which would, in turn, affect other sectors.

“Big push theory posits that growth in one sector can stimulate growth in others through backward and forward linkages. The telecom sector has both forward and backward linkages to various sectors.

“This linkage to other sectors is vital for economic growth, innovation, and productivity across various industries, making it a key enabler and driver of development in modern economies. If the telecom industry collapses, all other sectors will follow,” Rewane said.

The telecommunications sector has historically played a crucial role in Nigeria’s economy, especially during the COVID-19 pandemic when it emerged as an economic lifeline. As businesses and educational institutions shifted to remote operations, the demand for telecom services soared.

This surge in demand helped stabilize the economy during a period of unprecedented global disruption. The telecom industry provided essential connectivity, enabling business continuity, remote learning, and the facilitation of digital services, thus acting as an economic cash cow during the pandemic.

However, the current economic headwinds have severely impacted the telecom industry’s operations and growth. Rising inflation has escalated the costs of goods and services, affecting operational expenses. High operating costs and limited access to foreign exchange have hindered the sector’s ability to invest in infrastructure and technology upgrades.

Regulatory burdens and multiple taxations have further strained the financial viability of telecom companies. Additionally, local government extortion has compounded the industry’s challenges, leading to increased costs and operational inefficiencies.

Rewane’s concerns were echoed by other notable speakers, including Professor Ali Bongo, who emphasized the need for government support and deregulation to ensure the sector’s survival. They highlighted the sector’s growth potential, noting its 8% outperformance of the GDP growth rate between 2019 and 2023.

The telecommunications and Information Services sector in Nigeria contributed N2.508 trillion to the nation’s Gross Domestic Product (GDP) in the first quarter of 2023, representing 14.13 percent of the GDP, according to statistics released by the National Bureau of Statistics (NBS).

In April, Mobile Network Operators (MNOs) and Telecommunication Companies (Telcos) in Nigeria voiced concerns over the Nigerian Communications Commission’s (NCC) interference in price-setting for service providers, warning that this could threaten the industry’s sustainability and erode investor confidence. The group called for regulatory neutrality and independence, which they described as crucial to ensuring a thriving telecommunications sector.

The NCC regulates prices in the telecom industry, and telecom operators are not allowed to implement any price change without the regulator’s approval. Reacting to this, the group, under the aegis of the Association of Licensed Telecom Operators of Nigeria (ALTON) and the Association of Telecommunication Companies of Nigeria (ATCON), called for a tariff increase after 11 years.

They lamented that the telecom industry remains the only sector that has not reviewed its prices despite the rising inflation and other economic realities that warrant an increment.

The inability to adjust tariffs due to regulatory restraints has prevented telecom operators from pricing their services appropriately, the group stated.

“For a fully liberalized and deregulated sector, the current price control mechanism, which is not aligned with economic realities, threatens the industry’s sustainability and can erode investors’ confidence,” the statement read.

ALTON and ATCON urged the government to facilitate a constructive dialogue with industry stakeholders to address pricing challenges and establish a framework that balances consumer affordability with operator financial viability.

Stakeholders at the event urged the government to create an enabling environment to foster the sector’s growth, warning that without such support, the sector’s decline could severely impact Nigeria’s economic dynamism, innovation, and productivity.

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