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.

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.

Nigeria has achieved a significant trade surplus of N6.52 trillion in the first quarter of 2024, marking a remarkable recovery from the trade deficits recorded in previous quarters.

This surplus, the highest since 2009, underscores the country’s strong economic performance and is a substantial improvement from the N1.41 trillion deficit in Q4 2023 and the N927.2 billion deficit in Q1 2023, according to the Nigerian Bureau of Statistics (NBS).

The Q1 2024 surplus surpasses the previous record of N5.74 trillion set in Q4 2011. This impressive economic turnaround is largely driven by a substantial increase in exports, which totaled N19.17 trillion, a 51.00% increase from the previous quarter’s N12.69 trillion and a 195.47% rise from N6.49 trillion in Q1 2023.

The exchange rate depreciation also played a role in enhancing the Naira value of trade.

Export Performance Highlights

Crude oil exports dominated, accounting for 80.80% of total exports at N15.49 trillion. This represents a 50.20% increase from N10.31 trillion in Q4 2023 and a staggering 200.79% rise from N5.15 trillion in Q1 2023. Other major exports included liquefied natural gas, sesamum seeds, urea, and superior-quality cocoa beans.

France emerged as the leading destination for Nigerian exports, accounting for 11.09% of the total export value. This was followed closely by Spain, which represented 10.56% of Nigeria’s total exports. Similar to France, Spain’s imports from Nigeria largely consist of crude oil and liquefied natural gas, underlining the strong energy trade ties between Nigeria and the European Union.

The Netherlands accounted for 8.85% of Nigeria’s total exports. The country’s significant import of Nigerian crude oil and agricultural products like cocoa beans affirms its strategic trade relationship with Nigeria. India accounted for 8.41% of Nigeria’s total exports.

The trade with India is heavily dominated by crude oil, which forms the backbone of the bilateral trade relationship. Additionally, India imports agricultural products such as sesamum seeds from Nigeria.

The United States was responsible for 6.84% of Nigeria’s total exports in Q1 2024. The trade relationship primarily revolves around the export of crude oil and other energy products, alongside agricultural commodities.

Import Performance Highlights

Total imports for Q1 2024 stood at N12.64 trillion, reflecting a 39.65% increase from N9.05 trillion in Q4 2023 and a 95.53% rise from N6.47 trillion in Q1 2023. Major imported commodities included motor spirit ordinary, gas oil, durum wheat, cane sugar meant for sugar refinery, and other liquefied petroleum gases.

China was Nigeria’s top trading partner on the import side, contributing 23.18% to the total imports. The imports from China primarily include machinery, transport equipment, and various manufactured goods, reflecting the strong industrial and technological ties between the two countries. India accounted for 8.46% of Nigeria’s total imports.

The trade with India involves the import of pharmaceuticals, chemicals, and industrial machinery, showcasing a diversified trade portfolio. The United States contributed 7.98% to Nigeria’s total imports. Major imports from the U.S. include machinery, transport equipment, and agricultural products, reflecting a broad spectrum of trade activities. Belgium was responsible for 7.56% of Nigeria’s total imports.

The country’s exports to Nigeria are dominated by machinery, chemical products, and various manufactured goods. With a 4.68% share of total imports, the Netherlands is a significant trading partner for Nigeria. The imports primarily consist of chemical products, machinery, and transport equipment.

Agricultural Trade

Agricultural exports saw substantial growth, totaling N1.04 trillion, up by 123.08% from N463.97 billion in Q4 2023 and by 270.13% from N279.64 billion in Q1 2023. Agricultural imports were valued at N920.54 billion, reflecting a 29.45% increase from N711.14 billion in Q4 2023 and a 95.28% rise from N471.39 billion in Q1 2023.

Trade by Mode of Transport

Maritime transport was the primary mode of transport for Nigeria’s trade activities. For exports, maritime transport accounted for N19.02 trillion, representing 99.25% of total exports. This highlights the importance of Nigeria’s ports and shipping infrastructure in facilitating the bulk of the country’s international trade.

On the import side, maritime transport was used for goods valued at N11.91 trillion, making up 94.17% of total imports. The reliance on marine transport is indicative of the volume and bulk of goods traded, which typically include heavy and large consignments like crude oil, machinery, and industrial equipment.

Air transport played a minor role in Nigeria’s trade, accounting for N55.32 billion or 0.29% of total exports. For imports, air transport was used for goods valued at N707.56 billion, representing 5.60% of total imports. The use of air transport is typically reserved for high-value, low-bulk goods such as electronics, pharmaceuticals, and perishable items that require quick delivery.

Road transport accounted for N30.20 billion or 0.16% of total exports and N30.11 billion or 0.24% of total imports. While the volume is relatively small compared to maritime and air transport, road transport is crucial for regional trade within the ECOWAS subregion and neighboring countries, facilitating the movement of goods across land borders.

Other modes of transport, including rail and inland waterways, accounted for N58.65 billion or 0.31% of total exports. This category is indicative of Nigeria’s ongoing efforts to diversify its transport infrastructure to enhance trade efficiency.

Timi Bomodi, comptroller of the Seme command of the Nigeria Customs Service (NCS), highlighted the positive impact of the naira devaluation on the country’s exports.

His comments come in the wake of Nigeria’s record-breaking N6.52 trillion trade surplus in the first quarter of 2024. Bomodi shared his insights during an interview with the News Agency of Nigeria (NAN) on Sunday.

He noted that the dynamics of imports and exports are significantly influenced by market forces, particularly supply and demand. He said, “The exchange rate plays a big role in determining the demand or the purchasing power of the people.”

Discussing the exchange rate’s effect on exports, Bomodi said, “As the value of naira begins to decline, you find out that Nigerian-made goods are considered cheap within the region. This encourages people from neighbouring countries to want to purchase goods from Nigeria. While we complain that the exchange rate has a negative impact on imports, it has a positive impact on exports.”

He explained that although a high dollar value makes it challenging for Nigerians to import goods, it makes Nigerian goods more affordable and attractive to neighboring countries.

“For the first time, you have a net export gain for Nigeria vis a vis her neighbouring countries, because you find out that what makes Nigerians go to their neighbours is now making them come to Nigeria,” he said.

The comptroller also stressed that the devaluation of the naira has had a beneficial impact on the local economy.

“Even a devalued naira is an advantage for export. So it’s not such a negative thing, but in trade, you have to balance both ends,” he said.

Bomodi outlined the critical role of the Seme-Krake border post in facilitating legitimate trade, managing imports and exports, and enforcing government fiscal policies, especially in areas of prohibition.

“The Lagos-Abidjan corridor is considered the most viable trade corridor in West Africa and indeed the whole of Africa. It’s so strategic to the economic development of Africa that the European Union and other international agencies are ready to invest heavily in infrastructure around this axis,” he added.

However, the Nigerian Customs Service has faced criticism for the incessant increases in export and import rates, which many believe hampers trade growth. Economists have reiterated that the customs service is not a revenue-generating agency, calling on the NCS to lower these rates to boost trade, investment, and economic activities.

They note that reducing these tariffs could significantly enhance Nigeria’s competitive edge in the global market, encouraging more robust trade relations and economic growth.

Analysts at Financial Derivatives Company Limited said the naira, which exchanges at around N1,476.12 to dollar at the official market, is currently overvalued by 37.91 percent.

Naira’s current devaluation trajectory started on June 14, 2023, when the Central Bank of Nigeria (CBN) announced the unification of all segments of the foreign exchange (FX) market. The apex bank stated that all FX windows are now merged into the investors and exporters (I&E) window, now known as NAFEM.

Since the naira’s floatation, there have been consistent fluctuations in the FX market.

Economists argue that the significant drop in the naira’s value is beneficial for Nigeria’s efforts to boost exports. Data from the Nigerian Bureau of Statistics (NBS) supports this view, showing that the country recorded a substantial trade surplus, largely due to the naira’s devaluation.

“Nigeria’s total merchandise trade stood at N31,810.59 billion in Q1, 2024. This represents an increase of 46.27% over the value recorded in the preceding quarter and a rise of 145.58% compared to the value recorded in the corresponding period of 2023,” the NBS reported.

Export activities accounted for 60.25% of total trade in the reviewed quarter, with a value of N19,167.36 billion. This marks a 51.00% increase from Q4 2023 and a remarkable 195.47% rise from Q1 2023.