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The Precious 30 Million Nigerians

The Precious 30 Million Nigerians

The Nigerian Communications Commission (NCC) is the best government agency in Nigeria right now. Yes, you can have your own choice. I like NCC because it delivers results. The advent and the relative success of GSM in Nigeria should not be taken for granted. NCC got many things right.  Nigerian bureaucrats have botched many great national visions. From water to electricity, we continue to struggle. Unlike NERC (Nigerian Electricity Regulatory Commission), the electricity sector regulator, NCC has made itself a recognizable brand.

Yet, the recent push by NCC on broadband may be very hard. The construct that ubiquitous 2G/3G in every part of Nigeria would catalyze economic growth has been at the core of the strategy. That is fine: Nigeria needs to pursue the aspirations to expand broadband connectivity.

But if you examine this from a business sense, as a telecom analyst with mandate to make money, it could be challenging. I do not really think anyone needs to preach to MTN, Glo, Airtel and 9Mobile to invest in new broadband infrastructures across Nigeria. They have the numbers, and would pursue growth where it makes sense. They do know that most Nigerians can talk but would hardly afford broadband services. In other words, for people making $2 per day, there is no business in building broadband infrastructures in their areas. Indeed, there is a huge difference between loading credit of N100 for voice and spending N1000 to check Facebook feeds. The former is a necessity to most Nigerians; the latter is largely a luxury across the nation.

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Prof Umar Danbatta of Nigerian Communications Commission

 

So, it is going to be really hard for most telcos to justify the investments in broadband services, at least in the short term. That does not mean that NCC cannot try; that is its works, to push the entities to deepen connectivity nationwide. But expect it to be a hard one to achieve, as the telcos would not be a hurry to pick the instructions, and run with them.

The 30 Million Nigerians

If we discuss broadband connectivity and the associated required investment without considering the earning capacities of the users, we would fall into a trap. That trap is similar to parading Nigeria’s 180 million in population (some have 200 million; others 192 million. I like 180 million) when only about 30 million people earn decent income with spending power.

For most analyses, across industries, I like to work with 30 million people since that number is close to the total unique bank account users in Nigeria. Technically, anyone that does not have a bank account in Nigeria at the moment is largely poor. And when I do models for markets, for most products, I rely on this 30 million because those are the full market potential at the moment, unless the product is free or in some sectors like food. Most banks excluding First Bank which has about 14 million customers have lower than 10 million customers. That is not what you expect in a country of 180 million citizens. Yes, everyone is circling around 30 million people.

It is estimated that the Bank Verification Number exercise which links customers with their biometric data like facial features and fingerprints generated more than 28 million unique customers in Nigeria. Those 28 million customers accounted for about 52 million bank accounts in Nigeria. About 46 million accounts are not yet linked to BVN out of the total 98 million bank accounts in Nigeria, as at April 2017. (Please note that the exact statistics keeps changing. If you have the latest, please update in comment area).

This seems to be a more authoritative data on the total BVN number. Please note that this number is not the unique customers to the banks. In other words, some people have multiple bank accounts [ I know this number must have changed; if you have new numbers, share link in the comment section]

The total number of bank customers that now have Bank Verification Number (BVN) has increased to 51.72 million as at February 2017.

Data compiled from the Nigeria Interbank Settlement Systems Plc’s (NIBSS) website, showed that as at January 2017, the number of bank customers that had obtained their BVN stood at 50.92 million.

Now, where are those 30 million people? They are mostly in cities. That is why the telcos focus on the cities because that is where the customers are. That is also why the banks have most of their operations in the cities because that is where the people that can help them make money are located. So, if Nigeria funds broadband infrastructure in most rural areas, and fail to EMPOWER the citizens with economic opportunities, few would connect to browse. Simply, the infrastructure investments, from the lens of the telcos, cannot make business sense because the expected users are very poor to benefit.

Some numbers on Nigeria; most not unique users

 

The fundamental thing in Nigeria is economic empowerment. I am expecting all tiers and arms of government to pursue that with urgency. It is not really a question that if you have the broadband in rural areas, the people would use them to get out of poverty. That is not completely true: most would not because the web is still a luxury. They do not have the money at scale, and most telcos may not necessarily have the patience to put the massive investment, and then expect these citizens to rise up.

Taxing the 30 Million

To solve a similar problem in U.S., the government imposes taxes on every telecom user to help the telcos subsidize the cost of delivering telephony (not necessarily broadband) to rural America. So, the cost of voice services is cheaper in rural America even though in those areas the density is low which could have attracted more fees. But the taxes paid by those in the cities help mitigate potential loses to telcos for charging the rural people low. This is one area NCC needs to consider. Otherwise, expecting the telcos to invest in rural broadband, thinking that the investments would anchor the lifting of people out of poverty may not necessarily be true. You can build all those services and the people would not use them because they do not have the capacity to pay for them.

Yes, a better idea could be to find how the 30 million Nigerians could help. Indeed, as we talk of financial inclusion, we need to also add broadband inclusion in the national roadmap. That capacity to tax city-dwelling America to subsidize rural America connectivity is the missing link when people parade how broadband and telephony uplift people’s lives in Africa. If we do not model such strategies, we can build them, and they would be priced out of the reach of the same people we want to help.

Comments from LinkedIn

De ja vu!! Interesting argument, I was also thinking about the infrastructure deficit we currently face in the Telecoms this week and I believe that in action the NCC is aware of this economic constraint. This is constraint is evident when you consider that we have been hovering around a penetration rate for some years now. The solution I thought of is for the FGN to treat Telco infrastructures required to deliver internet and voice capability as a utility infrastructure in that way Telcos can have the economics limitation preventing from building infrastructure removed. Fixed costs like RoW, Frequencies that enable rural and mass telephony and data should be given out at reduced cost. Tax points can be issued for building infrastructure in areas of lower economic development. This moratorium should be put in place for 5 years after which normal tax regimes can resume.

NCC has a role to facilitate sites on USPF (Universal Service Provision Fund) scheme. I know MNOs deploy such sites against negative ROI reports, primarily to deepen ICT penetration in the rural areas of Nigeria. I reason that they get refunded by the Government. When we say data penetration is less than 20%, it does not mean service coverage is not above 80% of our population. It means only 20% of total subscribers account for the multiple internet connections. A vast majority of phone users remain on voice only. A way to verify telephony coverage would be by light scan and cell coverage maps. Do not say 3G is not there, all 2G sites has GPRS function enabled. The next step for NCC is to drive improvement of KPIs which they understand better than anyone in Nigeria

 


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1 THOUGHT ON The Precious 30 Million Nigerians

  1. Thank you for an excellent article.
    For me, the critical question is how to expand in a sustainable manner the purchasing power of more Nigerians beyond the 30 million out of 200 (180) million Nigerians?
    With the devastating onslaught of Covid-19 on the nation’s economy that 30 million has probably shrunken to 20 million or less.
    How do we urgently reduce the rate of the concomitant mass poverty bound to hit Nigeria

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