Lull In Telecoms Sector To Contract GDP by N2.2trn | Independent Newspapers Limited
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Lull In Telecoms Sector To Contract GDP by N2.2trn

broadband, VAS
Posted: Jul 14, 2016 at 4:31 am   /   by   /   comments (0)

Emmanuel Okwuke


Lagos – The telecoms sector continues to be at the epicentre for growth, innovation, and disruption for virtually any industry and economy.

Mobile devices and related broadband connectivity have continued to be more embedded in the fabric of society today and they are key in driving the momentum around some key trends such as video streaming, Internet of Things (IoT), and mobile payments, among others.

However, the Nigerian telecoms industry seems to be in a lull despite the huge opportunities in the sector.

Since the beginning of this current administration, the industry has been experiencing slow growth due majorly to regulatory pressures, multiple levels of taxation, exclusion of telecomm companies from accessing foreign exchange from the Central Bank of Nigeria’s (CBN) official window and heavy sanctions for regulatory infractions, among others.

Moreover, strict regulatory tightening of Value Added Services (VAS) in a market where revenue from voice is dwindling on daily basis continues to impact negatively on the bottom line of telecommunications companies.

According to stakeholders, the current lull in the sector may affect its contribution to the nation’s Gross Domestic Product (GDP). It could be recalled that the telecoms sector contributed 7.4 percent to GDP in 2013, 7.6 percent in 2014 and 8.5 percent in 2015. Its 2015 value is worth $520 billion.

Stakeholders specifically are projecting that the telecoms sector’s contribution to GDP may drop to the region of 7.0 percent by year-end if the lull continues, a contraction of about 1.5 percent over that of 2015. This is worth about N2.2 trillion.

Gbenga Adebayo, Chairman, Association of Licensed Telecommunications Companies of Nigeria (ALTON), told Independent that the Federal Government and its agencies have to be careful not to kill the goose that lays the golden egg.

He said the practice of seeing the telecommunication sector more as a means of boosting revenue for government at all levels rather than a catalyst for socio-economic development must be stopped if they do not want to deliberately kill the sector.

Lanre Ajayi, former President, Association of Telecommunications Companies of Nigeria, said the government must stop imposing huge fines on telecommunications companies as evident in the recent fine imposed on MTN Nigeria. He said such fines are capable of scaring away foreign investors.

He warned the Federal Government to understand that these foreign investors have other choices and when they see that the Nigerian environment is unfriendly to business, they will simply pack their load and go to other countries that are friendlier.

The industry has huge potential as the number of “connected things” continues to grow as mobile and “smart” device utilisation and connectivity continues to expand, which will ultimately shape and define the IoT space.

“Continued momentum around core telecommunications businesses—as well as innovation around non-traditional business models such as Internet of Things applications, mPayments, and evolving communications technologies—will present both new challenges and growth opportunities for telecommunications companies,” says Craig Wigginton, Vice Chairman and US Telecommunications leader, Deloitte & Touche LLP.

It has been projected that massive data consumption will continue to grow with the expansion of IoT and more streaming of content—especially video. Wigginton expects to see sponsored data services further emerge as providers look for ways to increase revenue in a market where consumers are less likely to invest in long-term ownership of content.

Nigeria is experiencing massive increase in the uptake of mPayments. The findings of Deloitte’s most recent GMCS show that there was a nearly fourfold increase in use of mPayments technology from 2014 to 2015. More handsets are being equipped with Near Field Communication (NFC) chips, retailers are upgrading payment systems in response to regulatory pressures and consumer demand, and businesses of all types, from gas stations to coffee shops are implementing point-of-sale technology that allows customers to pay using mobile devices. Given these trends, we anticipate that mPayments will finally become a payment method of choice for many consumers in 2016.