Are telcos the new oil in Nigeria?

May 18, 2017
3 min read

Statistics from the National Bureau of Statistic (NBS) shows that telecommunication is, in fact, a big 'deal' in Nigeria. According to a report recently released in 2017, the telecommunications sector contributed ₦1,663 billion (9.1%).  to Nigeria’s Gross Domestic Product (GDP), in the fourth quarter(Q4) of 2016.

Also recently, the Vice-Chairman of the Nigerian Communications Commission (NCC), Prof. Umar Danbatta reportedly claimed that telecos contributed about 8% in the fourth quarter (Q4) of 2016 to the nation's GDP.

Even though these reports seem contradictory. One important fact that shouldn't be missed is that telecommunications sector is contributing quite a lot to Nigeria's GDP.

In times past, the oil and gas sector has been a major source of revenue for the Nigerian economy.  But one amazing fact this report released by NBS shows, is that, from the year 2015 and 2016, telecoms has surpassed oil and gas.


How is revenue generated?

Telecommunication is much bigger than most think. Nigeria telecoms are part of the top paying company in Nigeria as listed in Jobberman’s top 100 companies to work for. Airtel ranks second on the list, is the first telecommunication company to feature on the list. MTN follows at the 48th position. While Etisalat ranks 70th, and Globacom ranks 85th. Even NCC features in the list at the 61st position.
Though the report by NBS doesn’t state how this revenue is generated, it is obvious that it is generated from tax payments made by telcos, and from the numerous fines that telcos incur from NCC.

In 2015, MTN was fined a sum of ₦1.04 trillion, which was later reduced to ₦330 billion in 2016, after some interference and legal tussle. Though MTN is yet to complete the fine, as stipulated in the agreement between NCC and MTN, the payment of the ₦330 billion fine is to span throughout three years. Of recent MTN paid ₦30 billion of the fine. Another instance, in 2015, NCC fined all Nigerian mobile network operators ₦120.4 million each. And this is just two of many fines telcos have incurred from the NCC in recent years.

What has changed in the last decade?

It is quite surprising how telecoms have grown in contrast to a decade ago. In 2005, the Nigerian telecommunication sector had over 19 million subscribers. But at the end of 2016, it has grown to a total of 154 million.

The growth in the number of subscribers is due to factors such as, the decrease in the prices of sim cards, thanks to more telcos that joined the race. Long gone are the days when people purchased sim cards at ₦30,000. Sim cards have become affordable, such that, some people have two to three sim cards of the same telecoms network.

Also,  Chinese mobile brands have successfully flooded the Nigerian market with a variety of phones, at different prices, such that phones have become inexpensive. Even a white paper report on Nigeria Mobile trends 2017 by Jumia, reveals that the most purchased phone on Jumia eCommerce store in 2016 were the Chinese mobile brands, the likes of Infinix, Tecno, Innjoo much more.

Although there are several arguments going on globally about data as the new oil, and indeed it is, to an extent, judging from what can be done with Big Data if properly harnessed, the new status of the telecommunications sector ought to be praised. It is a reassurance that though, data accessibility is still a far goal, at least the country is on a right path.

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