April 26, 2023/United Capital

Data from the National Bureau of Statistics revealed that active voice and internet subscriptions grew by 13.9% y/y and 9.1% y/y to 222.6mn and 154.8mn, respectively, in Q4-2022. The bureau disclosed previously that the Telecommunications & Information Services sub-sector grew by 10.7% in real terms in 2022. The sector contributes heavily to the Nigerian economy; asides from the taxation revenues (Company Income and Value Added Taxes from the information and communication sector have grown by 41.1% y/y in H2-2022 to 319.0bn with between c. 25.0%  to 40.0% of this attributed to the Telecomms sector.) and the Licensing fees (MTN, Mafab and Airtel paid a total of $863.9mn to the Nigerian Communications Commission for their 5G licences) the sector remains a catalyst for economic growth.

The consistent growth in the sector can be attributed to internet penetration and “leapfrogging” in the sector. In addition, collaboration and commitment by both government and private stakeholders. The government has reiterated its commitment to the sector, disclosing that it is targeting 70.0% broadband penetration by 2025. It has continued introducing efficiency-improving and growth initiatives such as harmonising shortcodes and reducing Right of Way charges by 90.0% to N14.5 for telecommunications operators who want to deploy broadband infrastructure in green areas. Private operators MTN Nigeria and Airtel Africa investments in infrastructure rose to N613.13bn in 2022, underpinned by capital expenditure in 5G and 4G.

We envisage the Telecommunications sector will continue on its current growth trajectory, especially in the internet and payment services space. According to the global Findex database, as of FY-2021, c.55.0% of Nigerians had no accounts in any financial institution, and less than 10.0% of adults had mobile money accounts as compared to the Sub-Saharan Africa average of c. 45.0% without accounts and c. 33.0% of adults with mobile money accounts. The sub-sector is poised to be one of the few sectors expected to improve significantly in Q1-2023 as more Nigerians were incentivised to switch to the cashless modes of payments during the “cash crunch”.