October 10, 2023/CSL Research
The Nigeria Bureau of Statistics capital importation data showed the telecoms sector attracted investments worth US$25.81m in Q2 2023 compared to US$153.50m in Q2 2022, representing a significant decline of 83.19% y/y. Quarter on quarter, foreign capital inflow into the telecoms sector increased by 17% in Q2 2023 when compared with the US$22.05 million investments recorded by the sector in Q1 2023. The NBS data also revealed that the telecoms sector accounted for 2.51% of the total capital inflow into the economy in Q2. We note that there was a decline in Nigeria’s total capital importation in Q2 2023 to US$1.03bn, lower than US$1.5bn recorded in Q2 2022, indicating a decrease of 32.9%y/y. Quarter on quarter, capital importation declined by 9.04% from US$1.13bn in Q1 2023.
The telecommunications sector has also been affected by the issues that the country’s economy is currently facing, as seen by dwindling industry numbers. In Q2 2023, the sector growth rate declined to 9.74% from the 11.71% recorded in Q1 2023, while contributing 16.06% to the aggregate Real GDP. According to the Nigerian Communications Commission (NCC), teledensity, the number of active telephone connections per 1,000 inhabitants living within an area, declined to 115.63% in August 2023 from 115.70% in July 2023. Broadband penetration also declined to 45.57% from 47.01%, while mobile subscriptions declined to 220.72 million from 220.86 million.
We observe that players in the sector are currently facing several issues, one of which is the issue of multiple taxation, a key factor deterring investments in the sector. According to the Chairman of the Association of Licensed Telecommunications Operators of Nigeria (ALTON) Engr. Gbenga Adebayo, telecoms operators are currently paying a total of 39 taxes and levies as governments at different levels in the country continue to introduce various charges. We also note that exchange rate instability, scarcity of forex, and high levels of inflation are other factors currently discouraging investments into the sector
