November 29, 2023/CSL Research
Based on data from the National Bureau of Statistics (NBS), the Information and Communications Technology (ICT) sector’s growth rate declined to a five year low of 6.69% y/y in Q3 2023 compared with 10.53% recorded in Q3 2022 and 8.60% recorded in Q2 2023. The sector contributed 15.97% to Nigeria’s total GDP, higher than 15.35% in Q3 2022 but significantly lower than the 19.54% contribution in Q2 2023. The ICT sector comprises of telecommunications and information services, publishing, motion picture, sound recording, music production, and broadcasting.
The y/y decline in the growth rate of the ICT sector was largely driven by the decline in the growth rate of the telecommunications subsector, which fell by 23.06% y/y to 7.74% in real terms. Broadcasting declined by 51.7% y/y in the quarter, contributing 4.45% to the overall performance of the ICT sector. The telecommunications sector has also been affected by the issues that the country’s economy is currently facing as reflected in dwindling industry
numbers. Mobile subscriptions have declined by 2.85% to 220.7m in August 2023 from 227.2m in February 2023 while teledensity is down 2.8% to 115.63% in August 2023 from 119.01% in February 2023.
The negative effects of the Naira devaluation and other government macroeconomic policies have impacted both the telco players and the purchasing power of subscribers. These policies have significantly impacted on the sector’s profitability while also lowering their capex intensity. However, we maintain our view that the ICT sector, which is predominantly driven by the telecommunications sector, is primed to grow, given the opportunities in the sector.
The launch of the 5G network and the continued growth of the 4G network will continue to drive growth. Also, we expect to see the fintech segment contribute significantly to total revenue in the medium to long term. Long-term growth in the telecommunications subsector will be driven by new technologies, increased smartphone usage, more digital consciousness, and increased collaboration with the financial services sector.
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