May 28, 2024/CSL Research
According to data from the National Bureau of Statistics (NBS), the Information and Communications Technology (ICT) sector’s growth rate has declined for the fourth consecutive quarter, reaching a five-year low of 5.43% y/y in Q1 2024. This represents a 47.39% decrease from the 10.32% growth rate recorded in Q1 2023 and a 14.26% decline from the 6.33% growth rate in Q4 2023.
Despite this decline, the ICT sector contributed 17.89% to Nigeria’s total GDP in Q1 2024, up from 17.47% in Q1 2023 and 16.66% in Q4 2023. The ICT sector includes telecommunications and information services, publishing, motion picture, sound recording, music production, and broadcasting.
The y/y decline in the ICT sector was largely driven by a significant drop in the growth rate of the telecommunications sub-sector, which fell by 46.81% y/y to 6.23% in real terms. This
decline reflects the impact of Nigeria’s economic challenges and the negative effects of the Nigerian Communications Commission’s (NCC) directive to disconnect subscribers whose SIM cards are not linked to their National Identification Numbers (NIN).
According to the NCC, active mobile subscriptions decreased by 3.03% y/y in March 2024, dropping to 219.30 million from 226.16 million in March 2023. Additionally, teledensity, which measures active telephone connections per 1,000 inhabitants, also decreased from 118.48% in March 2023 to 101.16% in March 2024.
Telecom operators in Nigeria are facing significant challenges, especially due to rising operational costs. These challenges are exacerbated by the devaluation and scarcity of foreign exchange, which has severely impacted the profitability of major telecom operators.
To address these issues, telecom companies are advocating for tariff adjustments to better reflect their costs. We believe that an upward adjustment in tariffs is essential in the short term to protect profit margins and ensure the continued growth of the sector.
Despite these current difficulties, we maintain a positive medium to long-term outlook for the telecommunications subsector, driven by the adoption of new technologies, increased smartphone usage, greater digital awareness, and increased collaboration with the financial services sector.
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