September 3, 2024/CSL Research
Based on data from the National Bureau of Statistics (NBS), the Information and Communications Technology (ICT) sector’s growth rate has declined for the fifth consecutive quarter, reaching a five-year low of 4.44% y/y in Q2 2024. This represents a 48.38% drop from the 8.60% growth recorded in Q2 2023 and an 18.21% decline from the 5.43% growth in Q1 2024. Despite the slowdown, the ICT sector contributed 19.78% to the economy in Q2 2024, slightly higher than the 19.54% contribution in the same quarter of the previous year and the 17.89% in the preceding quarter. The ICT sector encompasses telecommunications and information services, publishing, motion picture, sound recording, music production, and broadcasting.
The y/y decline in the ICT sector’s growth rate was primarily driven by a significant slowdown in the telecommunications subsector, which saw its growth rate plummet by 53.07% y/y to 5.17% in real terms. Broadcasting also experienced a sharp decline, with its growth rate falling by 73.32% y/y to 1.52% during the quarter. The telecommunications sector has been particularly impacted by the broader economic challenges facing the country, as reflected in declining industry figures. According to the latest industry numbers released by the Nigerian Communications Commission (NCC), active mobile subscriptions declined by 3.03% in March 2024, dropping to 219.30 million from 226.16 million in March 2023. Teledensity, which measures active telephone connections per 1,000 inhabitants, also decreased slightly to 101.16% in March 2024 from 118.48% in March 2023.
Telecom operators in Nigeria are facing rising operational costs, driven by the devaluation and scarcity of foreign exchange, which has put significant pressure on their profitability. The surge in energy costs, inflation, and a challenging foreign exchange environment have strained their profit margins. To address these challenges, telecom companies are advocating for tariff adjustments that better reflect their increasing costs. An upward revision of tariffs appears necessary to protect their margins and ensure the sector’s continued growth and sustainability. Without such adjustments, the financial health of these operators could be jeopardized, potentially limiting their ability to invest in infrastructure and new technologies.
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