October 10, 2024/CSL Research
The Nigeria Bureau of Statistics capital importation data showed the telecoms sector attracted investments worth US$ 113.42m in Q2 2024 compared to the US$25.81m recorded in Q2 2023, a significant increase of 439.46% y/y. However, Quarter on quarter, foreign capital inflow into the telecoms sector decreased by 40.79%, down from US$191.57m recorded in Q1 2024. The NBS data also revealed that the telecoms sector accounted for 4.35% of the total capital inflow into the economy in Q2. We note that Nigeria’s total capital importation reached US$2.60 billion, a significant increase of 152.81% compared to the US$1.03 billion recorded in Q2 2023. However, this was a 22.85% decline from the US$3.38 billion reported in Q1 2024.
Despite the y/y investment gains witnessed, the sector continues to grapple with economic challenges, as reflected in declining industry metrics. The sector’s GDP growth rate fell to 5.17% in real terms in Q2 2024 from 9.74% the previous year. According to the latest industry numbers released by the Nigerian Communications Commission (NCC), active mobile subscriptions saw a decline of 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 saw a slight decrease to 101.16% in March 2024 from 118.48% in March 2023.
High energy expenses, inflationary pressures, and the challenging foreign exchange landscape have been limiting growth in the sector. The devaluation and scarcity of foreign exchange have placed significant strain on the profitability of companies within the sector.
Despite these challenges, the long-term outlook for Nigeria’s telecommunications sector remains optimistic. This optimism is fuelled by the increasing adoption of advanced technologies, a largely untapped internet market, an underserved rural population, and favourable demographics. As Africa’s largest mobile market, the Nigerian telecom industry presents attractive growth opportunities, making it a prime destination for investment despite these short-term hurdles.
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