January 7, 2025/CSL Research
According to data from the National Bureau of Statistics (NBS), the growth rate of the Information and Communications Technology (ICT) sector slowed to 5.92% y/y in Q3 2024, compared to 6.69% in Q2 2024. On a q/q basis, however, the sector saw a slight improvement, rising from 4.44% in Q2 2024. Despite the y/y decline, the ICT sector’s contribution to Nigeria’s total GDP increased to 16.35% in Q3 2024, up from 15.97% in Q2 2023. However, this marks a decline from the 19.78% contribution recorded in Q2 2024. The ICT sector encompasses telecommunications, information services, publishing, motion picture, sound recording, music production, and broadcasting.
The year-on-year (y/y) decline in the ICT sector was primarily driven by a notable decrease in the growth rate of the telecommunications sub-sector, which fell to 6.78% in Q3 2024, down from 7.74% in Q3 2023 in real terms. Q/q however, the telecoms sub sector’s growth rate increased to 5.92% from 4.44% in Q2 2024. The y/y decline reflects the negative effects of the Nigerian Communications Commission’s (NCC) directive to disconnect subscribers whose SIM cards were not linked to their National Identification Numbers (NIN). However, there are signs of recovery within the sector, as evidenced by the quarter-on-quarter (q/q) growth.
According to the NCC, active mobile subscriptions dropped by 29.07% in October 2024, falling to 157.60 million subscribers from 222.19 million in the same period last year. Nevertheless, on a month-on-month (m/m) basis, active mobile subscriptions increased slightly by 1.74%, rising from 154.91 million subscribers in September 2024. This suggests that customers who were previously disconnected due to the NIN-SIM issue are beginning to reconnect their lines.
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 maintain that an upward adjustment to 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.
