*Agusto & Co credit ratings firm, in its 2021 Telecommunications Industry report, discloses Nigeria鈥檚 telecoms sector has attracted $3.9billion in portfolio and Foreign Direct Investments (FDIs), and projects the telecoms consumption pattern in the country is expected to be sustained in the near-term

*Report indicates the ongoing NIN-SIM verification exercise, however, reduces the industry鈥檚 active telephony subscriptions by 7.7 percent

Gbenga Kayode | 绿帽献妻

Sequel to key connectivity support the leading industry provides, Agusto & Co, a leading research, credit ratings, and credit risk management firm, in its 2021 Telecommunications Industry report has described the Nigerian telecoms sector as one of the country鈥檚 few bright spots in 2020 along with sectors, such as financial institutions, agriculture and health services.

绿帽献妻 reports the firm noted that between 2015 and 2020, Nigeria鈥檚 telecommunications sector attracted $3.9billion in portfolio and Foreign Direct Investments (FDIs) into the West African country.

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Agusto & Co. Limited is a pan-African credit rating agency and leading provider of industry research and knowledge in Nigeria & Sub-Saharan Africa.

In the report, the company also observed these investments accounted for an average of seven percent of Nigeria鈥檚 aggregate capital importation during the same period.

It disclosed that the industry has consistently remained one of the top five ranking economic sectors for foreign investments during the period.

According to the firm, following the key connectivity support the industry provides, telecommunications 聽together with other sectors, such as financial institutions, agriculture and health services, was one of the economy鈥檚 few bright spots in the economy last year.

Except during the 2016/2017 economic recession, the telecoms industry鈥檚 real growth has consistently exceeded the country鈥檚 Gross Domestic Product (GDP) growth, the report stated.

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Agusto & Co in the 2021 Telecommunications Industry report further projected that the 聽Nigerian Communications Commission鈥檚 (NCC) imminent deployment of 5G technology and the Federal Government of Nigeria鈥檚 Broadband penetration target of 70 percent by 2025 will support substantial additional FDIs in the near to medium term.

Impact of NIN-SIM exercise on telecoms sector鈥檚 growth pace

In spite of the fact that the telecoms industry鈥檚 real growth has consistently exceeded Nigeria鈥檚 GDP growth in the last five years, Agusto & Co, however, observed that the reported unstable macroeconomic environment in the country yet poses a huge challenge to successfully harnessing the huge potential of the telecommunications industry.

The report stated: 鈥淚n the span of five years (2016-2020), Nigeria has gone through two economic recessions while the Naira has continuously lost value against the world鈥檚 major currencies, negatively impacting purchasing power and the ability to maintain quality network equipment and services.

鈥淚n addition to the fragile macroeconomy, the telecommunications industry has also had its fair share of unfavourable regulatory changes through onerous tax regimes, delayed approvals and heavy regulatory penalties.鈥�

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Regulatory changes, with the commencement of the National Identification Number (NIN)-Subscriber Identity Module (SIM) verification exercise, drove a considerable decline in the industry鈥檚 growth rate to 6.3 percent in Q1 2021 from 17.7 percent in Q4 2020, said the firm.

According to Agusto & Co, in an attempt to complete the ongoing NIN-SIM exercise, the NCC mandated the suspension of SIM card activations and registrations, thereby slowing the industry鈥檚 growth pace in the country.

The report further said: 鈥淚n only four months of the NIN-SIM verification exercise, the industry鈥檚 active telephony subscriptions reduced by 7.7 percent from 204.5 million as at the end of December 2020 to 188.7 million at the end of April 2021.

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It noted in view of anticipated SIM deactivations for subscribers without valid NINs, the firm estimates that the subscriber base will shrink by three percent (year-on-year) by the end of 2021 to 198 million subscribers.

Mobile Internet consumers in Nigeria

鈥淗owever, due to the sustained uptake in mobile Internet services and increasing diversification of value-added services by telcos, we believe revenue will grow, albeit by a lower rate of five percent in 2021 (2020: 14 percent).

鈥淲e anticipate that logistics around the NIN-SIM verification exercise will be resolved by the end of 2021 and thus, double-digit top line growth should be restored by 2022,鈥� the report noted.

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The rating agency also stated that outbreak of the damaging Coronavirus (COVID-19) pandemic posed an extraordinary test for the entire global community, considering several social isolation measures mandated to curb the spread of the virus.

The telecommunications industry provided businesses and individuals with connectivity, which fostered resilience as the world grappled with the pandemic, according to the report.

The firm in the report stated that in Nigeria, the proportion of mobile Internet users to mobile phone subscriptions increased from 69.1 percent January 2020 to 75.4 percent as of December 2020.

Looking ahead

The firm expects the country鈥檚 telecommunications consumption pattern to be sustained in the near-term given lingering concerns around the emergence of COVID-19 variants.

Agusto & Co expects the challenges of the industry to remain with high business costs, against the backdrop of the consistent devaluation of the Naira, prevailing inflationary pressures and the adverse impact of regulatory changes.

The report added: 鈥淗owever, the industry鈥檚 outlook remains stable on the premise that telecommunications will provide recovery support to key economic sectors post-pandemic.

鈥淎nticipated business diversification efforts of operators will also support our outlook.鈥�

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