*Dr. Olayemi Cardoso, Governor of the Central Bank of Nigeria, urges telecoms companies to embrace backward integration to minimise reliance on foreign imports by locally producing key components of their inputs to strengthen the Naira, drive socio-economic progress, and ensure sustainability

Gbenga Kayode | 绿帽献妻

As the West African country intensifies efforts at diversifying the economy, the Central Bank of Nigeria (CBN) has urged telecoms companies to minimise their reliance on foreign imports by producing locally, key components of their inputs.

Dr. Olayemi Cardoso, Governor of CBN, highlighted this much in Abuja, FCT, while playing host to the Management team of Airtel Africa, led by Sunil Taldar, Group Chief Executive Officer (CEO) recently.

Cardoso also gave insights into what the Nigerian economy stands to gain from the backward integration drive, especially in the telecoms sector.

绿帽献妻 reports Cardoso’s submission during Taldar鈥檚 visit becomes consequential as more businesses and the entire economy strive for growth to encourage local production, to create jobs and boost Foreign Exchange (Forex) earnings.

It is also noted that application of backward integration initiative in telecommunications would strengthen the Naira and drive socio-economic progress across the West African country.

Analysts as well opined that the advocacy for backward integration in the telecoms sector of the economy is in tune with the much-needed sustainable growth in the real sector.

Despite current challenges in local manufacturing, experts yet believe it is crucial for a stable Naira and sustained economic growth, with the telecoms sector playing a key role in achieving these objectives.

Why MNOs should strive for economic growth, industry sustainability -Experts

As Nigeria faces a critical moment where promoting local manufacturing is more urgent than ever, experts opined that businesses, including the Mobile Network Operators (MNOs), and the entire economy should strive for growth and sustainability.

This move will encourage local production that will not only create jobs and boost foreign exchange earnings but also strengthen the Naira and drive economic and social progress in Nigeria.

The Bankers’ Bank, however, noted that achieving this goal requires a strategic balance, ensuring that key sectors, including telecoms, adopt backward integration, a model where companies source and produce essential materials locally rather than depending on imports.

Cardoso, however, emphasised the players in the key sectors of the economy need to rely less on imported raw materials for their operations to attain this lofty objective.

Significance of backward integration in telecoms industry, by Cardoso

Expatiating on the inherent benefits of applying backward integration in their operations, Cardoso stressed that local production would help to reduce pressure on the US Dollars, create jobs, and boost the country’s economy.

According to him, massive production of key inputs that are currently being imported, like Subscriber Identification Module (SIM) Cards, cables, and telecoms towers is essential.

The Governor of CBN noted over the past 16 months, the banking sector regulator has worked to stabilise the Foreign Exchange (Forex) market, strengthen the Naira, and attract investors.

With these improvements in place in the industry, Cardoso advised the Telcos to explore backward integration in the economy.

Besides the telecoms industry reforms, the CBN’s broader goal is making financial services more accessible to Nigerian consumers, especially in rural areas.

He unveiled plans for a high-level summit where the CBN and industry leaders would discuss ways to improve digital payments and financial inclusion in the Nigerian economy.

“The CBN is committed to ensuring that financial services reach more Nigerians, especially in rural and underserved communities.

“We aim to build a more inclusive and digitally-driven financial system,鈥� he stated.

Cardoso , therefore, assured Airtel, and other stakeholders in the country’s telecoms space of CBN’s commitment to creating a business-friendly environment that encourages competition, innovation, and wider access to financial services.

Speaking during the visit to the CBN, Taldar Airtel Africa鈥檚 CEO, applauded the Bank’s reforms and expressed support for local production in telecommunications.

This would benefit telecoms companies in the long run, said he.

The CEO Airtel Africa also reaffirmed the Telco’s commitment to expanding financial inclusion through technology in Nigeria.

Accompanying Taldar during the visit are Dinesh Balsingh; Group CFO, Jaideep Paul; and Femi Adeniran, Director of Corporate Communications and CSR of the company.

Stakeholders: Enhanced investments will accelerate backward integration in telecoms

In regard to CBN’s advocacy for听 backward integration in听 businesses, especially telecoms, Gbolahan Awonuga, Executive Secretary of the Association of Licensed Telecommunication Operators of Nigeria (ALTON), said besides MNOs, other key business owners and entrepreneurs could invest in the local manufacturing of key components in telecoms operations.

Awonuga reportedly stated: 鈥淲e have to look inwards and get Nigerian companies to produce these key components in telecoms operations locally.

“Government also has a role to play, by ensuring that key infrastructure, especially power is available.

“We do not want a situation where locally produced inputs will become more expensive than imported versions.鈥�

He emphasised the telecoms sector of the economy plays key roles in banking services, including enabling digital payments and ensuring security of transactions.

The Executive Secretary of ALTON affirmed the banking and telecoms sectors have more to gain, if backward integration thrives in the country.

The government has a significant role to play to make this move a success, stated he.

Charles Abuede, Research Head at Cowry Asset Management Limited, also said the CBN Governor鈥檚 call was to discourage the importation of foreign services into Nigeria, especially when efforts can be made to develop such services locally.

Abuede reportedly said: “The high demand for Foreign Exchange by telecoms operators has further pressured the Naira due to increased demand for the Dollar.

“However, with adequate infrastructure development and a conducive operating environment facilitated by regulators, these challenges can be mitigated.”

The analyst opined: 鈥淕iven Nigeria鈥檚 FX policies, illiquidity in the foreign exchange market, and infrastructure deficits, I think increased investment in the telecoms sector would enable operators to embrace backward integration.

“This would allow them to manufacture key components, such as SIM Cards, locally.

As a result, production costs could decline鈥攑rovided the operating environment remains stable.

“This will improve profit margins and enhance both top-line and bottom-line growth in the long run.”

NCC-led reforms and telecoms contribution to GDP Q4 2024, by NBS

According to the National Bureau of Statistics (NBS) Third Quarter (Q4) 2024 Gross Domestic Product (GDP) report indicated the Information and Communication sector, is made up of Telecommunications (telecoms) and Information Services; Publishing; Motion Picture, Sound Recording and Music Production; and Broadcasting.

It was gathered the sector recorded 14.51 percent (year-on-year) growth, which was 2.65 percent points higher than the rate recorded in the preceding quarter.

The sector contributed also 16.35 percent to the total real GDP, higher than in the same quarter of the previous year in which it represented 15.97 percent and lower than the preceding quarter in which it represented 19.78 percent, according to NBS.

Meanwhile, the NCC-led reforms in the telecoms sector are meant to align the sectoral guidelines with international best practices, and accommodate the rapidly changing technological landscape.

The NBS announced the capital importation data indicated the telecoms sector of the Nigerian economy attracted $191.5 million in Foreign Direct Investments (FDIs), indicating renewed confidence among foreign investors.

It noted the data indicated the Q1 2024 figure surpasses the total FDI of $134.75 million recorded in 2023.

Compared to Q1 2023, the sector saw a 769 percent year-on-year increase in capital importation, rising from $22.05 million to $191.5 million.

The transformation within the telecommunications sector was not just limited to a comparison with the previous year.

Comparing the Q1 2024 figure of $191.5 million to the $22.84 million recorded in the preceding quarter, Q4 2023, the sector demonstrated a 738 percent growth rate.

This remarkable rebound in FDIs has been attributed to a series of strategic measures implemented by the Nigerian Government, which aimed to enhance the telecoms sector鈥檚 appeal to foreign investors.

The CBN鈥檚 proposal would further put the sector on the path of growth and support for the domestic economy, report noted.

Experts, however, cautioned that a positive investment climate characterised by clear, fair, and well-enforced regulations should be entrenched for marked improvements in the sector.

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