If you’ve been keeping an eye on the Nigerian telecom industry, you might have heard the concerning news that Telecom operators are thinking about implementing load-shedding to manage their services. Why? Because they’re under a lot of financial pressure and are pushing for higher tariffs to stay afloat. Here’s a breakdown of what’s going on.
Telecom companies in Nigeria are finding it harder and harder to keep up with the costs of running their operations. Telecom operators in Nigeria are drowning in taxes. Believe it or not, the tax rate on these companies can be as high as 39%, according to a PwC report. That’s a huge chunk of their revenue going straight to the government, leaving them with less money to invest in improving their services.
Keeping their cell sites running isn’t cheap. With the unreliable power supply in Nigeria, these companies spend a fortune on diesel to keep generators running. They were promised 18 hours of daily power when telecoms started in 2001, but reality has been a far cry from that. On average, they get only 8-10 hours of power daily, meaning they’ve had to fill the gap with costly alternatives.
On top of that, telecom operators are dealing with unpaid debts from various clients and new rental charges for their infrastructure. These financial obligations are adding up and making it nearly impossible for them to cover their costs without making some tough choices.
So, why are they considering load-shedding? It’s about survival. Load-shedding, in this context, means telecom operators might start turning off some of their cell sites during less busy times to save on energy and costs. This could help them manage their resources better and keep things running, but it’s not a perfect solution. If telecom operators implement load-shedding, the quality of service could decline sharply. Load-shedding would likely result in reduced network coverage, slower internet speeds, and an increase in dropped calls. According to the Nigerian Communications Commission (NCC), Nigeria had over 156 million active internet subscriptions as of June 2023, with mobile data accounting for the majority. A reduction in service quality could severely impact these users, leading to widespread frustration.
Historically, Nigeria has faced issues with telecom service quality. The NCC has previously penalized operators for failing to meet key performance indicators (KPIs), including call completion rates and network availability. Introducing load-shedding could exacerbate these issues, potentially leading to more penalties and further eroding consumer trust.
On the other hand, raising tariffs might help telecom operators manage their financial burdens, but it could also lead to a significant backlash from consumers. A report from the World Bank highlights that nearly 40% of Nigerians live below the poverty line. For many, even small increases in telecom costs could strain their budgets, especially in a country where telecom services are increasingly essential for both personal and professional activities. Moreover, the 2023 edition of the GSMA’s “State of Mobile Internet Connectivity” report shows that mobile internet users in Nigeria already spend a significant portion of their income on data. Any increase in tariffs could push telecom services out of reach for lower-income users, leading to reduced access and potential digital exclusion for millions.
The Nigerian Communications Commission (NCC) knows these companies are under pressure but isn’t fully convinced that raising tariffs is the answer. They’re worried that increasing prices could make telecom services less affordable, especially for people who are already struggling to pay their bills.
Nigeria’s digital economy, which the government has been actively promoting, could suffer if telecom services become less reliable or more expensive. The National Bureau of Statistics (NBS) reported that the information and communications technology (ICT) sector contributed 17.92% to Nigeria’s GDP in Q1 2023. This growth is largely driven by the expanding telecom sector. However, load-shedding and higher tariffs could slow this growth. E-commerce, online education, remote work, and other digital services rely heavily on stable and affordable internet access. If telecom operators reduce service quality or raise prices, it could stifle innovation and growth in these areas, hindering Nigeria’s broader economic development.
While load-shedding and tariff hikes might provide short-term relief for telecom operators, they could also lead to long-term challenges. Operators might face regulatory backlash, especially if the NCC and consumer groups like the National Association of Telecom Subscribers of Nigeria (NATCOMS) resist tariff increases or if service quality declines sharply.
Also, if consumer satisfaction drops, operators could see a rise in churn rates, where customers switch to competing providers. Although the Nigerian telecom market is somewhat oligopolistic, with a few major players like MTN, Airtel, and Glo dominating, dissatisfied customers might still seek alternatives. The situation is still unfolding, but it’s clear that Nigerian telecom companies are in a tough spot. Whether they go through with load-shedding, hike tariffs, or find another way out, the industry is at a critical juncture. For now, all we can do is wait and see how this plays out, and hope it doesn’t end with us having to pay more for worse service.
