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Broadband-N400bn GDP Growth Dividend for Nigeria

Nigeria is set to reap Gross Domestic Product (GDP) growth dividend of over N400 billion via Broadband by 2018 if the various stakeholders in the ICT industry get their acts together.

Mr. Mathew Willsher, Chief Executive Officer, Etisalat Nigeria, painted the rosy picture at the Commonwealth Broadband Forum 2015 hosted by the Nigerian Communications Commission (NCC) in Abuja. “Broadband is clearly no longer just a service but a critical economic enabler. It is therefore important that all stakeholders take necessary action to ensure that Nigeria’s Broadband is developed to its full potential.

Studies show that Broadband has the potential to drive GDP growth in excess of N400 billion between 2014 and 2018. But only if we get it right.” Willsher said the current industry structure is incapable of supporting the attainment of Nigeria’s Broadband development goals to fully achieve the expected GDP growth impetus by 2018.

“The inability of the majority of operators in the industry to achieve the scale necessary to support Broadband deployment is perhaps, the most critical challenge. Broadband involves considerable amount of fixed cost and struggling operators who, as a result of their size, are unable to attract the volume of reasonably priced, long-term funding required to deploy and operate Broadband infrastructure profitably, are leaving a major investment deficit which even an outsize incumbent is unable to fill.”

He said the resultant shortfall is underlined by Nigeria’s ICT investment as a percentage of GDP of 2.6% while the average for peer countries is 5.5%. The Etisalat Nigeria CEO noted for instance that while mobile Broadband penetration in Nigeria stands at 10.1%, the average figure for peer countries in Africa is 30%. In the same vein, while peer countries have an average smartphone penetration of 26%, Nigeria can only muster an average of 12%.

Also, in terms of mobile Broadband affordability, the Internet Society estimates that Nigerians spend 9.8% of their average GDP per capita to access Broadband while the average for peer countries is 4.3%. “Notwithstanding the appreciable progress in Broadband deployment in Nigeria, considerable effort is still required to move Nigeria towards its Broadband targets,” Willsher told delegates at the Forum.

“When benchmarked against peer countries, it is clear that there is a considerable gap between where we are and where we should be, given the size of our industry and economy.” He also noted the presence of struggling operators, many of whom are barely active, in an industry the size of Nigeria’s, which he said, is indicative of serious underlying issues with value distribution across the industry.

“Where is the industry value going to? Why are so many operators unprofitable amidst so much value available? Is there a need to provide tailor-made regulation to ensure that value is better distributed among operators in the industry?” He insisted that “inadequate Spectrum to Support Broadband Deployment is another key challenge in the provision of Broadband services in Nigeria”, saying that “mobile Broadband is clearly Nigeria’s best route towards achieving its Broadband coverage objectives, given the high cost associated with fixed Broadband.”

One notable drawback he did not overlook is the current value of the national currency. “Broadband equipment is largely manufactured outside the country and the recent devaluation of the Naira has greatly increased the cost of importing equipment. Related to this is the recent closure, by the Central Bank of Nigeria (CBN), of the Wholesale and Retail Dutch Auction windows, where telecommunications operators would previously have sourced foreign exchange to fund equipment purchases at lower rates.

Operators have therefore, been compelled to source foreign exchange at significantly higher rates through the interbank foreign exchange market which is mostly unable to meet demand. Moreover with very high cost of borrowing in Nigeria, funding capital investment from long-term instruments adds as much as 30% to the purchase price over the repayment term.”

On the way forward, Willsher said support for technology should be at the centre of the new government’s policy agenda. “Broadband, as the key enabler of technology diffusion to business, government and people, therefore has a direct impact on GDP growth. Policies which accelerate Broadband deployment are essential to success of the economy.”

He listed other factors as: buy-in to Smart State Initiative by States for nationwide Broadband deployment; passage of the Critical National Infrastructure (CNI) Bill to protect telecom equipment; avoid untimely increase in customs duty for imported SIMs; review of current industry structure to ensure equitable value among operators; non-duplication of investment in terms of infrastructure; expedite action on digital migration to free up the 700MHz band for use by the telecommunications industry and downward review of spectrum fees and USPF subsidies to drive last mile connectivity.

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