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Nigerian mobile network operators have committed to utilizing proceeds from a proposed 100% tariff increase for significant infrastructure upgrades and service quality improvements. This agreement forms part of ongoing discussions between the telecom companies, the Nigerian Communications Commission (NCC), and the government.
The NCC, acting as the telecom regulator, will monitor and enforce compliance to ensure that the planned investments are executed effectively. Dr. Karl Toriola, MTN Nigeria’s Chief Executive Officer, disclosed these details in a column published in BusinessDay.
Challenging Economic Conditions Prompt Tariff Review
Telecom operators are grappling with an increasingly challenging operating environment, driven by volatile naira-to-dollar exchange rates and inflation currently at 34%. According to the operators, their running costs have soared by over 300% in the past 18 to 24 months, necessitating a tariff adjustment to maintain the sector’s long-term sustainability.
Despite the rising costs, operators have been hesitant to invest further in infrastructure due to economic pressures. Consequently, telcos are proposing a tariff increase, sparking public backlash. Subscribers have expressed outrage over the proposal, with some threatening legal action if the NCC approves it.
Balancing Tariff Increases and Consumer Concerns
Dr. Toriola emphasized that any tariff increase would be capped and remain lower than price hikes in other sectors such as energy and oil. He stated that discussions with the government have focused on achieving a balance between affordability and the need to fund network improvements.
“The proposed tariff increases will be capped and significantly lower than the price hikes in other sectors,” Toriola wrote. “These increases are linked to mandatory investments in network upgrades and service enhancements, which the NCC will oversee to ensure compliance.”
Decline in Foreign Investment Highlights Sector Challenges
The telecom sector has experienced a sharp decline in foreign investment, with inflows dropping to $14.4 million in Q3 2024, an 87% decrease from the $113.42 million recorded in Q2. This downturn underscores the sector’s struggles with infrastructure deficits and escalating operating costs, despite its considerable growth potential.
Commitment to Industry Sustainability
Toriola expressed confidence that aligning tariff increases with investment commitments would provide the telecom sector with the resources needed for sustainable growth. He highlighted the benefits of higher prices, including better network performance, improved customer experiences, and enhanced services, all of which would drive further growth.
He also lauded the government’s decision to implement a sustainable tariff regime, describing it as essential for the digital economy’s continued progress. “We have consistently demonstrated our long-term commitment to Nigeria,” Toriola said. “We remain steadfast in our belief in Nigeria’s potential and are dedicated to continuing our investments in the country.”
Industry Perspectives
Airtel Nigeria’s CEO, Dinesh Balsingh, echoed Toriola’s sentiments, noting that the proposed tariff adjustments are necessary for the sector’s sustainability and long-term benefits for Nigerian consumers.
“For over a decade, tariffs have remained static despite a dramatic 300% surge in operating expenses over the past 18 to 24 months. To meet the growing demand for digital connectivity and maintain high-quality services, it is essential to realign pricing structures with current economic realities,” Balsingh stated.
The combined efforts of the government, NCC, and telecom operators aim to ensure that the proposed tariff adjustments lead to tangible improvements in Nigeria’s telecom infrastructure, paving the way for a more robust digital economy.
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