Business

Assessing ICT/telecom’s contribution to GDP

The second quarter 2020 Gross Domestic Product (GDP) released by the National Bureau of Statistics (NBS) further highlighted the critical role of information and communication technology in the economy. While stakeholders have hailed the development in the sector, they want government to do more in the area of policy to sustain current growth. SAMSON AKINTARO reports

Amidst a general downturn in the economy aggravated by the outbreak of coronavirus, the information and communications technology sector contributed 17.83 per cent in the second quarter. This was boosted by activities in the telecommunications sub-sector, which share of the GDP contribution stood at 14.30 per cent in the quarter under review. At a period most sectors came out negative, the ICT sector, in the second quarter, recorded a growth rate of 15.09 per cent in real terms, year-on-year. Compared to the rate recorded in the corresponding period of 2019, this was an increase of 6.09 per cent points. According to the National Bureau of Statistics (NBS) data, quarter on quarter, the sector exhibited a growth of 20.32 per cent in real terms. Telecommunications’ contribution to the economy in the second quarter translates to N2.272 trillion, up from N1.821 trillion in the first quarter of the year. Economic experts note that the performance of telecom was not unexpected as it remained the only active sector when the economy was shut down in the second quarter due to the coronavirus (COVID-19) pandemic. Interestingly, it is expected that the growth will be sustained as telecommunications remains a major driver of the economy even before the pandemic.

ICT as the new ‘oil’

Over the last few years, the ICT sector has been projected to replace oil and gas as the main source of revenue for the country. And with the second quarter performance where ICT’s contribution surpassed that of oil and gas, the projection appears to have come to reality. Out of the four activities under the ICT sector, telecommunications’ 14.30 per cent contribution far exceeded 8.93 per cent contributed in the quarter by the oil and gas sector.

Stakeholders react

While attributing the second quarter performance of the ICT sector to the sound regulatory environment enthroned by the Nigerian Communications Commission (NCC), stakeholders in the industry have called for strategic policy measures to sustain the growth. Reacting to the development, Chairman of the Association of Licensed Telecoms Operators (ALTON), Gbenga Adebayo, thanked all industry players for their resilience and consistency of purpose. Adebayo hinged the growth on so many factors, including the investorfriendly policy and regulatory environment championed by the leadership of NCC, the commitment of all stakeholders, consistent investment in network maintenance and expansion, and sacrifice by sector operators. To sustain this growth, the ALTON chairman said the country should continue to invest in network expansion and maintenance operations, access to foreign exchange to procure network critical equipment, consistency in policy, and policy environment. Adebayo said there should be access to spectrum and friendly policies around its allocation, assignment, and cooperation between the stakeholders. Also speaking, President, Association of Telecommunications Companies of Nigeria (ATCON), Mr. Olusola Teniola, said: “Telecoms industry has remained bullish owing to the quality of leadership at the helm of affairs at the Commission.” He added that NCC had become a reference point in the telecoms regulatory ecosystem in Africa and beyond. Also, President of National Association of Telecoms Subscribers of Nigeria (NATCOMS), Adeolu Ogunbajo, said the proactive regulatory approach of Danbatta had helped made telecoms “the oxygen that keeps economic activities afloat during the lockdown, and consumers are appreciative of the fact that the Commission, working with its supervising ministry, didn’t allow the consumer to suffer serious disruption to quality of service and quality of experience.”

Positive outlook

Meanwhile, financial experts have projected more growth for the sector amidst the peculiar challenges of infrastructure in the country. According to investment analysts at Afrinvest, while there is an immediate worry over other sectors due to the impacts of the scourge, the telecoms sector is expected to remain resilient as the digital economy boomed during the lockdown implemented to fight the virus. Afrinvest, in its telecommunications industry report, noted that the industry had remained the fastest-growing, the most resilient, and the largest contributor to the country’s economic growth. Mobile subscriptions, especially for data, have been on a steady in-crease over the years but became astronomic in the last three months of the pandemic. According to data from the Nigerian Communications Commission (NCC), data subscriptions in the country stood at 146.7 million as of July this year. The researchers at Afrinvest, however, said that despite this, the sector was not at its full potential yet given weak broadband penetration and the huge prospects for mobile money under the right regulatory framework. “These opportunities drive our optimistic outlook for the sector despite weak macroeconomic conditions,” they said. “With regulators loosening previously rigid rules and providing to telcos an even better opportunity to deliver financial services, we see another pathway for strong growth reminiscent of historical levels in the medium-term,” they added.

Record growth

Despite challenges, Afrinvest noted that the growth of telecoms in Nigeria had been explosive at a CAGR of 31.8 per cent between 2000 and 2019, driven by reforms that liberalised the sector and attracted foreign and domestic investment. According to the analysts, “from negligible 0.1 per cent contribution to GDP in 1999, before the adoption of GSM, the sector’s contribution to the GDP has risen to 10.3 per cent in 2019, with nominal GDP rising 200.0x from N26.3bn to N7.4 trillion. “Interestingly, the sector has been the fastest-growing at a normalised average (excluding 2000 2001) of 34.9 per cent between 2000 and 2010 before moderating to average growth of 4.6 per cent from 2011 to 2019.”

More investments required

Highlighting opportunities for growth in the sector, Afrinvest noted that with broadband penetration relatively low in Nigeria compared with peers such as South Africa and Egypt, more investments would be required as there are significant earning prospects. “Currently, the Average Revenue per User (ARPU) of our coverage companies remains weak relative to levels in other peer countries such as South Africa and Egypt. We believe platforms of operators can be leveraged to catalyse change in other sectors, especially financial services, and deliver enhanced earnings performance,” it said. Afrinvest added that the major pressure point for the industry had been regulation, with NCC’s heavy regulatory fines and policies to ensure fair competition restraining the growth of some major players. “Similarly, regulation has restricted the expansion into other business lines with strong prospects such as financial services, unlike in markets like Kenya and South Africa. We believe the speed and flexibility of regulation would shape the trajectory of growth and investment in the sector,” the investment advisors observed.

Last line

With the growth recorded so far despite the poor infrastructure, the potential for ICT to drive the economy remains huge. However, the potential could only be realised in full with the implementation of the right policies aimed at addressing the current infrastructure challenge in the sector

 

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