Business

ICT: Hope for startups amidst shrinking connectivity

One key positive development in Nigeria’s Information and Communication Technology (ICT) sector in the last six months was the continued attention being received by the country’s tech startups. The period, however, marked a reversal of fortune for the telecoms market as the operators continued to lose subscriptions. SAMSON AKINTARO reports

Until December last year, Nigeria’s telecommunications market was acclaimed to be the fastest- growing in Africa and even worldwide. This was based on the consistent increase in active connections being recorded on monthly basis by the telecom operators. But with the events of the past six months, Nigeria cannot be said to be in that position anymore as the monthly growth in subscriptions flipped to consistent losses. Between December 2020 and May 2021, data released by the Nigerian Communications Commission (NCC) revealed that the four mobile network operators in the country, MTN, Airtel, Globacom, and 9mobile had lost a total of 20.8 million subscriptions. The loss was the result of a fourmonth ban on new SIM registration by the Federal Government amidst the implementation of the NIN-SIM integration policy of government. The perennial disagreement between banks and telecom operators over the use of Unstructured Supplementary Data (USSD) also erupted in the first half of the year, throwing Nigerians who are customers of both parties into a frenzy, until a reprieve was achieved. However, it was not all doom and gloom for the ICT sector in the first half of the year. Nigeria’s young technology companies attracted more funding within the period than they did throughout last year.

Connectivity loss

As of November 2020, active mobile subscriptions in Nigeria stood at 207.5 million. This was at the time the telecom operators were recording over a million new connections every month. But that changed in December 2020 when government imposed a ban on new SIM registration. According to government, the suspension, which took effect on December 9, 2020, is to allow a proper audit of the SIM registration database to ensure that all mobile lines in the country are properly registered. From December last year to May this year, the mobile network had lost 20.8 million connections. By the end of May, total active subscriptions across the networks had shrunk to 186.6 million. With the steep decline in the number of active mobile connections, the country’s teledensity, which measures the number of active telephone connections per 100 inhabitants living within an area, also declined from 108.92 per cent in November 2020, to 97.98 per cent in May 2021. Although the ban was lifted on April 19 with a condition that new SIM buyers must present the National Identification Number (NIN), NCC data showed that the losing streak continued until May, while June data was yet to be released as of the time of filing this report.

Broadband penetration decline

While the telecoms regulator, NCC, had successfully implemented the National Broadband Plan 2013-2018 in such a way that the 30 per cent target was surpassed by December 2018, stakeholders said the government’s recent interventions in the sector is casting a shadow of doubt over the current Plan, NBP 2020-2025, in which government sets a 70 per cent penetration target. Contrary to the plan, which seeks to increase the number of Nigerians connected to broadband service each month, the country consistently recorded a decrease in the number of broadband users from December 2020 through to May this year. According to the industry data, between December 2020 and May 2021, the telecom operators had lost a total of 10.4 million broadband subscribers.

Telcos vs banks

Again, the lingering tussle between the telecom operators and commercial banks came into the limelight in the first half of this year as the telecom operators threatened to disconnect the financial institutions from their Unstructured Supplementary Service Data (USSD). The disagreement, which first came to public knowledge in 2019, centred around payment for the services rendered to bank customers through the telecoms infrastructure. While the banks had, last year, proposed an end-user billing to the telecom operators, thereby shifting their responsibility of paying for the service to the costumers, the telecom regulator forbade the telcos from charging the customers. The impasse between last year and this year led to an accumulated debt of over N42 billion, according to the telecom operators. This prompted the threat to withdraw access to the use of USSD from banks with effect from March 12, 2021. However, an intervention of the Minister of Communications and Digital Economy, Dr. Isa Pantami, in collaboration with the Central Bank of Nigeria and the NCC averted service withdrawal, which would have negatively affected millions of bank customers and telecoms subscribers and disrupted the financial industry.

More funding for tech start-ups

Meanwhile, smarting up from the impact of COVID-19, which caused a dip in investments last year, the Nigerian tech start-up echo system began the year on an impressive note, attracting series of funding from foreign investors. Within a month, two leading fintechs in the country had raised close to $200 million in investments. First was Flutterwave, which announced that it has closed a $170 million deal, which raised the company’s value to over $1 billion. New York-based private investment firm Avenir Growth Capital and U.S. hedge fund and investment firm Tiger Global led the Series C round. Thereafter, Kuda Bank raised $25 million in a Series A round to continue to provide a modern banking service for Africans and the African diaspora. The funding round was led by New York-based venture capital, Valar Ventures, with participation from existing investor Target Global, an international venture capital firm headquartered in Berlin, Germany, and several other existing investors. With the series of funding received in the first half of the year, industry analysts said the startups have surpassed the value of investments they received throughout last year and more investments are still being expected as young Nigerians continue to come up with innovative ideas.

SpaceX in Nigeria

In what came to be another positive development in the tech space during the period under review, a delegation from SpaceX, an American aerospace manufacturer and space transportations services company, in May, visited NCC and made a presentation to the Commission on their plans to deploy their satellite service in Nigeria. The visit of the American company and its interest in the Nigerian market marked another landmark development in the country’s quest to achieve 70 per cent broadband penetration by the year 2025 as set out in the National Broadband Plan 2020-2025. SpaceX, which had already launched several satellites into spacee, is in the process of launching a low-earth orbiting (LOE) constellation of satellites to provide low latency, high bandwidths Internet to all corners of the globe and has identified Nigeria as a critical market. Incidentally, the service being proposed for the Nigerian market is to be targeted at the urban areas, thus increasing the competition among existing and new service providers.

Last line

While the ICT sector had underperformed in the first half of the year going by the declining connectivity an decrease in contribution to the country’s GDP, it is hoped that things will get better in the second half of the year as the industry players recover from the impact of the unfavourable government policy.

 

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