The telecom sector is finally receiving the tariff increase service providers have been seeking for over a decade and Dr Bosun Tijani, minister of Communications, Innovation and the Digital Economy has revealed that it will be a 60% increase.
Phone calls will now cost N18.33 per minute, SMS rising to N6.67, and a 1GB data bundle now priced at N479.17.
This increase will affect daily communication and data usage, especially for Nigerians already hit with inflation and high costs of living.
Users could increase reliance on platforms like WhatsApp and others for calls and messages but what about those without smartphones?
Well, let’s break down the proposed tariffs and analyze their financial impact on consumers and businesses.
The Breakdown of New Tariffs
The proposed 60% tariff increase will apply across mobile services, with the following adjusted costs:
- Phone Calls: The cost of making phone calls will jump from N11 to N18.33 per minute, a rise of N7.33 (66.5% increase).
- SMS: The price for sending text messages will increase from N4 to N6.67, a jump of N2.67 (66.75% increase).
- 1GB Data Bundle: The cost for 1GB of mobile data will increase from N287.5 to N479.17, an increase of N191.67 (66.67% increase).
These increases already show a considerable burden on consumers, especially considering the price elasticity of demand for mobile services. With these hikes, consumers may need to adjust their usage patterns, reducing their reliance on mobile communication or exploring more affordable alternatives.
Mathematical Analysis of the Impact
To better understand the financial impact, let’s apply a few calculations to daily telecom expenses based on average usage:
- Phone Call Costs: If a user spends 30 minutes per day on calls:
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- Current cost: 30 minutes × N11 = N330 per day
- New cost: 30 minutes × N18.33 = N550 per day
- Increase: N550 – N330 = N220 increase per day
- Annual cost increase: N220 × 365 = N80,300 annually
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- SMS Costs: If a user sends 10 SMS messages daily:
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- Current cost: 10 messages × N4 = N40 per day
- New cost: 10 messages × N6.67 = N66.70 per day
- Increase: N66.70 – N40 = N26.70 increase per day
- Annual cost increase: N26.70 × 365 = N9,745.50 annually
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- Data Bundle Costs: If a user purchases one 1GB data bundle every 3 days:
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- Current cost: N287.5 × 122 = N35,075 annually
- New cost: N479.17 × 122 = N58,472.74 annually
- Increase: N58,472.74 – N35,075 = N23,397.74 increase annually
Cumulative Impact on the Consumer
Taking the average consumer who spends on calls, SMS, and data bundles:
- Total annual cost increase for calls, SMS, and data:
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- Calls: N80,300
- SMS: N9,745.50
- Data: N23,397.74
- Total increase: N80,300 + N9,745.50 + N23,397.74 = N113,443.24 annually
For an average Nigerian, this could wildly stretch their monthly budget. With over 200 million mobile subscribers in Nigeria, this surge in prices could splash through the economy, affecting consumer spending, business operations, and digital accessibility for underserved communities.
How will this Affect the Economy?
This telecom tariff increase will likely hit low-income individuals and small businesses hardest, as they rely on affordable communication to maintain both personal and professional interactions. The costs could lead to:
- Reduced Digital Access: With higher data costs, individuals may limit their online presence, curtailing opportunities for education, remote work, and e-commerce, thereby deepening the digital divide.
- Business Strain: Small businesses, particularly those relying on mobile phones for customer interactions and mobile banking services, may face increased operational costs, prospectively slowing down economic growth.
- Increased Costs of Living: Since mobile communication is a key aspect of daily life in Nigeria, higher telecom charges could contribute to an overall rise in the cost of living, making it harder for Nigerians to cope with inflation.
Conclusion and Recommendations
The proposed telecom tariff increase of 60% will undoubtedly add really high financial stress on consumers. While the government and telecom operators argue that the increase is necessary to sustain the industry due to high costs of operations, the burden on Nigerians could have far-reaching effects.
To mitigate the impact, the government could consider implementing subsidies for low-income users, promoting digital literacy, and investing in infrastructure that reduces the cost of telecom services.
Ultimately, it all boils down to the country’s economy and a balance from the government.
