Foreign investment in Nigeria’s telecommunications sector plunged to a historic low in the third quarter of 2024, with capital importation dropping to just $14.4 million.
This is an 87% decrease compared to the $113.42 million recorded in the second quarter, according to the latest report from the National Bureau of Statistics (NBS). Year-on-year, the sector experienced a 77% decline from the $64.05 million recorded during the same period in 2023.
This steep decline results from continued challenges in the industry, despite earlier signs of recovery. In the first quarter of 2024, the sector recorded $191.5 million in capital inflow, representing a 769% increase from the $22.05 million received in the first quarter of 2023. However, this initial revenue was not sustained, as foreign investments dropped sharply in subsequent quarters.
Telecom Sector’s $191.57m Q1 2024 FDI Growth Excites Bosun Tijani
Long-standing Issues Affecting Investments
The telecommunications sector, essential to Nigeria’s economy, has been challenged with foreign exchange instability, high operating costs, and infrastructural deficits. Industry stakeholders, including the Association of Licensed Telecommunications Companies of Nigeria (ALTON) and the Association of Telecommunications Companies of Nigeria (ATCON), have repeatedly called for government intervention to address these issues.
ALTON’s Executive Secretary, Gbolahan Awonuga, has noted the adverse effects of multiple taxation, unstable forex rates, and Right of Way (RoW) charges on the sector. He noted, “Until these issues are resolved, we are unlikely to see consistent growth in investments.”
Similarly, Engr Ikechukwu Nnamani, CEO of Digital Reality and former ATCON President, stressed the need for a stable policy environment to attract foreign investors. “Policy consistency and economic stability are key to restoring investor confidence,” he stated, adding that the fluctuating exchange rate has discouraged potential investments.
Declining Telecommunications Investments Over the Years
In 2022, the NBS reported that the telecom sector attracted $399.9 million in investments, a 47% decrease from the $753 million recorded in 2021. While the 2021 figures were a recovery from the COVID-19-induced slump in 2020, they were still lower than the $942.8 million recorded in 2019.
This decline has led to reduced capital expenditure (CAPEX) by telecom operators. In 2022, the industry’s CAPEX fell by 30% to ₦785 billion from ₦1.1 trillion in 2021. Experts warn that without significant investment in network expansion and infrastructure optimisation, the sector’s growth could stagnate.
Nonetheless, the telecommunications sector remains a cornerstone of Nigeria’s economy, highly contributing to the country’s GDP and providing essential services to millions. However, the rising inflation and the lack of adequate investment threaten its sustainability.
Stakeholders are urging the government to create a more conducive environment for business. Measures such as stabilising the forex market, reducing operational bottlenecks, and incentivising infrastructure development are seen as critical to reversing the investment decline.
The drop to $14.4 million in Q3 reveals that without sufficient capital inflow, telecom operators face severe limitations in upgrading networks and expanding connectivity, leaving millions of Nigerians underserved. If urgent measures are not taken, the consequences could extend beyond the telecom sector, affecting the broader economy.
Reversing this trend doesn’t just require policy reforms but also collaboration to create a stable, investor-friendly environment. Failure to address these systemic challenges could result in a stagnated telecom industry, hampered innovation, and diminished service quality.
