From the periphery, it could be said the capital inflow means the sector would have a continued flourishing end, but foresight tells us there is a need for certain policy shifts and in-depth management, to sustain the tempo of FDIs.

Opportunities

The increase in FDIs positively impacts Nigeria’s digital transformation agenda, with the government’s target of connecting at least 70% of the population to broadband by 2025. 

To achieve this, Nigeria requires an estimated $3.4 billion in investments for fibre infrastructure and the Federal Government has launched a Special Purpose Vehicle (SPV) to spearhead this expansion, aiming to deliver an additional 90,000 km of fibre optic cable. 

This initiative aims to connect over 200,000 educational, healthcare, and social institutions across the country.

The probable economic impact of these investments cannot be overstated. Increased connectivity is expected to drive internet penetration beyond 70%, reduce internet access costs by more than 60%, and contribute to a 1.5% GDP growth per capita. 

This could see Nigeria’s GDP rise from $472.6 billion in 2022 to $502 billion within the next four years. Early indicators of the SPV’s effectiveness are positive, with 30,000 km of new fibre optic cables already laid and a 10% increase in internet penetration since its launch. 

Added to this, some regions have seen internet costs drop by up to 30%, boosting business efficiency and consumer access to digital services.

The Fragility beneath the Surface

While the opportunities are many, there are risks that could undermine these successes, causing adverse effects across Nigeria’s economy. 

Hillson’s ‘Practical Project Risk Management’ (2012) defines risk as uncertainty affecting outcomes. In financial contexts, Black and Scholes’ ‘The Pricing of Options and Corporate Liabilities’ (1973) and the PMBOK Guide (2017) note that “risk is an inherent part of doing business.”

A good way to understand these risks is to examine strategies of successful business leaders. Richard Branson and Aliko Dangote, for example, have both emphasized the necessity of taking calculated risks. 

In an interview with Forbes, Dangote noted, “To be successful, one needs to be able to take risks and make bold decisions,” which resonates with Branson’s view that “risk is an inherent part of doing business.”

According to records, in 2023, global business failures surged due to inflation, economic uncertainty, and supply chain issues. The U.S. reported 157,000 closures, up from 140,000 in 2022, while the UK saw around 18,000 insolvencies, a rise from 16,000. In Europe, Germany experienced a 10% increase in corporate bankruptcies.

Back home in Africa, business failures also increased, with Nigeria seeing about 12,000 closures, South Africa experiencing an 8% rise, and Kenya facing over 8,000 failures. Egypt encountered rising closures due to economic reforms and currency devaluation.

These statistics tell us about the fragility of the global and regional business environment, where even seemingly powerful sectors are not immune to failure. 

The Nigerian telecommunications sector, despite its supposed boom, faces several high risks that could deter future investments and potentially lead to a downturn.

Key among these risks is regulatory and policy fluctuations. Frequent changes in regulations can create an unpredictable business environment, making it difficult for investors to commit long-term. 

The consequences could include investor flight, as frequent changes in regulations may deter foreign investors, leading to a decline in FDIs inflows. Compliance with new regulations can be expensive, resulting in increased operational costs for telecom operators, while regulatory changes may disrupt existing services, negatively impacting customer satisfaction and business operations.

Again, multiple taxation by various government agencies increases operational costs, reducing profitability for telecom operators. 

The issue of Right of Way (RoW), where inconsistent policies across states make it cumbersome and expensive to lay fibre optic cables, also poses a serious challenge.

Another vital risk factor is Nigeria’s unreliable power supply. Telecom operators are forced to invest heavily in backup power solutions, further inflating operational costs. 

Interconnection settlement disputes among telecom operators, which can lead to service disruptions and financial losses, add another layer of risk.

Economic instability, denoted by fluctuations in exchange rates and inflation, is perhaps the most disturbing issue. 

Inflation has greatly impacted the sector in 2024, driving up the cost of imported equipment and operational expenses. This has put huge pressure on telecom operators to maintain profitability, with many calling for tariff increases to offset rising costs. 

However, in a price-sensitive market like Nigeria, higher tariffs could dampen consumer demand, creating a vicious cycle that threatens the sector’s growth.

Adding to these economic challenges is the unending insecurity and social unrest. The issues of terrorism, banditry, and kidnappings in Nigeria is gradually creating an environment that can deter foreign investors.

The fear of potential attacks and the safety of personnel and assets have put fear in the minds of people.

This insecurity can lead to increased costs for businesses, such as higher insurance premiums and the need for private security, which can reduce the attractiveness of Nigeria as an investment destination.

As inflation rates increase, the cost of living becomes more expensive for the average citizen, leading to a huge burden. These protests have disrupted business operations, supply chains, and overall economic activity.

For foreign investors, such disruptions can mean delays, increased operational costs, and uncertainty about the stability of their investments.

The unpredictability of these protests makes it challenging to plan long-term investments, further discouraging FDI.

If these risks are not addressed, the outstanding profits made in attracting FDIs could quickly unravel. As MTN’s CEO and other industry experts have warned, a lack of adequate returns due to these challenges could lead to a reduction in future investments. 

This would not just slow down the expansion and improvement of telecom infrastructure but could also lead to investors withdrawing altogether, potentially causing a collapse of the sector. 

Such a collapse would have far-reaching consequences, threatening the stability of other sectors that rely heavily on telecommunications, from finance to healthcare.

The resilience of Nigeria’s telecom sector is fixed on how well these risks are managed. While the opportunities are huge, the challenges are equally huge. 

It will require a joint effort from all stakeholders — government, private sector, and investors — to develop and implement sustainable strategies that ensure the sector’s continued growth and resilience.

In conclusion, the influx of FDIs in 2024 is a positive sign, but it is not a guarantee of success. Strategic risk management, clear regulatory frameworks, and a stable economic environment are essential to ensuring that Nigeria’s telecom sector survives and thrives in the years to come. 

The decisions made today will determine whether the sector remains a huge contributor to the country or becomes another casualty of unmitigated risks.

The Fibre Forward Strategic Development Project, a $2 billion initiative, aims to expand the country’s fibre-optic infrastructure by a commendable 90,000 kilometres.

Undoubtedly, this is a potential game-changer for internet connectivity, economic growth, and digital inclusion in Nigeria. But do we see prospects of monopolies, last-mile challenges, and overall effectiveness? Well…

In recent years, Nigeria has had a big shoot in digital transformation initiatives, and the Fibre Forward Strategic Development Project is definitely one of them. 

However, as with any large-scale infrastructure project, there are both pros and cons.

Can Nigeria Deliver?

Nigeria has a mixed history with large-scale infrastructure projects like the Ajaokuta Steel Mill launched way back to make Nigeria self-sufficient in steel production, among many others. 

Delays and mismanagement were issues with past projects. These experiences leave some of us pondering on the feasibility and efficiency of the Fibre Forward Strategic Development Project.

Nevertheless, under the leadership of Bosun Tijani, the minister of Communications, Innovation, and Digital Economy, careful planning, and effective project management are expected to mitigate such risks.

It’s interesting to note that the Fibre Forward Strategic Development Project isn’t funded through borrowing, but relies on a $2 billion Special Purpose Vehicle (SPV) initiative. While this approach avoids immediate burdens on national debt, potential indirect tax implications are factors to consider, leading to issues about long-term fiscal impacts.

Impact on Local ISPs

The impact on local Internet Service Providers (ISPs) is another important consideration. Will the Fibre Forward Strategic Development Project empower them or squeeze them out? The project’s structure could inadvertently create a dominant player, weakening competition and innovation in the telecom space.

Therefore, a solid regulatory framework is important for Fibre Forward’s success. It must safeguard against anti-competitive practices, ensuring a level playing field for all ISPs and stakeholders. 

A single entity controlling the fibre backbone could act as a gatekeeper, dictating terms to service providers (ISPs) and potentially limiting competition. 

Key measures to curb this include mandating open access to the fibre network to facilitate competition and implementing strict antitrust regulations, ultimately preventing monopolistic behaviours and protecting smaller ISPs.

Combining Terrestrial and Submarine Cables

It needs to be emphasized that the crux of a robust internet backbone is the combination of terrestrial fibre optic cables and submarine cables.

While submarine communications cables are used to connect countries and continents to the Internet, terrestrial fibre optic cables are used to extend this connectivity to landlocked countries or to urban centres within a country that has submarine cable access. 

Thus, in most of the world, a large number of such cables exist, often amounting to robust Internet backbones.

Meanwhile, the lack of such high-speed cables poses a great problem for most African countries. Therefore, the construction of both submarine cables and their terrestrial extensions is considered an important step towards economic growth and development in many African countries.

For record purposes, the list of terrestrial fibre optic cable projects in Africa currently includes, but is not limited to, Algeria, Angola, Benin, Botswana, Burkina Faso, Burundi, Cameroon, and Chad. Others are Côte d’Ivoire, the Democratic Republic of Congo, Ghana, Guinea, and Kenya, among others.

It is important to note that some of the terrestrial fibre-optic cables are managed by private organizations and government entities. For instance, Mascom started operations in 2013, and by 2018, it announced it would be laying Botswana’s first fibre-to-the-home service.

In Burkina Faso, Group Vivendi Africa, Onatel, and Orange S.A are major drivers of the terrestrial fibre-optic infrastructure. Onatel came on board in 2020 and is run by the state, while Orange S.A surfaced in 2021.

Stepping away from the terrestrial and submarine stories, the efficacy of telecommunication power or the internet, with its attendant ability to create opportunities and an ecosystem of employment for the teeming unemployed and under-employed Nigerians, is essential.

Private vs. Public

The argument has been raised: should this all-important project be driven solely by the Federal Government of Nigeria, or should the Federal Government co-opt industry practitioners?

Taking a cue from Mrs. Funke Opeke, the chief executive officer of MainOne [now, an Equinix], she noted that Nigeria is yet to make maximum use of its cable capacities. According to her, Nigeria has utilized less than 5% of its cable capacities, and the same applies to other cable operators such as Glo 1 and MTN WACS.

She lamented a situation where Nigerians have more than enough broadband capacities from the three cable operators, which is not being utilized in a country of over 160 million persons.

According to Opeke, broadband capacities remained low on the shores of the country, with less than 10 percent utilization. 

She, however, said the fibre optic cable operators were able to reduce the cost of bandwidth. When compared to other African countries, Opeke said Kenya and Tanzania have gone far in internet access penetration because the governments of those countries built a nationwide infrastructure fibre optic cable backbone and allowed the private sector to run it at a determined low cost, ensuring that every Internet Service Provider (ISP) has equal access to available broadband capacities.

It is on record that so far, the eight subsea cables that have landed in Nigeria include MainOne cable with a capacity of 10 Tbps; ntel’s SAT-3 with 800 Gbps; Globacom’s GLO-2 (12 Tbps); Africa Coast to Europe Cable System with a capacity of 5.5 Tbps; WACS (14.5 Tbps); Equiano (144 Tbps); the Nigeria Cameroon Submarine Cable System (NCSCS) with a capacity of 12.8 Tbps; and 2Africa (180 Tbps).

As referenced above, investment in terrestrial fibre-optic infrastructure has often been a function of combined efforts between the government and private sector, with the government setting the pace, securing critical infrastructure, and regulating operations. We believe the Federal Government of Nigeria should involve industry investors and professionals to give the vision the necessary drive it deserves.

Pricing and Accessibility

Another vital point of emphasis regarding our subject of discussion is the centrality of pricing and access. 

One of the sprawling effects of the 90,000 kilometres of fibre optics infrastructure, among others, is a technological boost, job creation, and the technological empowerment of the nation. This already mirrors an affordable pricing system and accessibility, which are key.

According to Surfshark, a cybersecurity company, Nigeria has one of the most unaffordable internet services in the world. It was ranked 119th for mobile Internet affordability out of the 121 countries surveyed. While the top ten European countries on the list only have to work for an average of 36 minutes, compared to Nigeria’s 175 minutes, to afford mobile Internet. However, the country’s rank for quality Internet is one of the highest in Africa.

The survey revealed that Nigerians have to work for one and a half days (over 35 hours) to afford the cheapest broadband Internet in the country. For context, that is 119 times more than in Romania, which has the world’s most affordable broadband Internet. People in Romania have to work for only 18 minutes to afford the cheapest broadband Internet in the country.

Where Africa’s most populous country ranked 99th globally for mobile Internet affordability, Angola held an impressive fourth position, South Africa ranked 63rd, Botswana ranked 61st, and Ghana was in 96th position.

In addition to the subject matter of affordability and pricing, which we hope the Federal Government of Nigeria will address squarely, it is also important to realize that factors such as infrastructure investment, regulatory environment, technological advancements, access to international bandwidth, economic factors, and operational and maintenance costs are determinants in setting the pace for the price mechanism. We believe these will be adequately taken care of through the balancing and alignment of the federal government’s lofty ideas, industry professionals’ insights, and current economic realities.

Security and Privacy of Data

Closely related to the above is the recurring question of security and privacy of data. An increase in connectivity will automatically pose higher risks to the people. The question begging for an answer, therefore, is, are these challenges pre-empted by the Federal Government of Nigeria? 

For instance, 2021 data from the Nigeria Inter-Bank Settlement (NIBSS) noted that Nigerian banks lost N3.5 billion between July and September 2020 to fraud-related incidences, representing a 534% increase from the same period in 2019, when it was N522 million.

Meanwhile, the Financial Institutions Training Centre (FITC) record also indicated that the N2.09 billion loss recorded in Q4 was a 77.58% increase compared with N1.18 billion lost by the banks in Q3 2024. It also revealed that a total of 12,405 cases of fraud were recorded in Q4 2024. When compared to the 12,066 cases in Q3, this shows a 2.81% increase.

According to Ayotunde Coker, CEO of Open Data Access Centre (OADC), there is an increasing number of submarine cables, which means a lot of big data will be captured and will require massive storage capacity. This is responsible for the renewed deployment of capital into hyperscale mega data centres in the country.

The companies currently building hyperscale data centres in Nigeria include Kasi, Rack Centre, and OADC. Kasi Cloud Limited began construction of its hyperscale or Tier IV data centre, modelled after the Silicon Valley technology parks, in 2022. The facility, worth $250 million, will be located in Lekki, Lagos, and is expected to go live in 2024. Rack Centre, a Tier III data centre company, started building a 12-megawatt IT data centre at Ikeja, Lagos in 2023. The data centre is situated on a 20,000-square-meter greenfield site and sits at over 30 meters above sea level.

The construction of OADC’s hyperscale data centre began in 2022. The company is building a data center with a capacity of 24 megawatts of power. “You will see that from the end of this year, the facilities with hyperscale spec will become available, almost like every quarter into the year after. It is like the tipping point is happening,” Coker said. 

Before now, most investors have built Tier III data centres, the second-highest certification in the Uptime Institute’s system of classifying data centre performance into four tiers. Tier III data centres, such as MainOne Data Centre and Rack Centre, offer additional reliability over Tier II in the form of N+1 redundancy and multiple power and cooling distribution paths.

Hyperscale data centres have much larger capacities and infrastructure. These facilities are massive business-critical facilities designed to efficiently support robust, scalable applications and are often associated with big data-producing companies such as Google, Amazon, Facebook, IBM, and Microsoft. Hyperscale data centres usually exceed 5,000 servers and 10,000 square meters.

While South Africa built the first hyper-scale data centre in sub-Saharan Africa seven years ago, in Nigeria, companies like Google, Microsoft, and Facebook store some of their data with data centres like MainOne. With the proliferation of data, therefore, comes the attendant problem of privacy and security, many of which have been mentioned above.

“Data is the new oil,” said British mathematician Clive Humby. This cannot be stressed enough. In today’s digital age, data is indispensable for the survival of any company, business, or entity.

That’s how important data has become for everyone. Steve Jobs, the visionary founder of Apple Inc., articulated his views on data privacy in 2010, defining it as “…means people know what they’re signing up for, in plain English and repeatedly.” With Nigeria’s exponential growth of the internet, which has sparked a surge in the demand for data within the Nigerian digital sphere, it is important to note that over 84 million out of Nigeria’s 200 million citizens have access to the internet. Hence, data has become a critical asset for every business operating in Nigeria. 

However, the collection and storage of data present numerous challenges all over the world, including Nigeria.

For instance, in June 2023, a new data protection bill was signed into law by the Nigerian president, which legalized the regulations set by the Nigeria Data Protection Regulation (NDPR). However, like most laws, these regulations are continually evolving, which can become a challenge for businesses and digital companies to keep up with compliance.

Interpreting and implementing these regulations can be challenging even with the aid of a good lawyer, particularly for small and medium-sized companies with limited resources. There is also the issue of user consent and transparency. Additionally, data breaches are a major concern. In Nigeria, where internet cyber fraud, commonly referred to as “Yahoo Yahoo,” has become rampant, fending off cyber-attacks has grown increasingly challenging. Data breaches, often resulting from cyber-attacks like malware, phishing scams, and ransomware, have become all too common.

Consequently, service providers and product owners bear significant financial burdens due to the need to hire additional personnel to strengthen product security, provide comprehensive customer support to aid users in dealing with attacks and educate them on the importance of safeguarding their passwords.

In essence, as long as cybercriminals persist in exploiting product vulnerabilities and taking advantage of customers’ ignorance and naivety, data privacy will continually face a formidable threat. But what are the ways out of these teeming challenges? Since we cannot stop the proliferation of data, we can embrace regulatory compliance, implementation of data policies, regular audits, and user consent and transparency among other measures.

It’s important to note that transparency in decision-making and pricing structures is essential to build trust among investors, service providers, and the public alike. In this regard, Bosun Tijani’s inclusive approach to the Fibre Forward Strategic Development Project, and governance is commendable, enabling confidence and accountability among Nigerians.

The new funds were received from two unnamed investors who channelled the capital through a special purpose vehicle (SPV) named OpenAI Startup Fund SPV III, L.P, per reports.

This is the third time the OpenAI Startup Fund has utilized an SPV for fundraising purposes.

Earlier fundraising efforts saw the Fund close on $10 million for its first SPV in February 2024. The company followed this up with an additional $15 million secured last month through its second SPV.

Public filings with the U.S. Securities and Exchange Commission (SEC) revealed that the OpenAI Startup Fund had commitments totalling $175 million last year and the fund had a gross net asset value of $325 million earlier in 2024.

While operating as a corporate venture capital unit, the Fund relies on external limited partners for capital. One such partner is Microsoft, a longstanding collaborator and investor in OpenAI.

The Fund has actively invested in at least 16 AI startups. Some notable names include Harvey, Ambiance Healthcare, and the humanoid robotics firm Figure AI. 

It’s worth noting that the Fund also previously backed Ghost Autonomy, an autonomous driving company that ceased operations in April 2024.

The OpenAI Startup Fund’s continuous fundraising efforts target the growth of early-stage AI companies. This latest round of funding is likely to be directed towards supporting new investments within the growing field of artificial intelligence.