Nigeria’s Telecom Sector Faces Declining Revenue as Currency Depreciation Hits ARPU“““““““““`
Nigeria’s telecommunications market has seen a significant downturn, with the average revenue per user (ARPU) falling by 38.79% in 2024. The decline, from $3.08 in 2023 to $1.89 by the end of 2024, is primarily attributed to the naira’s depreciation, which has caused financial strain on telecom companies operating in the country. The value of the naira has plummeted by about 70% since June 2023, adversely affecting businesses and eroding the profitability of telecom giants like MTN and Airtel.
Historically, Nigeria was the largest revenue generator for international telecom operators like MTN and Airtel. However, the continuous volatility in the foreign exchange market has diminished Nigeria’s position, leading MTN Nigeria to fall from its spot as the top-performing subsidiary in MTN Group to 11th place globally. The company reported a significant dip in ARPU in the last quarter of 2024, dropping by 35.42% compared to the previous year. Airtel Nigeria also faced challenges, with its ARPU shrinking by 75% in the same period.
As a result of these declines, telecom companies have been unable to cover their rising expenses, particularly those incurred in dollars. This financial strain has led to a reduction in network investments and a decline in service quality. MTN’s capital expenditure, for instance, decreased by 1.3% year-on-year, and Airtel allocated less for capital projects in the same period, marking a 7.8% drop. With operating costs continuing to outpace revenue, the Nigerian Communications Commission (NCC) approved a 50% hike in tariff prices to help operators stay financially viable.
Despite the tariff increases, which are expected to boost revenue and improve investments in infrastructure, there are concerns about the impact on consumers. The rise in costs is likely to reduce user spending and may affect overall telecom consumption, with many consumers struggling to adjust to higher prices amidst Nigeria’s rising living costs. Industry experts warn that while these adjustments will support operators’ ability to reinvest, the long-term effect on consumer behavior remains uncertain.
source: business day