SBM Warns of Telecom Sector Collapse Without Urgent FX Access, Policy Reform

SBM Intelligence, a leading research firm, has raised alarms over the deteriorating state of Nigeria’s telecommunications sector, warning that without immediate foreign exchange (FX) prioritization and stronger government intervention, the industry may collapse. In its new report titled “Signal Strength: The Past, Present, and Future of Nigerian Telecom,” SBM highlighted the sector’s strategic role in Nigeria’s economy and urged the federal government to act swiftly.

The telecom sector, which contributed 14.4% to Nigeria’s GDP in Q4 2024, is facing macroeconomic turmoil marked by rising operational costs and a severe shortage of FX for importing critical infrastructure. Telecom giants like MTN have had to increase tariffs drastically to cope, a move described as “an absolute necessity” by MTN CEO Karl Toriola. He revealed that while revenue grew by 30% in 2024, operational costs surged by 96%, threatening business sustainability.

SBM’s report paints a grim picture: over 70% of telecom infrastructure is imported, and the depreciation of the naira has made equipment costs unmanageable. Additionally, the cost of diesel used to power over 40,000 base stations has risen from N200-N300 to N1,200 per litre. The sector also faces 41 different taxes and excessive Right-of-Way fees, further hindering growth and access.

Despite these challenges, the telecom sector remains crucial to Nigeria’s digital ecosystem, having grown from fewer than 300,000 mobile lines in 2001 to over 160 million today. It employs over 2.3 million people and has facilitated financial inclusion through mobile banking. However, security issues persist, with widespread vandalism of telecom infrastructure due to poor policy enforcement and lack of designated protection agencies, even after a presidential directive.

The ongoing review of the Nigerian Communications Act (NCA) 2003 is seen as a necessary step to modernize the regulatory framework, reduce telco burdens, and promote sector sustainability. SBM Intelligence stresses that Nigeria’s telecom future depends on balancing regulation, industry viability, and consumer access. The report concludes with a stark message to the government: failure to act now could derail both economic progress and digital inclusion goals.

Source: The Sun