Experts in Nigeria Telco Industry Expresses Concerns Over Low Foreign Capital Inflow

The decline in Foreign capital inflow into the Nigerian telecommunications sector has heightened experts’ concern as the nation looks to deepen its broadband penetration.

In 2019, Nigeria’s telecommunications sector welcomed $942.8 million (N358.26 billion) in capital inflow. This amount declined by $525.4 million to $417. 5 million in 2020 while in 2021, the foreign direct investment into the sector was flat at $417.5 million, the same as in 2020.

In 2022, Nigeria’s economy recorded a boost in foreign direct investment to the tune of N23.982 billion ($57.79 million) in Q1 of 2022. Data obtained from the National Bureau of Statistics disclosed that the figure represents a 2.6 percent increase when compared to the same period last year.

Speaking on some of the reasons for low foreign capital inflow in Nigeria’s telecommunications industry, the President of the Association of Telecommunications Company of Nigeria (ATCON) and Chief Executive Officer of Medallion Communication Limited Engr. Ikechukwu Nnamani disclosed that Nigeria’s unfriendly foreign exchange is a limiting factor that has discouraged foreign investors. 

He added that foreign investors have bemoaned the contradictory regulations coming from the Central Bank of Nigeria (CBN), which they claim is discouraging them from making investments in Nigeria.

In his words, “It has been estimated that the country would require $100 billion in investments in the next 10 years to bridge the existing infrastructure gap in the telecom sector, but where is the money going to come from?

“The exchange rate situation in Nigeria is of serious concern for Foreign investors, they are not sure of what the situation would be by the time they want to repatriate their returns. Their returns on investments could be halved due to the fluctuations in the exchange rate. If we want to see investors, we have to first address the foreign exchange situation.”

Meanwhile the 5G network rollout in the country, was said to have reportedly increased foreign investments in the telecommunication sector. According to telecom experts, 5G is expected to headline network investment and drive foreign investment into the sector.

Investors King understands that MTN Nigeria and Airtel Africa which are considered the big players in the industry had their investments in the sector increase to N613.13 billion in 2022. While MTN spent a total of N504.33 billion on the network rollout, Airtel’s investment hit N108.79 billion ($236m) for the same purpose.

The 5G network is projected to contribute $2.2 trillion to the global economy by 2034, according to a 2020 GSMA Intelligence report, titled: ‘The Mobile Economy’.

Nigeria reportedly has one of the largest telecommunications markets in Africa, supported by the second largest economy on the continent after South Africa. In recent years, the telecom sector has benefitted from supportive regulatory measures aimed at improving competition and developing infrastructure. This has helped boost the country’s broadband sector, which remains strongly focussed on mobile connectivity.