Growth in the telecommunication sector slowed in the third quarter of 2023, following the increasing impact of high inflation and the foreign exchange unification policy.
In the quarter under review, the contributions of the sector, in real terms, declined by N219.97 billion. This is a 8.38 per cent quarter-on-quarter decline and coincides with the increasing foreign exchange loss recorded by telcos.
Despite the decline, the telecoms sector spurred the country’s economic growth in Q3, 2023.
During the period, telecoms contributed N2.63tn to real GDP, a slight decrease from the N2.85tn it recorded in Q2, 2023.
Nigeria’s GDP grew by 2.54 per cent (year-on-year) in real terms in Q3 2023, driven largely by the service sector (that includes telecoms), which recorded a growth of 3.99 per cent and contributed 52.70 per cent to the aggregate GDP.
Commenting on the growth of the Information and Communication sector, which constitutes telecoms, the National Bureau of Statistics said, “The sector in the third quarter of 2023 recorded a growth rate of 6.69 per cent in real terms, year-on-year.
“From the rate recorded in the corresponding period of 2022, there was a decrease of 3.84 per cent points. On a quarter-on-quarter, the sector exhibited a growth of -10.30 per cent in real terms.
“Of total real GDP, the sector contributed 15.97 per cent in the 2023 third quarter, higher than in the same quarter of the previous year in which it represented 15.35 per cent and lower than the preceding quarter in which it represented 19.54 per cent.”
The growth of the telecoms sector in recent years is evidenced by its sustained contributions to GDP. However, a challenging macroeconomic environment is now threatening this.
Record high inflation has reduced purchasing power and a currency reevaluation has cut margins.
In the first nine months of the year, MTN Nigeria and Airtel Africa (the only two telcos publicly traded) lost N479 billion to currency revaluation and recorded reduced profit margins.
On its part, Airtel recorded a loss of $13m. The firm said, “Loss after tax was $13m driven largely by a foreign exchange loss of $471m recorded in finance cost before tax and $317m after tax because of the devaluation of the Nigerian naira in June 2023. This impact has been classified as an exceptional item.”
Commenting on the challenges of the operating environment in the firm’s nine-month financial statement for the period ended 30th September 2023, MTN Nigeria Chief Executive Officer, Karl Toriola, said, “The operating conditions in the first nine months of 2023 remained tough. This was in line with expectations following the removal of the fuel subsidy, the currency devaluation due to the liberalisation of foreign exchange (forex) management, and the impact of the 2023 Finance Act.”
He highlighted that consumer spending power had been diminished by the upward pressure on overall inflation.
He added, “This is supported by the government’s reform programmes aimed at creating an environment that enables businesses to thrive. Furthermore, the liberalisation of the forex management in June 2023 resulted in a 68.5 per cent upward movement in the exchange rate from N461/$1 in December 2022 to N777/US$ at the end of September, resulting in higher cost of doing business.”
Both MTN and Airtel strongly believed that the recent economic challenges in the country would bear long-term benefits.
However, the Federal Government intends to increase its revenue from the telecommunications industry by 100 per cent between now and 2027 and has set a target of 22 per cent contribution to GDP by the end of 2027.
