Decline in Telecom Investment May Hurt Other Sectors- Rewane
Mr Bismarck Rewane, managing director/CEO, Financial Derivatives Company Limited (FDC), has warned that the Nigeria’s telecommunications sector, is fast losing its spark, a situation that will adversely affect remote banking services, improved accessibility and customer service.
Rewane, who disclosed this in the latest edition of the Lagos Business School breakfast session, attributed the decline to economic challenges, inflation, exchange rate pressures, regulatory burden, right-of-way conundrums and multiple taxations crunching the once vibrant sector.
According to him, industry players have consistently shown positive top-line performance over the years but have experienced slower growth in the last two years.
“Bottom-line performance, hampered by huge FX losses and squeezed margins, slow pace of profit growth gradually weighs on shareholder’s value and investor sentiment,” he said.
Although the sector’s growth outperforms annual Gross Domestic Product (GDP) growth, after discounting for inflation, it becomes evident that the sector is stagnating as revenue and margins decline.
Despite the current turbulence the telecoms sector faces, there is still hope, mainly because of the strong linkages with other critical and job-elastic sectors of the economy, including manufacturing, agriculture and trade.
Rewane hinted that the way out is to boost aggregate telecom investment that had shrunk 47percent since 2021, crippling market efficiency and growth, stressing that the regulatory landscape and macro-fundamentals must be supportive to incentivise investments.
He cited India for instance is the second largest telecom market in the world with a market size of $44billion, adding that the country’s massive reforms and investments in the sector supported the growth and 2021 spectrum auctions alone fetched a record-breaking amount of approximately $10.5 billion, indicating the high level of investment and competition in the sector.
National Digital Communications Policy (NDCP) of India aims to attract $100 billion investment in the telecoms sector in four years.