Nigeria’s ISPs under pressure as soaring operation costs threaten digital ambitions

Joy Agwunobi

Once a luxury, now a necessity, the internet has become the lifeblood of modern society. From real-time communication across countries to learning online, it has become  a vital tool for millions around the world.  Despite this digital revolution, Nigeria’s Internet Service Providers (ISPs) find themselves struggling to provide the reliable and affordable internet services that their customers crave.

According to reports, the rising costs of building and maintaining the necessary infrastructure – from fibre optic cables to cell towers,adding to the soaring costs of power, security, and maintenance, has piled on to the ISPs’ already hefty burden, leading to a situation where these expenses are inevitably passed down to consumers. The result is a digital divide, where the Internet – once a great equaliser – becomes a luxury that many Nigerians simply cannot afford.

The rising cost of doing business has dealt a crippling blow to Nigeria’s internet service providers, with 146 companies being forced to shut down their operations, according to a recent report from the Nigerian Communications Commission (NCC). The report revealed that the  loss of over half of the ISPs licensed in Q4 of 2023 has left only 106 active ISPs, casting a pall over the country’s digital landscape and raising fears about the implications for consumers and businesses alike

Despite the importance of ISPs in providing internet connectivity and achieving the National Broadband Plan (NBP 2020-2025), the companies have lamented that the high cost of operation in Nigeria has posed a significant survival challenge for their businesses. The cost of acquiring, upgrading, and maintaining physical assets, as well as the high cost of right of way (RoW), security concerns in the country’s northern region, and various taxes, have all contributed to the inactiveness of ISPs.

The mounting pressure on Nigeria’s ISPs has led industry experts to call on the government to step in, with a raft of measures being proposed to alleviate the burden on these critical companies. From tax relief on imported equipment to protection from harassment by area boys, police, and estate agents, experts see multiple avenues for the government to support these struggling businesses. At the same time, they urge ISPs to innovate and form strategic partnerships with key players, in a bid to boost their revenues.

Chidi Ajuzie, chief operating officer of WTES Projects Limited, noted that the past two years have been challenging for ISPs, with lots of damage done to infrastructures, particularly in Lagos state. He highlighted key challenges facing ISPs, including vandalism, competition, tariffs, taxes, power availability, and cost.

Ajuzie said this sub-sector needs regulatory support in terms of licensing issues, spectrum availability and price, inter-sector policies framework, Right of Way intervention, human security and safety at the plants.

According to the technology and business expert,  silos are a major obstacle to the ISPs in Nigeria, consuming both operational expenses (OPEX) and capital expenditures (CAPEX). He pointed out that the federal government needs to enact laws to protect critical telecommunications infrastructure. While the ISP business in Nigeria is viable, he emphasised the need for government support at the federal, state, and local levels to create an enabling business environment. 

Specifically, he stressed the need for government support in areas such as licensing issues, spectrum availability and pricing, inter-sector policies framework, Right of Way intervention, and ensuring human security and safety at infrastructure sites.

Dwelling further on the issue, Ajuzie stated that ISPs need to be highly innovative, going beyond typical connectivity by embracing value added services and providing solutions on fibre infrastructure. He added that ISPs must understand their market and take informed, deliberate steps to increase their revenue turnover. According to him, collaboration is crucial for ISPs to successfully operate across all tiers, and they need to find key players to partner with for wider broadband reach and cost savings.  He highlighted further the need for ISPs to consolidate and expand their serviceable footprints, monetise and stabilise existing infrastructure, provide End-to-End solutions and services, and focus on end-users’ wallets.

Furthermore, Ajuzie  stated  that ISPs should explore other areas to sustain their business, suggesting that they leverage open access rollouts and partnerships, reduce legacy capital and operational expenditures, expand their serviceable footprint, consolidate multi-vendor maintenance, reduce risk and high costs, and maintain integration for end-to-end broadband, among other strategies.

On his part, Martins Akingba, chief operating officer of eStream Networks Limited, explained that connection to the internet is challenging for several local providers, who are competing in a market where other players have access to foreign support in terms of funds and expertise 

Akingba noted  that the federal government has recognised the importance of broadband penetration in reducing data costs, and has set a target of achieving 70 per cent  broadband penetration to cover 90 percent  of the population by 2025. He commended the government for taking a step in the right direction by reducing the right of way tariff to N150 per metre, which will facilitate the attainment of this goal.

Kenny Joda, head of sales at FibreOne Broadband, also acknowledged that the federal government has provided assistance to ISPs to enhance broadband penetration in Nigeria.

However, he noted  some states like Lagos are yet to comply with this directive ,as they still charge ISPs as much as N1500 per metre as against N150, which is a hindrance to their operations. 

Joda appealed to state governors to adhere to the federal government’s directive which is aimed at promoting the growth of the broadband industry. He also urged the government to take additional steps to support  ISPs including reducing taxes on imported equipment.  He expressed optimism that by doing so, the government would be able to create a conducive environment for ISPs to operate and expand their services.