Tariff hike advocacy sows seeds of discord in Nigerian telecom sector

Joy Agwunobi

A controversial proposal for a tariff hike in Nigeria’s telecom sector has intensified debate between operators and stakeholders, with telecom giants adamant that higher tariffs are critical to remain competitive and maintain profitability in the face of escalating operational costs. However, the decision to approve the proposed increase is yet to be made, leaving the industry’s future profitability and the daily lives of millions of Nigerians in limbo.

As the telecom sector contends with mounting pressure to balance long-term sustainability with the needs of consumers, the inherent tension highlights the fragility of Nigeria’s previously lauded regulatory success story. Even as the sector boasts an impressive track record of expansion and significant contributions to the economy—accounting for 16.36 percent of GDP in Q2, as per NBS data, the pressing challenge of addressing mounting operational costs in a manner that does not negatively impact consumers remains unsolved.

The Nigerian telecom sector has earned its status as Africa’s leading ICT market, with statistics by the Nigerian Communications Commission (NCC) indicating that the country accounts for a huge percent of the continent’s total telecom subscribers and 29 percent of its total internet usage.

Behind the triumphs of Nigeria’s flourishing telecom industry lies a formidable array of challenges that threaten to destabilise its future. From security concerns to the burden of multiple taxation, the telecom sector faces a diverse set of obstacles ranging from inadequate infrastructure and Right of Way (RoW) disputes to inconsistent power supply and fluctuating macroeconomic conditions. These issues, coupled with the exorbitant costs associated with repairing frequent fibre cuts, have made it increasingly difficult for telecom operators to sustain their services, putting the industry’s resilience to the test.

The sector’s many struggles have not gone unnoticed, prompting repeated demands to categorise it as a “critical national information infrastructure”, with a correspondingly heightened level of protection against sabotage and vandalism. In recognition of these concerns, the government recently issued an official gazette titled “Designation and Protection of Critical National Information Infrastructure Order, 2024”, which seeks to deter cable damages and vandalism by introducing stricter penalties and providing greater security for telecom operators and their investments.

While these measures represent a crucial step in addressing the sector’s immediate concerns, the underlying debate about the sustainability of the telecom industry persists. As cost pressures continue to mount, regulatory bodies and operators have intensified their push for tariff hikes, arguing that increased charges are necessary to offset growing operational costs.

For over a decade, major mobile network operators such as Airtel, MTN, 9mobile, and Glo claimed to have maintained their pricing structures despite the mounting pressures of inflation and currency devaluation. While other sectors like food, oil and gas, electricity, transportation, healthcare and manufacturing have adjusted prices in response to economic conditions, telecom operators have largely kept their rates unchanged.

This has led to growing tensions between the telecom regulator and operators, especially after stakeholders requested a 40 percent  increase in the cost of voice calls, SMS, and data services in 2022 due to rising diesel prices and other operational costs.

Operators argued that the financial pressures are becoming unsustainable, with rising fuel costs increasing the expense of running diesel-powered generators, which are crucial in a country plagued by frequent power outages. Additionally, the weakening naira has made it more expensive to import essential technology and equipment needed to maintain network quality.

Unfortunately, despite these challenges, telecom operators continue to face strong resistance from both the public and the NCC whenever tariff increases are proposed.

For many Nigerians, the prospect of higher telecom tariffs is deeply concerning, as telecom services have become a necessity, not a luxury, for daily activities ranging from business transactions to personal communication.

Gbenga Adebayo, chairman of the Association of Licensed Telecommunication Operators of Nigeria (ALTON), has been at the forefront of the need for a tariff increase, noting  the increasing  costs that telecom operators are facing. He pointed out that the cost of telecom equipment has tripled over the years, while the expenses for diesel, electricity, and transportation continue to rise. These challenges, Adebayo said, are making it increasingly difficult for telecom operators to maintain the quality of service that consumers have come to expect.

Adebayo warned that operators are reaching a breaking point, and they can no longer absorb the high operational costs without passing some of that burden onto consumers through tariff hikes.

“Telecom operators may soon run out of business,our current pricing model is simply not sustainable. With the way things are going, I’m not sure we can keep this sector afloat at the  current price,” he stated.

While telecom operators continue to push for a tariff increase,there has been opposition from other bodies. The Association of Telephones, Cable TV, and Internet Subscribers of Nigeria (ATCIS) has been vocal in opposing the proposed hike, arguing that improving service quality should be the priority instead.

In a press conference held in August this year, ATCIS called on the Nigerian Communications Commission to reject the operators’ demand for a tariff increase, stating that it would only add to the financial strain already felt by millions of subscribers.

Sina Bilesanmi, ATCIS national president, in a statement, described the timing of the proposed hike as  insensitive, given the tough economic conditions many Nigerians are facing.

“We acknowledge the challenges the telecom industry faces, such as rising operational costs and the need for more infrastructure investment. However, passing these costs onto consumers places an unfair burden on them, especially when many are already struggling with the current economic hardships,” Bilesanmi said.

“Telecom companies have cited the rising cost of diesel to power their base transceiver stations (BTS) as a key reason for their push for tariff hikes. But this alone does not justify increasing the tariffs,” he added.

The association also called for transparency from telecom operators, demanding a clear explanation of why the increase is necessary and how it will benefit consumers.

Bilesanmi further stressed the importance of enhanced service quality, insisting that any increase in tariffs should come with noticeable improvements in service delivery.

Amid ongoing demands from telecom operators for a tariff increase, the NCC, which is the body responsible for regulating telecom prices, has maintained a stance of resistance given that mobile operators cannot implement any price changes without the NCC’s approval.

In the midst of the tariff hike controversy, the NCC has attempted to quell public speculation by firmly denying reports of tariff changes and stressing the need for accurate information. To this end, the commission issued a comprehensive guideline titled “Guidance on the Simplification of Tariffs in the Nigerian Communications Sector”, which went into effect on July 29, 2024

At the heart of this new guideline lies a crucial objective: the simplification and standardisation of tariff structures within the Nigerian telecom sector. By creating a more streamlined pricing system and ensuring greater transparency, the NCC seeks to safeguard consumer interests while promoting a fair, competitive marketplace. The guideline also mandates that telecom operators provide comprehensive, easily understandable information about their pricing structures, enabling consumers to make informed decisions about their pricing structures.