Tariff hike: Experts warn of monopoly, consumer hardship

Joy Agwunobi

The recent approval of telecom tariff increases in Nigeria has sparked widespread debate, with concerns mounting over the potential for monopolistic dominance and the negative impact on consumers.

Industry experts have called for a more competitive and inclusive market, stressing the need for regulatory intervention to safeguard consumer interests and promote industry growth. This is coming with growing concerns over the increasing dominance of MTN Nigeria, the country’s largest telecom operator, and the potential marginalisation of smaller players.

Ayoola Oke, a former special adviser to the Executive Vice Chairman (EVC) of the Nigerian Communications Commission (NCC),in a recent interview, Oke voiced his disapproval of the tariff hike and the underlying market dynamics. “There should be no price increase. The NCC needs to facilitate market entry, get more companies to apply for licenses, and encourage international investment in Nigerian telecoms. Turning Nigeria into an enclave for just one company is not the way to go,”Oke said.

Oke emphasised the importance of fostering healthy competition to drive down costs. According to him, the global telecommunications landscape is witnessing a downward trend in prices due to technological advancements like Voice over IP (VoIP).

 “When there is competition, market prices will reduce. You don’t start by encouraging a dominant monopoly that will lead to price increases. You should start by fostering competition and facilitating market entry,” he explained. “The global trend today, due to technology adoption like voice over IP, is that prices are going down. But here, we are trying to regulate technology and even declare some technologies illegal.”

He urged the NCC to reconsider its regulatory approach, highlighting the necessity of aligning policies with the government’s broader investment goals. “We need to get this right and shape regulatory policies to support government objectives. The government wants investment in Nigeria, and attracting more companies through market-friendly policies aligns with this vision,” Oke noted.

He added “Competition is at serious risk, choices for  consumers are not there, and if you want to make consumers pay more, you must show why. Why are prices going down elsewhere but going up in Nigeria?”

Oke criticised the NCC’s recent decisions, stating that the regulatory body’s actions might inadvertently create a less competitive environment.

Additionally, speaking on the commission’s  efforts in addressing consumer protection and ensuring service quality across the telecommunications industry, Oke expressed dissatisfaction with the current state of affairs.

Oke recalled the tenure of Garba Danbatta, noting that consumer protection was a distinct focus during that period. “When Professor Garba Danbatta was there, he had a clear mantra related to consumer protection. But in the last two years or so, I don’t think the interests of consumers have been properly addressed,” he said.

He further emphasised the need for the NCC to rediscover its foundational principles, drawing attention to the leadership of Ernest Ndukwe, a former EVC of the Commission. “In the days of Engineer Ndukwe, the NCC operated with a guiding philosophy: consumers are the object, the subject, and the primary beneficiaries of the telecom industry’s offerings. Consumers must always come first, next, and last. It should always be about the consumers.”

Oke cautioned against a potential shift in focus toward larger industry players at the expense of smaller operators and end-users. “It shouldn’t be about a single company or a group of companies coming together to suppress or wage  war against  smaller competitors and disregard consumer welfare,” he said, while also adding “We have to be very careful about that.”

Looking ahead, Oke expressed deep concern about the future of Nigeria’s telecom sector if the current challenges are not tackled. He warned that the industry could face significant difficulties, especially if issues like pricing and foreign exchange requirements continue unchecked.

“If this issue is not addressed, the future is bleak. Very soon, we may find ourselves dealing with either a monopoly or an oligopoly, and then consumers will suffer. They will suffer because we will pay through our noses,” he warned.

He stressed the importance of evaluating telecom tariffs through the lens of purchasing power parity rather than direct currency conversion. He explained that “If the cost of calls in another country appears higher than in Nigeria, you have to match it with the economic index. If we conduct a purchasing power parity analysis, you will see that Nigerians are currently paying too much currently for telephony services compared to the UK. A direct currency conversion might suggest otherwise, but when you consider the economic realities in both countries, you will realise that prices there are going down while Nigerians are paying more when adjusted for parity.”

Oke also highlighted the potential long-term repercussions for indigenous participation in the sector. “If we do not address these issues, we will witness a situation where the Nigerian telecommunications market becomes dominated by foreign-owned companies. Indigenous participation will slowly die off. And when that happens, how do we then get local content?”

According to him, “this sector is already a significant area where Nigeria is bleeding foreign exchange. Imagine a company insisting on collecting foreign exchange payments or controlling traffic for up to 80 per cent  of international calls, demanding payment in dollars. Such practices lead to routing traffic through companies abroad, like in Dubai, where declarations can be manipulated to the detriment of Nigeria’s economy. I think the FIRS needs to wake up; otherwise, the future looks bleak, and Nigeria risks becoming a captive market.”

Oke underscored the strategic importance of the telecom sector for national development and called for policies that encourage local participation. “Telecommunications will continue to be a critical sector for national development, as we have seen over the years. Unfortunately, since 2015, things, in my opinion, started going south. This is not about politics or personal interests; this is about my country. Anyone aiding practices that undermine the sector’s growth is, to me, an unpatriotic Nigerian. We need to work hard to adopt policies that encourage indigenous participation in the telecom sector. We cannot allow local content to diminish; instead, it should increase,” he said.