Telecommunications sector depletes forex by $ 10.8 billion in five years

Nigeria has lost $ 10.8 billion over the past five years due to the flight of capital in the telecommunications sector amid the country’s continuing currency shortage.

In its “National Policy for the Promotion of Indigenous Content in the Nigerian Telecommunications Sector,” the Nigeria Communications Commission said annual foreign exchange outflows for the sector amounted to approximately $ 2.16 billion.

The document states: “According to available statistics provided by the management of the Association of Telecommunications Companies of Nigeria, annual foreign exchange outflows for the telecommunications sector amount to approximately $ 2.16 billion.

“The breakdown of foreign exchange expenses is as follows: i. CAPEX programs – $ 750 million ii. Network software licenses – $ 250 million iii. Management fees – $ 800 million iv. Managed Services (Level 2 and 3 Support) – $ 157 million v. Miscellaneous (international circuits, roaming and termination reconciliations, etc.) – $ 200 million.

“The statistics were based on the average annual reports of a sample of players in the telecommunications industry over a five-year period. This is an important part of our average annual budget and it is essential that this trend is reversed. ”

Communications and Digital Economy Minister Isa Pantami said in October 2020 that as part of efforts to promote indigenous content, the ministry has developed a policy to promote indigenous content in the telecommunications sector to complement similar efforts focused on the information technology sector. .

“It’s important to stem the tide of capital flight, among other things. A healthy digital economy requires a strong indigenous content policy to drastically reduce this, ”he said.

The president of the Association of Licensed Telecommunications Operators of Nigeria, Gbenga Adebayo, in a telephone interview with our correspondent, described the sector as being completely dependent on forex.

He said: “The industry needs a lot of foreign currency. First in terms of payment for international traffic, which is done using foreign currency. Also, in terms of software licenses for the many applications that run on different networks.

“They are bought abroad; equipment is also purchased abroad. In terms of needs, these are services and equipment that are not necessarily available locally. For example, we send traffic to international parties and have to pay for these services. Equipment is purchased annually, both for maintenance and upgrading, which requires foreign currency.

“The industry needs it for the services we provide. I am not sure that we have any other alternative but to continue to procure the services abroad. ”

According to Adebayo, it is difficult for traders in the sector to access forex.

He said: “We will continue to call on the CBN, especially in areas that are critically needed. In the service of foreign exchange bonds, it is important that the industry can access forex so that we are not in debt to foreign traders.

“This is a problem, although we have received assistance from the regulator and the CBN to the best of their ability. But the point is, we need to be on the priority list of forex availability, to enable us to meet our international obligations in particular. “

With fluctuations in world crude oil prices, foreign currency inflows into the country have declined.

The governor of the Central Bank of Nigeria, Godwin Emefiele, had recently said that the decline in revenues from crude oil and the associated reduction in foreign portfolio inflows had affected the supply of foreign exchange in Nigeria.

In May 2021, the CBN adopted the NAFEX exchange rate as the official exchange rate against the dollar.

The president of the Foundation for Economic Research and Training, Prof. Akpan Ekpo, said that as long as the country does not manufacture telecommunications equipment, it should continue to import it.

He said: “It means we have to use our scarce foreign currency to import these gadgets. If we do it in the short term, do our research and start manufacturing some of these things, we would save some currency.

“Until we do, we’ll continue to use our scarce foreign currency to import gadgets. In the long run, we have to stop doing it, and the only way to do that is to start making these things ourselves.

“But in Nigeria we’ve been on this path for a very long time and we don’t plan to manufacture these things here. Countries do it in the short term and then start to manufacture some of the components or add value. It is not good for the economy. ”

Ekpo said it was not enough for the telecommunications sector to contribute to gross domestic product.

He said, “When we talk about GDP, we have exports and imports. If exports exceed imports, you have a trade surplus. But when your import exceeds your import, you have negative trade.

“Don’t just say telecommunications contributes to GDP because other sectors do too. You have to consider the aggregate; are we better? Do we have a trade surplus? GDP is important, but that’s not all. We have to look at the GDP in relation to other social indicators.

He stressed the need for the country to manufacture telecommunications equipment and export to other countries, especially West Africa.

In its policy of promoting local content in the sector, the NCC has stated that it will stimulate the design, development, production, sale and use of high-quality telecommunications equipment and services developed by companies. local.

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