“If nothing is done, we might begin to see in the new year grim consequences unfolding, such as service shedding. Operators may not be able to provide services in some areas and at some times of the day leaving millions disconnected.” These were the words of Gbenga Adebayo, Chairman of the Association of Licensed Telecommunication Operators of Nigeria (ALTON), speaking at a February forum with telco executives.
These comments highlight the telcos’ justification for the tariff increase, but consumers see another side to the story.
As the 50% telco tariff increase takes effect, a spirited debate has erupted online and on the streets, as Nigerians wrestle with the impact of this increase on their daily lives.
The unwavering position of the telcos in this debate has been that this increase is necessitated by rising operational costs. On the other hand, consumers suspect that this is simply a new burdensome price increase in the current landscape of ever-increasing prices.
As Nigerians dig deeper into their pockets to pay for data and calls, and telcos justify the hike with claims of necessary infrastructure upgrades, a critical question lingers: are these increases truly about sustainability, or are telcos simply padding their profits? This feature explores it all.
The Case for Sustainability
A report by SBM Intelligence titled, The Price of Everything, paints a harrowing picture of Nigeria’s economy over the years, one marked by relentless inflation, dwindling purchasing power, and rising living costs.
Prices in the market seem to rise almost daily, but perhaps the most jarring was the doubling of petrol prices following the removal of fuel subsidies in 2024.
SBM Intelligence reports on the cost of mobility: “As petrol prices rise, the cost of moving goods and people increases, creating a domino effect that inflates the prices of goods and services across the economy. This is particularly detrimental in Nigeria, where the transportation sector heavily relies on petrol, and alternative energy sources remain underdeveloped.”
Telecommunication companies argue that tariff adjustments are a necessity, not a luxury.
The industry has been grappling with rising costs, particularly due to the depreciation of the naira and soaring diesel prices, which significantly impact network operations. Maintaining base stations, expanding fiber-optic networks, and rolling out 5G infrastructure require substantial investment.
Beyond inflation, regulatory compliance and government-imposed levies also weigh heavily on telecom operators.
Spectrum licensing fees, taxation by the government, unavoidable security costs in volatile regions, and the repeated expenditure on repairing vandalised infrastructure all add to their financial burden. Telcos argue that without price adjustments, sustaining quality service would be nearly impossible.
The Case for Profit Play
For the telcos, this tariff hike is a survival measure. Critics argue that the move is more about protecting profit margins than maintaining service quality.
Many point to the financial reports of major telecom providers, which show that despite economic challenges, these companies continue to report healthy revenues and profit growth.
For the average Nigerian, the tariff increase means spending more on essential services. Small businesses, content creators, and remote workers who rely heavily on internet connectivity are particularly affected.
With no viable alternatives in sight, the situation is even tougher for low-income earners, as beloved daily and weekly data bundles have either become more expensive or disappeared entirely. Critics have raised concerns that this increase may completely exclude low-income users from digital access. In the meantime, netizens have made vows to reduce their data usage, by switching off mobile data when not in use or limiting online conversations to only what’s necessary.
A major point of contention is whether this increase will translate to better service. Nigerians complain of slow internet speeds, network congestion, and frequent downtimes, issues that persist despite the implemented tariff increase. If consumers are paying more, why aren’t they seeing significant improvements in service quality?
The Reality: Telecoms and Today’s Nigerian Economy
The Nigerian telecommunications sector has experienced significant growth over the past decade, becoming a cornerstone of the nation’s economy.
From contributing 7.6% to Nigeria’s GDP in 2014, the sector’s share nearly doubled to 14.58% by the first quarter of 2024. This expansion has been driven by increased adoption of data services and the rise of mobile money.
However, beneath this growth lies a web of financial challenges, including an unresolved USSD debt dispute that has added to the financial strain on telecom operators. As of November 2023, Nigerian banks owed telecom providers approximately ₦200 billion (about $132 million) for USSD services. The dispute arises from disagreements over who should bear the costs of USSD transactions, with banks allegedly deducting fees from customers but failing to remit payments to telcos.
This growing debt shortfall affects telcos’ cash flow and operational budgets, adding pressure on them to find alternative revenue streams to stay profitable. With billions in unpaid debts and mounting inflationary costs, telecom companies argue that a tariff adjustment is necessary to offset financial gaps and maintain quality service.
While consumers may view the hike as a simple price increase, telcos insist that unresolved financial burdens like USSD debts contribute to the need for higher tariffs.
Despite these financial disputes, Nigerian telecom companies have remained profitable.
However ‘profitability’ is relative, when considering economic conditions like the naira devaluation. While telco prices have remained unchanged for over a decade, the costs of goods and services have continued to rise. Tech Cabal reported that delays in implementing tariff adjustments led to significant revenue losses, with forecasts indicating a potential $11.3 billion shortfall between 2022 and 2026.
In the midst of all this, mounting operational costs have put increasing pressure on telco profit margins.
Comparing Nigeria’s telecom tariffs to other African markets provides interesting insights. Data released by the International Telecommunications Union (ITU) revealed that Nigeria ranked among the lowest in terms of data costs, when compared to other countries like South Africa, Kenya, Zimbabwe, and Ghana. The ITU’s ICT Services Affordability Report 2023 showed the cost of data in Nigeria as $2.35, whereas it cost $2.66 in Ghana.
On another hand, a 2GB data package costs $2.92 in Kenya, while in South Africa, the same package is $7.98. Despite facing similar inflationary pressures, Nigeria has maintained lower data costs than its counterparts.
One is left to wonder if this tariff increase is, in fact, a long overdue adjustment.
Still, consumers have vowed to switch to other networks. Yet, the tariff increase isn’t limited to Nigerian telecom providers as foreign operators in the country have also adjusted their pricing.
According to SBM Intelligence, “Starlink subscribers were hit with a price increase in 2023 and an attempted 97% tariff hike in October 2024 due to the Naira’s devaluation, which was walked back by regulatory action from the Nigerian Communications Commission (NCC).”
On the topic of regulations, with few players in the market, many perceive that telecom operators have the power to dictate prices with little resistance. The delay in the approval of this 50% tariff increase by the NCC proves otherwise. Additionally, the telcos had initially requested a 100% tariff increase, which was rejected by the NCC. In the wake of this 50% approval, the NCC has enforced strict regulations, giving telcos 3 months to address customer complaints on quality.
A Delicate Act – Finding a Balance
Telcos face a delicate balancing act, maintaining profitability in a challenging economic environment while ensuring that their services remain accessible and affordable. While telecom operators face genuine economic challenges, consumer concerns about affordability and service quality are valid.
Striking a balance between sustainability and fair pricing will be crucial in ensuring continued digital access for Nigerians.
Moving forward, transparent communication may help bridge the gap. As consumers are forced to adjust to this increase, operators must accept a necessary responsibility: they need to prove that this price hike is necessary and beneficial to consumers.
The only way to do this is with improved quality of service.
