Nigeria lost $10.8bn in the last five years to capital flight in the telecommunications sector amid lingering foreign exchange scarcity in the country.
In its ‘National Policy for the Promotion of Indigenous Content in the Nigerian Telecommunications Sector,’ the Nigerian Communications Commission said the annual outflow of forex for the sector amounted to about $2.16bn.
The document said, “According to available statistics provided by the leadership of the Association of Telecommunications Companies of Nigeria, the annual outflow of foreign exchange for the telecommunications sector amounts to approximately $2.16bn.
“A breakdown of the forex spending is as follows: i. CAPEX programmes – $750m ii. Network software licensing – $250m iii. Management fees – $800m iv. Managed services (Tier 2 and 3 support) – $157m v. Miscellaneous (international circuits, roaming and terminations reconciliations etc.) – $200m.
“The statistics were based on the average annual reports of a sample of industry players in the telecommunications space over a five-year period. This is a significant portion of our average annual budget and it is critical that this trend is reversed.”
The Minister of Communications and Digital Economy, Isa Pantami, had in October 2020 said as part of efforts to promote indigenous content, the ministry had developed a policy for promoting indigenous content in the telecom sector to complement similar efforts that focused on the information technology sector.
“This is important to stem the tide of capital flight, among other things. A healthy digital economy requires a robust indigenous content policy to significantly reduce this,” he said.
The Chairman, Association of Licensed Telecommunications Operators of Nigeria, Gbenga Adebayo, in a telephone interview with our correspondent, described the sector as being completely forex-dependent.
He said, “The industry needs a lot of foreign exchange. First in terms of payment for international traffic, which is done by way of foreign exchange. Also, in terms of software licences for the many applications that run on the various networks.
“They are procured overseas; hardware is also procured overseas. In terms of needs, these are services and facilities that are not necessarily available locally. For instance, we send traffic to international parties and have to pay for those services. Equipment is procured year in year out, both for maintenance and upgrade, which requires foreign exchange.
“The industry requires it for the services that we provide. I am not sure we have any other alternative than to continue to procure the services overseas.”
According to Adebayo, it is difficult for operators in the sector to access forex.
He said, “We would continue to appeal to the CBN, especially in areas that require critical need. Servicing foreign exchange obligations, it is important that the industry is able to access forex so that we are not indebted to foreign operators.”
“It is a problem, although we have been receiving help from the regulator and the CBN as best as they can assist. But the fact is we need to be on the priority list of forex availability, to enable us to service our international obligations in particular.”
With fluctuations in global crude oil prices, forex inflow into the country has reduced.
The Governor of the Central Bank of Nigeria, Godwin Emefiele, had recently said the drop in crude oil earnings and the associated reduction in foreign portfolio inflows had affected the supply of forex into Nigeria.
In May 2021, the CBN adopted the NAFEX exchange rate as its official exchange rate to the dollar.
The Chairman of the Foundation for Economic Research and Training, Prof. Akpan Ekpo, said as long as the country failed to manufacture telecom equipment, it would have to continue to import them.
He said, “That means we have to use our scarce foreign exchange to import those gadgets. If we do it in the short term, do our research and start to manufacture some of these things, we would save foreign exchange.
“As long as we don’t do it, we will keep using our scarce foreign exchange to import the gadgets. In the long term, we need to stop doing it, and the only path to that is to start to manufacture these things ourselves.
“But in Nigeria, we have been on this path for a very long time, and we are not making plans to manufacture these things here. Countries do that in the short term, then begin to manufacture some of the components or add value. It is not good for the economy.”
Ekpo said it was not enough that the telecom sector was contributing to the Gross Domestic Product.
He said, “When we talk of GDP, we have export and import. If export exceeds import, you have a trade surplus. But when your import exceeds your import, you have negative trade.
“Don’t just say telecoms contribute to GDP because other sectors do too. You have to consider the aggregate; are we better off? Are we having a trade surplus? GDP is important, but it is not everything. You have to look at GDP vis-a-vis other social indicators.”
He stressed the need for the country to manufacture telecoms equipment and export to other countries, especially in West Africass a way to reduce capital flight.
In its policy to promote indigenous content in the sector, the NCC said it would stimulate the design, development, production, sales and utilisation of high-quality telecom equipment and services developed by indigenous companies.