On the 3rd of May, 2021, The Federal Government announced a deal with Microsoft through the Federal Ministry of Communications and Digital Economy for the development of high-speed internet infrastructure across the six regions in the country.
Microsoft disclosed in a statement saying: “Six regions in the country have been earmarked for the development of high-speed internet infrastructure. Microsoft’s Airband team will work closely with local partners to improve broadband connectivity in these communities while also assisting with the design and implementation of hyper-scale cloud services.”
The FG stated that Microsoft’s AirBand Tech has enabled rural and underserved communities gain access to high-speed internet connectivity, tapping into the unused broadcasting frequencies of television white spaces. The technology is also cheaper and faster to deploy than fibre and is coming at a time when telecoms have been the brightest spot of Nigeria’s economy in a period of declining growth.
With Nigeria looking to diversify the economy, deeper broadband penetration can act as a catalyst for Nigerian service exports for the African Continental Free Trade Area (AfCFTA).
Telecoms and Internet penetration in Nigeria
According to the last Gross Domestic Product Report released by the National Bureau of Statistics (NBS), Nigeria’s information and communication sector grew by 13.8% in full-year 2020 compared to 11.08% recorded in 2019 and 9.65% in 2018, comprising majorly of Telecommunications and Information Services, Publishing, Motion Picture, Sound Recording, and Music Production, and Broadcasting.
The sector also contributed 15.06% to aggregate real GDP in Q4 2020, with Telecommunications & Information Services growing by 17.64% in Q4 2020 compared to 17.36% in Q3 2020 and 10.26% in Q4 2019.
The Q4 2020 telecoms report by the National Bureau of Statistics (NBS) revealed that the number of internet subscribers in Nigeria increased from 126.1 million as of Q4 2019 to 154.3 million in Q4 2020, representing a 22.38% increase, with Lagos, Kano, Oyo, FCT, and Ogun state recording a total increase of 8.96 million new internet subscribers between 2019 and 2020.
The reason for the sector’s impressive performance is not far-fetched as more Nigerians were home during the lockdowns and spent more time online, working remotely for Nigerian and foreign firms.
To develop a robust service sector economy, broadband penetration is needed to maximize service economy exports in IT, Finance, Entertainment, and many others.
According to a report by MICUS Management Consulting GmbH, “companies adopting broadband-based processes improve their employees’ labour productivity on average by 5% in the manufacturing sector and by 10% in the services sector. The development of broadband allows the acceleration and automation of information flow between companies, which enables an increased specialization in knowledge-intensive activities.”
With the rising number of internet users in Nigeria, broadband penetration has also witnessed a boost. Minister of Communications and Digital Economy, Dr Isa Ali Ibrahim Pantami disclosed last year that Nigeria increased its broadband penetration rate from less than 6% in 2015 to 43.30% by August 2020 which translates to 82, 653,247 broadband subscriptions in the country.
It is fair to say that with the rising broadband and internet penetration in Nigeria, the nation’s potential for skilled service export and trade is a gold mine that should be harnessed for future African trade, especially as Africa agrees to enter into tariff-free trade.
The African Continental Free Trade Area (AfCFTA) agreement which took off on January 1, 2021, is expected to create the world’s largest free trade area measured by the number of countries participating. The pact which connects about 1.3 billion people across 54 countries with a gross domestic product (GDP) valued at $3.4 trillion, has the potential to lift 30 million people out of extreme poverty.
Nigerian Economic Summit Group (NESG) also urged that for the FG to maximize the Africa Continental Free Trade Area (AfCFTA) agreement, it needs to direct its efforts into strengthening domestic value chains.
“Resource-based countries, such as Algeria, Egypt, and Nigeria – which collectively account for approximately 50% of Africa’s GDP – contribute only 11% to intra-African trade.
In terms of intra-African exports, the estimates also showed that manufacturing exports will have increased by 110% followed by agricultural exports (49%) and services exports (14%) by 2035.
Nigeria could reap more gains through export diversification away from crude oil, as manufacturing exports currently account for an average of 9 % cent of the country’s total exports,” Mr Laoye Jaiyeola, Chief Executive Officer, NESG said.
From what the NESG concluded, it is safe to say that Nigeria has enough potential to cover with Intra African trade, especially through broadband-inspired service exports, which will create employment and improve productivity.
Prince Nwafuru, an international trade lawyer with Paul Usoro & Co, leader of one of the Commercial Dispute Resolution & Litigation Teams, and a Nairametrics trade analyst says improved broadband penetration will lead to reduced costs and more productivity; and the added innovation infrastructure funding will boost innovation rankings for Nigeria.
What does improved broadband mean for Nigerian tech jobs and service jobs and how would it improve earnings?
“The world is gradually transitioning into a knowledge and digital economy and Nigeria cannot be left behind,” Nwafuru said.
“In order to build a strong ecosystem for the digital economy, Nigeria requires strong broadband and ICT infrastructure. The broadband penetration based on the last report from the NCC is less than 44% with the plan to reach 90% penetration over the next 5 years. The speed and cost of data remain a major challenge for the service and tech sectors. Faster internet is required to drive e-commerce and digital economy. Improved infrastructure will definitely lead to a reduction in the cost of doing business and increased earnings for the tech and services industries,” he added.
The tech and service ecosystem requires incentives and enabling infrastructure to scale and serve the large market that exists in Nigeria. Though the e-commerce space has recorded some growth in recent years more needs to be done to position Nigeria to serve the rest of Africa.
Sadly, Nigeria was not even amongst the top 10 African Countries in the Global Innovation Index for 2020, which ranked Mauritius, South Africa, Kenya, Tanzania, Rwanda, Egypt, Senegal, and Ghana above the country, despite the fact that Nigeria boasts of young and innovative population. This paradox further underscores the need for investment in enabling infrastructure to drive the needed growth which will position Nigeria in its pride of place on the continent.
Download Nairametrics App for breaking news and market intelligence.