Stakeholders in Nigeria’s telecommunications sector are anticipating more investments this year on the back of the relative stability recorded in the forex market towards the end of 2024.
While stability is expected to continue this year, the industry leaders are confident that the worst of the volatility witnessed in the foreign exchange market last year is over.
According to them, the declining value of the Naira was not the main problem but the high rate of instability in the forex market, which made planning very difficult for many of the telecom operators.
Towards the end of last year, the official exchange rate at the Nigerian Foreign Exchange Market (NFEM) hovered between N1,535-N1538 to a dollar. On the parallel market, where the exchange rate is traded unofficially, the rate averaged between N1,650 and N1,655 to the dollar, showing stability.
Stability to pave the way for growth
Expressing optimism for 2025, the President of the Association of Telecommunications Companies of Nigeria (ATCON), Mr. Tony Emoekpere, noted that forex stability has a greater impact on the industry than the exchange rate itself.
“The main issue with the forex is the instability. In the last few months, we have seen some stability. Now that we have a kind of range—almost like a top and bottom ceiling—I think it’s enough for any organization to plan and help us to attract more investments,” he said.
Emoekpere highlighted that sustained stability, combined with effective implementation of policies to stabilize the naira, could signal growth for the telecom sector.
“If we continue to see the kind of stability we saw towards the end of last year, it will be a good pointer for investors to come in,” he added.
- The CEO of MTN Nigeria, Mr. Karl Toriola, echoed similar sentiments, predicting a more stable foreign exchange environment in 2025.
- Reflecting on the challenges of 2024, Toriola said the worst of the volatility may have been over and a repeat of the instability is not expected in 2025.
“I don’t expect any repeat of the kind of volatility we experienced last year, which was driven by the move towards a more liberal foreign exchange market,” he stated.
Toriola believes that the sector can adapt to a gradually declining currency as long as stability is maintained.
“We don’t need a reversal. We just need a relatively stable currency. We can manage that and find other ways and sources of efficiency,” Toriola added.
The turbulence of 2024
According to the Head of Operations at the Association of Licensed Telecommunications Operators of Nigeria (ALTON), Mr. Gbolahan Awonuga, the significant rise of the dollar from about N460 in 2023 to over N1,600 in 2024 disrupted the operators’ plans for importing equipment.
He said this also made it difficult for telecom operators to obtain additional funding, as they struggled to generate returns amid the worsening exchange rate instability.
Highlighting the challenge of the forex instability from a data centre operator perspective, the CEO of Digital reality, one of the leading data centre companies in Nigeria, Engr. Ikechukwu Nnamani, said:
“If you come to Nigeria and you use an exchange rate of N1500/$1 for instance, to benchmark what you want to charge and that amounts to $500 but you are charging in Naira for the use of your service, then by next year, Naira depreciates to N2000, if you convert back what you charge in Naira back to USD, you suddenly find out that you no longer selling your service at $500 but you are now selling it at $300 equivalent.
“So, your total business case, the basis of which you got investment, gets thrown out of the window, not because the customers are not there; not because the metrics under which you went into the business were wrong, but 100% based on the valuation of the naira, which unfortunately, you have zero control.”
Factors that will drive forex stability in 2025
The optimism of forex stability expressed by the telecom industry players may not be unfounded after all, going by financial experts’ projections for the year.
- In its 2025 economic outlook, Centre for the Promotion of Private Enterprises (CPPE) the exchange rate had largely stabilized between July and December last year, driven by the series of regulatory reforms and the periodic intervention by the Central Bank of Nigeria (CBN) in the market.
- According to the CPPE founder, Dr Muda Yusuf, based on sustained improvement in foreign reserves which is currently in excess of $40 billion dollars, the outlook for the exchange rate in 2025 is positive.
- He added that the rate would be stable, hinged on improvement in accretion to reserves on the back of improved inflows from the IMTOs and diaspora remittances.
- Yusuf said the improved capacity of the CBN to moderate rate volatility through periodic intervention would improve the market alongside the positive impact of the $2 billion Euro Bond proceeds on reserves.
“Other dynamics to improve the country’s foreign exchange rate in 2025 include the successful domestic dollar bond of $500 million and clearance of legacy obligations of about $7 billion by the CBN.
“Also, the import substitution effect of the Dangote and Port Harcourt refineries will consequently ease off demand pressure on the foreign market and the gradual recovery of the non-oil export sector,” he said.
What you should know
- While the anticipated forex stability may bring a reprieve for the telecom operators, they are also expecting the Nigerian Communications Commission (NCC) to implement a tariff adjustment that would see them increase their charges for data and voice services.
- Already, the telecom operators had proposed a 100% increment to the regulator to offset the rising operational costs.
- It is, however, uncertain that the telecom regulator would approve that given the current state of the economy and the battered purchasing power of many Nigerians.
