Like his counterpart in the Ministry of Power, Bosun Tijani, the Minister of Communication, Innovation, and Digital Economy, is set to foist a new regime of higher telecoms tariffs on subscribers in Nigeria.

Telecom is one of the country’s most critical industries, making the controversial 40 per cent tariff increase recently approved by the NCC for operators very sensitive to the current economic situation. And unless there is a change of plan, the new increase will effectively take off on January 25.

The new tariff hike applies to calls, SMS, and data. Under the new order, call rates will now increase from N11 to N15.40 per minute, SMS from N4 to N5.60, and the price of a 1 GB data bundle from N1,000 to at least N1,400. Whatever is the reason for the increment, it will put additional strain on household budgets for millions of Nigerians. Expectedly, subscribers have been kicking, calling on the NCC to reconsider the approval of the increment. But all pleas seem to have fallen on deaf ears. The latest tariff approval comes after 11 years of relative tariff stability.

For so long, the Association of Licensed Telecommunications Operators of Nigeria has been lobbying the government for higher tariff approval, citing rising costs of operation driven by factors such as inflation, exchange rate fluctuations, and the increasing price of key other inputs like diesel, power generation, and raw materials as a necessity for the review.

With the approval, the Minister now faces the burden of balancing consumers’ tariff affordability and operators’ profitability and financial sustainability.

On the one hand, telecom companies are insisting that the high cost of operation has made it difficult for them to maintain profitable operations.

The Chairman of the Association of Licensed Telecommunications Operators of Nigeria, ALTON, Gbenga Adebayo, citing soaring operational costs driven by inflation, volatile exchange rates, and rising energy prices as a huge burden, declared that the telecom sector was “under siege.”

The incessant increases in taxation, including the recent imposition of a 12.5 excise duty on the industry operators despite the strong opposition from consumer groups hasn’t helped either. This has added an extra financial burden on the operators and the already overburdened subscribers.

In this circumstance, the government’s hands appear to have been inadvertently tied, as the operators have declared that they could no longer bear the costs of these taxes. The Executive Secretary of ALTON, unequivocally declared: “We cannot subsidise the new excise duty; we will pass it on to subscribers.”

He, therefore, warned of imminent service disruptions unless tariffs were adjusted to account for escalating operational costs. Without an immediate tariff adjustment, he insisted, operators may resort to service shedding, leading to limited availability of telecom services in certain areas.

The National Association of Telecoms Subscribers (NATCOMS), on the other hand, is not lying low, threatening to resist the tariff hikes.

“This represents additional digital costs consumers will have to square up with at the beginning of a new year among other harsh economic realities of Nigeria of today. This, undoubtedly, is against public interest, contrary to the false narrative of NCC that described the recent adjustments as pro-public interest,” the association said in a communiqué.

According to an NCC report, Nigerians spent N1.77 trillion on national calls and text messages in 2020 alone. Yet, despite the increased use of telecom services, operators struggled with rising costs, particularly with the introduction of a 7.5 per cent VAT on telecommunications, which has put more strain on consumers’ finances.

Whatever the justification for the approval of new tariff hikes, the rising telecom fee is bound to have significant economic implications, particularly for digital inclusion. Overall, higher costs will widen the digital divide, making it more difficult for low-income individuals and rural communities to access essential services such as e-learning, healthcare, and job opportunities.

The impact will also extend to economic activities, especially for small businesses, startups, and entrepreneurs. Increased connectivity costs could limit their ability to stay connected, stifling innovation and hindering overall business growth.

Like in the other parts of the world, the 2020 global pandemic brought phenomenal growth in the use of telecom consumption patterns in Nigeria, as millions turned to online work and education, leading to an increase in mobile data usage.

However, the challenge of the operating environment for telecom companies has the potential to reverse the trend. The more subscribers grapple with economic realities, including the riding inflation, and currency devaluation, the more difficult it becomes for small and medium-scale businesses as well as individuals that rely on the online operations to maintain access to telecom services unencumbered.

With the new higher tariff order, the celebrated achievements recorded in the industry as a result of the surge in demand for data and voice services may likely be offset by an expected decrease in the number of subscribers for telecom services.

However, industry players are optimistic that the 40 per cent tariff increase will lead to better services, expand investment opportunities, and restore financial stability in the sector.

“This balance of tariff increases, alongside investment commitments, means that not only will the telecoms industry have the confidence to invest and a clear pathway back to sustainability – but the higher prices will lead to better networks, more relevant services and so the better customer experience that enables growth,” Karl Toriola, the chief executive officer of MTN Nigeria, said.

The actualization of these gains depends on the effectiveness of the regulatory framework set by the NCC and the direct supervision of the Ministry of Communication, Innovation and Digital Economy.

Ordinarily, increasing demand for digital services across sectors such as education, banking, and healthcare occasioned by the COVID-19 pandemic ought to have encouraged the operators to carryout continuous upgrading of their networks to deliver more capacity and improve service quality. But this has not been the case. Due to the poorly regulated operating environment, subscribers have had to contend with epileptic services, including drop calls that often come with costs.

Once bitten, they say, twice shy. The NCC and telecom operators have promised to use the revenue from the increase to upgrade network infrastructure and service quality.

The regulatory body said the telecommunications companies had been mandated to increase their investments in network infrastructure, stating that the tariff review increase was tied to a commitment to increase investments in the sector.

According to capital importation data from the Nigerian Bureau of Statistics, telecoms have slowed investments in the country due to rising costs and record losses. Foreign investments in the telecoms sector fell to a six-year low of $14.74 million in the third quarter (Q3) of 2024.

To that extent, there is a sense in which the new tariff regime is expected to stimulate growth in the industry and boost further investments. But as logical as it sounds, not many Nigerians will take the argument hook, line, and sinker, noting the experience in the power sector as a reference point.

In the wake of the introduction of a four-band system in the distribution sub-sector, the Minister in charge of Power, Adebayo Adelabu, told the stakeholders that a tariff increase from N66.3 to 225 kilowatts per hour will guarantee between 20-24 hours of electricity supply daily for customers on Band A, while those under Band B would enjoy 16 to 20 hours of power supply and Band C receive 12 to 16 hours daily.

But one year down the line, the sector has yet to record any significant improvement. Instead, electricity generation and distribution have been characterized by the incessant collapses of the national grid, recording more disruptions than at any other time in the recent past.

With the deficit of trust the government has had to grapple with, the same scenario is likely to play out under the supervision of Bosun Tunji, when the new telecom tariff takes effect on January 25. (Daily Sun)