Nigerians have become accustomed to electricity power load shedding, where electricity supply is strategically reduced or cut off in different areas to manage demand with available resources. This process helps balance the load on the electricity grid and is often planned and negotiated with local building owners. Utility providers monitor electricity demand and identify when it exceeds supply or approaches capacity limits. They then create a load-shedding plan that includes rotating power outages, temporary disconnections, and incentives for building owners to comply. Once demand decreases or additional power resources become available, power is restored to the affected areas.
However, load shedding can also occur without prior planning. In such cases, power customers experience involuntary load shedding when a utility provider lowers or stops electricity distribution across a coverage area for a short period. This is commonly referred to as a rolling blackout. Another form of involuntary load shedding, known as ‘brownouts,’ occurs when a power supplier lowers voltage distribution during peak usage times to balance supply and demand.
Load shedding may soon extend beyond electricity as telecom operators in Nigeria face increasing operational challenges. These operators might start turning off some of their cell sites during less busy times to save on energy and costs. While this measure could help them manage resources better and keep services running, it is not an ideal solution. If telecom operators implement load shedding, the quality of service could decline sharply, leading to reduced network coverage, slower internet speeds, and an increase in dropped calls, according to industry analysts.
The Nigerian Communications Commission (NCC) reports that as of March 2024, Nigeria had over 164 million active internet subscriptions, with mobile data accounting for the majority. A reduction in service quality could severely impact these users, leading to widespread frustration.
Load shedding in telecommunications could be described as a deliberate shutdown of services in specific areas to prevent the failure of the entire system when demand strains the capacity of available infrastructure. Telecom operators in Nigeria are currently plagued by rising operational costs, including the increased prices of diesel, infrastructure maintenance, and a depreciating naira. These challenges have prompted telecom companies to call on the NCC to approve a tariff increase to help mitigate their financial burdens.
For instance, MTN Nigeria, with a subscriber base of 81.7 million as of March 2024, reported its first loss after tax of N137 billion since its 2019 listing on the Nigerian Stock Exchange. The telco incurred foreign exchange (FX) losses of N740 billion (approximately $815.79 million at N907.1/$). Similarly, Airtel Africa, which had 63.3 million subscribers in Nigeria as of March 2024, reported a loss after tax of $89 million for its full year ended March 2024, primarily due to FX headwinds in Nigeria and Malawi. Airtel Africa lost $1.26 billion to derivative and FX exposures, with $770 million attributed to the naira’s devaluation.
These financial setbacks have led to dwindling investments in the telecom sector. Carl Cruz, Chief Executive Officer of Airtel Nigeria, emphasized that the devaluation of the naira—from N420/dollar to N760/dollar within a month, and now over N1500/dollar—has significantly affected the telecom industry, which relies heavily on importing infrastructure to grow the sector. Similarly, Karl Toriola, CEO of MTN Nigeria, noted that operators are reluctant to invest due to the high operating costs and the naira’s devaluation, among other issues hindering the sector’s growth.
Toriola stated that the telecom sector in Nigeria is now in an “intensive care unit (ICU), gasping for breath,” and called on the government to intervene. He warned that the sector could collapse if urgent action is not taken, stressing that investors will be reluctant to invest in the sector unless fundamental issues are addressed. He urged the government to consider increasing the prices of telecom services to help rescue the sector from its current challenges.
Despite repeated pleas from the telecom operators, the NCC has remained silent on the issue, causing frustration and uncertainty among industry players. The Association of Licensed Telecommunications Operators of Nigeria (ALTON) had earlier submitted a working paper (memo) to the NCC, highlighting the significant impact of macroeconomic challenges on the telecommunications industry. According to the memo, the industry has faced a myriad of challenges in recent years, leading to an exponential increase in business costs.
Some of the key challenges highlighted in the memo include:
– The inflation rate’s upward trajectory from 11.98% in 2019 to 21.34% in 2022, and currently 27.33% as of October 2023.
– The rapid devaluation of the naira, with a recent upward movement at a rate of 68.5% from N461/$1 in December 2022 to N777/US$ as of the end of September 2023, and now exceeding N1,590/dollar.
– A sustained rise in energy prices, with diesel currently retailing at an average price of N1,400/litre, up from N250/litre in January 2022.
With energy costs representing more than 40% of Mobile Network Operators’ (MNOs) operating expenses, tighter external financing conditions, higher debt service payments, and increased pressure on the Nigerian forex market, there has been a significant increase in the cost of production. This has jeopardized MNOs’ capacity to maintain healthy margins in such a capital-intensive and forex-dependent industry.
Despite these adverse economic conditions, the telecommunications industry remains the only sector that has not implemented a general tariff increase for its services in the last five years due to regulatory and political restrictions. MNOs’ applications for tariff increases have been pending with the NCC for over a year. In contrast, other critical industries have adjusted the retail prices of their goods and services with the support of their industry regulators to reflect their true business costs and cushion the impact of rising operational expenses.
The telecom operators also lament regulatory overlaps, which have led to unbudgeted expenditures to cover unexpected expenses. In their position, ALTON advocates for the co-creation of policies for the ICT sector and better collaboration between ICT and non-ICT regulators with oversight over the sector, given the cross-cutting nature of digital services, which span multiple subject areas and regulatory frameworks.
ALTON also calls for the Federal Government to grant the telecom sector a special status similar to that of agriculture and manufacturing. This special status would include the introduction of fiscal incentives for the sector, such as reducing spectrum and numbering fees and replicating the Road Infrastructure Tax Credit scheme for digital infrastructure projects.
Furthermore, ALTON emphasised the need to encourage market consolidation and collaboration arrangements to build stronger market players in the industry. The association also advocates for implementing an Open Data policy to make data accessible, allowing companies to collaborate with third-party developers, startups, and other industries to develop applications, analytics tools, and personalised services. This, ALTON believes, will unlock new data-driven revenue streams for telecoms and other industries such as banking, agriculture, and manufacturing.
However, ALTON cautions that the telecom sector’s challenges extend beyond operational costs and regulatory hurdles. The association highlights a protracted history of non-payment by Deposit Money Banks (DMBs) and other Financial Institutions (FIs) for their utilisation of Unstructured Supplementary Service Data (USSD) services provided by MNOs since September 2019. Despite numerous ministerial and joint regulator-led interventions, including the approval for the disconnection of banks by the NCC in 2022 and recent joint resolutions by the NCC and the Central Bank of Nigeria (CBN) in August 2023, the DMBs and FIs have persistently refused to meet their obligations to the MNOs. This has led to the accumulation of a massive debt of approximately N200 billion.
ALTON argues that it is unacceptable for the banking industry to hold the telecommunications industry to ransom through non-payment. The association urges the NCC to take decisive action to end this deplorable practice, especially as providing USSD services to DMBs and FIs comes at a considerable cost to MNOs. USSD services require substantial investment in enabling platforms such as Applications Programming Interfaces (APIs) and USSD Gateways for service delivery, the cost of establishing signalling channels, and the opportunity cost of utilizing these resources for USSD services instead of other prepaid network services like call and SMS setup and delivery.
As the telecom sector faces mounting challenges, the prospect of load shedding by operators looms large. If the sector’s financial burdens are not alleviated, and if regulatory support is not forthcoming, the quality of telecom services in Nigeria could deteriorate significantly. This would not only affect millions of subscribers but also have broader implications for the economy, given the critical role of telecommunications in driving digital transformation and financial inclusion. The time for action is now. The government, regulators, and industry stakeholders must collaborate to find sustainable solutions that will safeguard the telecom sector’s future and ensure that Nigerians continue to enjoy reliable and affordable telecommunications services.
