Report Presents Crucial Role Mobile Tech Sector Has in Driving Nigeria's Digital Economy

A report produced by GSMA and Through Line Advisors, a UK consultancy, addresses the challenges hindering the growth and development of the telecommunications industry and the crucial role of the mobile sector in Nigeria's economic development. The report begins by pointing out that digitalization is one of the Nigerian Government’s key strategies to achieve the country's socio-economic objectives. "The Federal Ministry of Communications, Innovation & Digital Economy (FMCIDE) Strategic Plan 2023–2027 articulates a clear ambition for digitalization and provides a comprehensive program and set of targets," the report explains. "This recognizes the role that digitalization can have in economic growth, job creation and increased tax revenues across the economy."

The report adds that "The adoption of digital technologies by individuals and businesses has been shown to enhance productivity and raise household incomes." Encouragingly, "Consumers in Nigeria would benefit from increasing adoption and use of digital technologies. The faster the rate of digital adoption in Nigeria, the more quickly and extensively the country will benefit from these effects."

The telecoms sector is a major contributor to the economy of Nigeria and provides the foundations for the digital transformation process. "The mobile telecoms sector accounted for 13.5% of total GDP in 2023, including the direct value-added by wider ICT industries and the impact of the sector in enhancing the productivity of other sectors," according to the report. "Overall, the mobile sector's total contribution to GDP is estimated at 33 trillion NGN in 2023, with 2.4 trillion NGN in tax revenue contributions."

The report importantly notes that "a successful digital economy would have a material impact on the economy of Nigeria over the next 3-5 years. It is estimated that growth in digitalization in agriculture, manufacturing, transport, trade and government will result in an increase in GDP of around 2 percentage points by 2028. This would also create nearly 2 million jobs and raise an additional NGN 1.6 trillion in tax revenue."

The mobile sector, however, faces some major challenges across multiple areas of its business. "The financial performance of the mobile industry in Nigeria has slowed down in recent years after a long period of sustained growth." The report says the industry faces a number of significant challenges:

• The overall financial performance of the industry in recent years has not been sufficient to support the capital-intensive nature of the business.
• Revenue in Naira has stopped growing as the number of subscribers has increased. Falls in ARPUs indicate pressure on prices and reductions in average usage.
• Operating costs have increased significantly in the recent period. The primary driver of this has been increases in the cost of power for sites due to the rapid increases in the price of fuel, high and increasing costs of tax compliance because of the complex and overlapping tax structure within the country, and increased demand for forex due to contractual obligations for rollout that are denominated in USD.
• The cost of building and operating fiber-optic networks has increased because of the difficulty and expense of obtaining Rights of Way (RoW) from state authorities and the very high number of fiber cuts, primarily caused by construction work and vandalism.
• Underlying these trends in revenue and operating costs has been the deteriorating macroeconomic situation in Nigeria. The high levels of inflation have pushed up the cost of many inputs into the mobile service providers' businesses.

The authors suggest that "Mobile service providers need to generate sufficient revenue to cover their operating costs and support this level of capex over the medium-term. If this is not realized, they are likely to cut back on either capital or operating expenditure or both. This results in a shrinking sector which leads to subscribers receiving a poorer quality of service and delays in coverage expansion."

Moreover, "In the short term, it would result in a reduction in the amount of tax revenue generated by the sector. In the medium term, a slow-down in digital adoption will forfeit all of the productivity gains and service delivery improvements that go with digitization."

West Africa nation's mobile "sector would further benefit from a policy and regulatory environment that takes account of the impact on the financial and operational sustainability of service providers," the report notes. The authors note that "Decisions on issues such as tax, regulatory fees, spectrum fees, customs duties and other government levies all have an impact on this. In particular, the current approach of the regulation of both wholesale and retail mobile tariffs by the Nigerian Communications Commission (NCC) does not allow for the adjustment of tariffs to reflect the changing cost of inputs into the businesses and facilitate investment into improved network coverage and quality of service. By international standards, the NCC's approach to retail tariff regulation is not considered to be standard practice."

The authors add:

In addition to the financial sustainability of the industry, further progress on the national strategy for digitalization could be made through a partnership between the sector and the Government. The sector can contribute in specific ways to the Government's strategic initiatives. The Government, the NCC, and all federal and state ministries and regulatory authorities can, in turn, support the sector to deliver on these initiatives. This can be done by improving the sector's regulatory environment and its investment climate. Together, this will further support the Government’s digital economy objectives.

What are you recommendations for how the mobile tech sector can drive Nigeria's digital economy?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

Malaysian Electric Utilities Seek U.S. Partners to Help Decarbonize the Country's Energy Sector

As noted in previous posts in this Forum, I am optimistic about the commercial opportunities that U.S. companies that are looking to sell their services and products in Southeast Asia. Among the ten nations that comprise the Association of Southeast Asian Nations (ASEAN), I recommend that American business owners and corporate executives look closely commercial opportunities in ASEAN's six largest economies (data provided by the International Monetary Fund): Indonesia, Thailand, Singapore, Philippines, Vietnam, and Malaysia.

The Malaysia Country Commercial Guide, which is a useful resource produced by the International Trade Administration, an agency within the U.S. Department of Commerce, explains that "Malaysia is an upper middle-income economy with a population of over 34 million. The country's growing affluent middle class increasingly drives consumer and business demand for quality goods and services. U.S. products and brands are favorably viewed and enjoy a strong presence in many sectors, including technology, machinery, electronics, medical equipment, and franchising."

What is more, "U.S. exporters looking to expand their market presence in Malaysia can benefit from the country's developed infrastructure, an English-speaking business and consumer environment, a well-established legal framework, and the ability to repatriate capital and profits. Malaysia is generally considered an easy and cost-competitive market for doing business. The United States is Malaysia's third-largest trading partner, and U.S. exports of goods to Malaysia were valued at over $18 billion in 2022." The U.S. Department of State also points out that "Malaysia is the United States' 17th largest trading partner and the second-largest trading partner among the 10 ASEAN members, after Vietnam."

Considering my optimism about ASEAN's economic opportunities and interest in employing technologies to mitigate the consequences resulting from global warming, I attended the Malaysia Smart Grid Technologies Reverse Trade Mission (RTM) on May 1st, 2024 in Millbrae, Calif. The U.S. Trade and Development Agency (USTDA), which helps companies create U.S. jobs through the export of U.S. goods and services for priority infrastructure projects in emerging economies, sponsored this event. Delegates of the RTM included representatives of agencies within the Malaysian governments and executives from Malaysian energy utilities. Representatives from the USTDA and the U.S. Commercial Service were also in attendance at the event held just outside of San Francisco.

A delegate from the Tenaga Nasional Berhad (TNB) said the Malaysian multinational electricity company is the only electric utility company in Peninsular Malaysia and is the largest publicly listed power company in Southeast Asia. Serving over 10 million customers throughout Peninsular Malaysia (except Sarawak) and the East Malaysian state of Sabah, TNB's core activities are in the generation, transmission and distribution of electricity. The presentation also highlighted how renewables are expected to grow significantly, with Malaysia targeting 70 percent of its 2050 installed capacity. Advancements in storage technologies are making renewables more dispatchable.

While not part of the presentation, TNB's most recent sustainability report explains:

We have been making progress in rolling out the adoption of a Smart Grid as part of our Grid of the Future (GoTF) initiatives. GoTF aims to improve the grid flexibility with two-pronged objectives - to allow for better services to our customers and enable higher growth of Variable Renewable Energy (VRE) and Distributed Energy Resources (DER). TNB has achieved a Smart Grid Index (SGI) score of 71.4% in FY2022, which demonstrates significant improvement of 19.4% from 2019. Moving forward, under our Smart Utility 2025 Masterplan, we target to achieve a score of 85% by 2025. Through the establishment of this ambitious target, we aim to facilitate the integration of clean energy into our electricity grid and enable efficient management and utilization of resources. These endeavors will help drive the pace of our decarbonization efforts and renewable energy initiatives to achieve our net zero aspiration.

 

Source: www.tnb.com.my/sustainability

Attendees then heard a presentation by Sarawak Energy Berhad, which is state owned electric utility company of the State of Sarawak. Sarawak Energy's vision is to achieve sustainable growth and prosperity for Sarawak by meeting the region's need for reliable and renewable energy—providing electricity to 3 million Sarawakians in urban and rural areas. Furthermore, the utility aims to ensure all rural communities including the most remote and inaccessible upriver communities have access to constant electricity supply. Using micro-hydro, which is the small-scale harnessing of energy from falling water such as that from steep mountain rivers, and solar hybrids, Sarawak Energy has a goal to help more than 30,000 rural household achieve full electrification by 2025. Sarawak Energy is also making progress in becoming a regional power house as the utility exports power to the Indonesian province of West Kalimantan.

Source: www.sarawakenergy.com/about-us

According to the aforementioned country commercial guide, "The Malaysian government is seeking ways to grow its national grid to be a smart, automated, digitally-enabled grid. Malaysia is looking for solutions that ensure greater cost efficiency, reliability, and customer satisfaction than can be achieved with centralized grids. Market opportunities for U.S. companies exist for smart meters, grid technologies and systems, and transmission & distribution systems." I appreciate how this business briefing provided an opportunity for U.S. entities to meet with a delegation of decision-makers from Malaysia interested in learning more about U.S. smart grid technologies and best practices for cybersecurity, distribution networks, and storage solutions for the power sector.

What opportunities are you seeing in ASEAN's renewable energy sector?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.