Tariff hike boosts telecoms profitability amid economic challenges

BY MOTOLANI OSENI

The recent 50 per cent tariff hike approved by the Nigerian Communications Commission (NCC) is set to bolster the profitability of telecom operators, offering a lifeline to an industry grappling with currency devaluation and soaring operational costs.

While the sector played a key role in Nigeria’s economic recovery from the 2020 recession, its growth rate slowed to 5.42 percent in 2024, down from 7.91 percent the previous year, according to the National Bureau of Statistics (NBS).

This decline follows a steep devaluation of the naira, which fell from N415.07/$ in 2021 to N1,500/$ in 2024, significantly impacting telecom operators.

MTN Nigeria’s revenue soared by 103.16 percent to N3.36 trillion in 2024, but the company posted a N400.44 billion loss after tax due to a N925.36 billion foreign exchange loss.

Airtel Africa’s revenue saw modest growth of 4.99 percent, reaching $4.76 billion, yet its Nigerian operations suffered a 40.34 percent revenue drop to $738 million.

Operating costs surged as well, with MTN Nigeria’s expenses climbing 76.6 percent to N1.52 trillion. Airtel Africa attributed rising costs to currency devaluation across Nigeria, Malawi, and Zambia, noting that average diesel prices in Nigeria jumped 60 percent.

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The GSMA warns that sustained revenue declines in the telecom industry could hurt GDP growth and slow digital adoption. However, the recent NCC-approved tariff adjustment, the first since 2013, is expected to bridge the gap between rising costs and stagnant tariffs.

Operators anticipate that, the hike will not only improve financial stability but also enhance network quality and drive future sector growth.

MTN Nigeria projects an additional N1.34 trillion in revenue from the adjustment, while its CEO, Karl Toriola, and Airtel Nigeria CEO, Dinesh Balsingh, emphasized that reinvestment in infrastructure and innovation will be key to securing the sector’s long-term sustainability.