The telecoms industry in Nigeria has conjured something of an industrial earthquake which no other industry has been able to duplicate. The growth and expansion in the industry is unfathomable.
First Bank, the oldest bank in Nigeria which metamorphosed from the former Standard Bank, was established in 1894. First Bank is actually the oldest surviving bank in Nigeria. Before its establishment in 1894, there was banking business in Nigeria. The banking industry in Nigeria dates back to 1892. It could therefore be argued that banking is 132 years old in Nigeria.
But the spread of banking in Nigeria is perilously low even as the industry remains Nigeria’s economic cornerstone. There are less than 62 million Nigerians owning bank accounts.
Despite 132 years of existence in Nigeria, the banking industry is yet to cover Nigeria’s 774 local government areas. Some of the headquarters of local government areas are yet to enjoy the service of a bank’s branch.
When it comes to the spread, the banking industry remains a toddler where the telecoms industry trudges. Even as telecommunications dates back to the closing days of the 19th century, the industry as it is known today in Nigeria was founded in the first quarter of 2001 when the federal government auctioned its mobile telephone licenses which were picked up initially by three firms, MTN, Econet and Nitel. Glo came into the scene some months later.
At the time of the license auctioning, Nitel had monopoly of the industry. The company had less than 700,000 functional lines for a population of well over 100 million people.
Today, 0804, the call sign that was allocated to Nitel, no longer exists. The company could not survive the intense competition conjured by the telecoms tsunami. It was swept away because it could not compete.
The new comers took over the industry and set out in an astronomical pace of development. From the just over 600,000 phone lines it inherited from Nitel, MTN, Airtel, Globacom and 9Mobile, the four companies controlling the industry at the moment, have rolled out more phone lines than the population of Nigeria.
No one in the federal government knows precisely how many of us are in the geographical contrivance named Nigeria. However, the World Bank estimates that there are 218 million people in Nigeria. That at the moment is the seemingly authentic figure.
Consequently, in a population estimated at 218 million, there are 224.7 million phone lines. Unlike the banking industry which regards some of the local government areas as “no-go-areas” apparently because of low patronage, the telecoms service providers are everywhere in Nigeria.
In some communities in Nigeria, residents have to travel for 30 kilometers to the nearest branch of a bank. Conversely, telecoms service network is practically everywhere in Nigeria. Operators have braved the hazards of rural Nigeria to extend their services to the country’s inconsequential majority grossly ignored by banks.
Banks complain that it is difficult to protect rural branches. But the telecoms service providers have taken their services to the rural communities at costs grossly higher than what it takes to open a cash office in a local government area headquarters.
The cost of building a telecoms tower varies from $100,000 to $1 million depending on the height to be reached by the company.
On the average, one can estimate the cost of a telecoms tower at N125 million at the lowest. The telecoms service providers build those structures in rural communities and employ the residents who benefit from the service, to protect them.
The cost of establishing a cash office in the headquarters of a local government area could be as low as a quarter of the cost of building a telecoms tower. Yet banks are nowhere to be found in those areas.
They complain that they cannot secure their cash offices in rural communities. That is a selfish excuse. They should ask the telecoms service providers how they do it.
The truth is that banks make more money in the rural communities than the telecoms service providers. They are either too lazy or selfish to operate in those communities.
Ironically, banks are reaping bountiful proceeds from their selfish operations in Nigeria. Even as banks credit to the private sector dropped from N76.2 trillion in the first half of 2023 to N73.5 trillion in the comparative period of 2024, banks interest income rose tremendously from N2.8 trillion in the first half of 2023 to N5.9 trillion in the first half of 2024.
Compared to the bumper harvest in the banking industry which is just reaping where it did not sow, the telecoms industry is facing dwindling returns in profit though turnover is surging.
MTN, the industry arrow head, recorded a loss after tax of N137 billion in 2023 even as its annual turnover hit N2.4 trillion. MTN’s loss emanated from the exchange rate fluctuation recorded by the naira as the Nigerian currency undergoes massive depreciation.
The telecoms industry has paid its dues but it is unfortunately not enjoying the massive gains that inadvertently go to banks and the 11 electricity distribution companies now extorting consumers.
The banking industry is feasting from the relentless hikes in monetary policy rate (MPR) by the Central Bank of Nigeria (CBN). Banks leverage on that and charge outrageous lending rates that cripple other sectors of the economy.
The electricity distribution companies have been allowed to make frivolous hikes in their tariff that has raised the tariff of Band-A consumers perilously close to N250 per kilowatt hour.
Ironically, the telecoms service providers that service Nigeria’s inconsequential majority is not allowed to raise tariff even as the naira depreciates precipitously against the dollar.
Stakeholders blame the lull in foreign direct investment in the industry on the federal government’s decision to hold tightly to tariff regulation. MTN has threatened to withdraw services if tariff hike is not allowed.
The telecoms service providers should be given a modest tariff increase even if tariff deregulation continues to elude them.
Banking boom, telecoms’ woes
