Tariff Hike: The Only Path to Nigeria’s Telecom Survival, Says MTN’s Tobe Okigbo

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Nigeria’s telecommunications sector is facing an existential crisis. Rising operational costs, economic instability, and infrastructural challenges threaten to derail its sustainability. At the heart of the debate is whether a tariff hike is necessary to keep telecom operators afloat. MTN Nigeria’s Chief Corporate Services Officer, Tobe Okigbo, argues that without an upward tariff review, the industry may soon struggle to provide basic services. This article delves into the telecom industry’s financial distress, the necessity of a tariff review, and the broader implications for Nigerian consumers and investors.

A Critical Crossroads for Nigeria’s Telecom Industry

Nigeria’s telecom industry is under immense financial strain, with costs rising and infrastructure deteriorating. The last tariff review happened over a decade ago, making the current pricing model unsustainable. MTN’s Tobe Okigbo insists that increasing tariffs is essential—not for profits, but for survival.

Key Points from

  • Risk of Network Collapse: Without tariff adjustments, the telecom industry could face a service collapse, which could take years to restore.
  • Sustainability vs. Profitability: The focus is not on profits but on keeping networks operational. Many telecom operators are forced to take large loans just to maintain services.
  • Economic Challenges: Inflation and currency devaluation have significantly increased the cost of running telecom operations.
  • Foreign Investment at Risk: Investors may withdraw from Nigeria’s telecom sector if even major players like MTN struggle to survive.
  • Consumer Concerns: Nigerians are already burdened by inflation, and an additional tariff hike adds more financial pressure.
  • Quality of Service Issues: Poor network quality results in revenue loss for telecom companies, contradicting the misconception that they profit from service failures.
  • Infrastructure Challenges: Frequent fiber cuts and vandalism significantly impact service quality, with MTN reporting 37 daily incidents.
  • Government Intervention: The Nigerian government has declared telecom infrastructure critical national infrastructure, signaling greater protection and stricter penalties for vandalism.

Okigbo emphasized that the planned tariff increase would ultimately benefit consumers by improving service quality and boosting GDP. While subscribers are concerned about affordability, telecom operators argue that without this adjustment, service disruptions could become the norm.

What Undercode Says:

Nigeria’s telecom industry stands at a pivotal moment, where decisions made today will shape the sector’s future for years to come. Let’s break down the key analytical takeaways from MTN’s tariff hike argument:

1. The Economics of Tariff Adjustments

Telecom operators operate in a high-cost environment, dealing with power shortages, inflation, and currency depreciation. The cost of importing telecom equipment has skyrocketed due to the naira’s devaluation. With diesel prices rising and network expansion projects becoming costlier, maintaining stable pricing becomes unrealistic. MTN’s argument holds weight: without a price adjustment, operators will struggle to sustain services.

2. Consumer Impact and Affordability

A major concern is how this affects ordinary Nigerians. The average consumer is already facing increased prices for food, fuel, and electricity. A telecom tariff hike could mean higher costs for internet and calls, which could negatively impact small businesses and freelancers who rely on affordable connectivity.

3. The Role of Government Policy

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4. Infrastructure and Service Quality

MTN argues that higher tariffs will fund better network infrastructure. However, consumers remain skeptical, as past tariff hikes have not always translated into service improvements. Telecom companies must ensure that additional revenue is reinvested in improving network reliability.

5. Foreign Direct Investment (FDI) Concerns

MTN highlights the potential withdrawal of foreign investors if Nigeria’s biggest telecom firm continues to struggle. If investors lose confidence, it could lead to reduced capital inflows, further weakening the industry. The government must strike a balance between protecting consumers and ensuring telecom firms remain attractive to investors.

6. Alternative Solutions

Rather than solely relying on tariff hikes, telecom companies should explore cost-cutting strategies such as renewable energy solutions for base stations, localizing equipment manufacturing, and streamlining operational costs. Innovation in infrastructure management could also reduce network downtimes without directly transferring costs to consumers.

7. The Timing Factor

One critical question remains: is now the right time for a tariff hike? With inflation at record highs, the timing could worsen economic hardship for Nigerians. While telecom operators need financial relief, a phased approach or government-backed subsidies might be a more balanced solution.

8. Consumer Trust and Industry Accountability

If telecom companies want consumers to accept price increases, they must rebuild trust. Many subscribers doubt whether higher tariffs will lead to better service. A transparent roadmap on how the extra revenue will be used could ease concerns.

9. The Global Perspective

Telecom industries in other countries have successfully managed cost surges through flexible pricing models, government interventions, and infrastructure-sharing agreements. Nigeria can learn from these global best practices to prevent overburdening consumers.

10. The Future of Nigeria’s Telecom Industry

If managed correctly, a tariff adjustment could revitalize Nigeria’s telecom industry, attract investment, and improve service quality. However, without proper execution and accountability, it could lead to consumer dissatisfaction and reduced mobile penetration. The Nigerian Communications Commission (NCC) must play a crucial role in ensuring fair pricing and service quality.

Fact Checker Results

  1. Telecom Service at Risk: TRUE – Rising operational costs and currency depreciation have put significant strain on the telecom industry. Without intervention, service disruptions could become frequent.
  2. Foreign Investors May Withdraw: PARTIALLY TRUE – While struggling telecom companies may deter investors, other factors like market potential and regulatory policies also influence investment decisions.
  3. Tariff Increase Will Improve Service Quality: UNCERTAIN – While higher tariffs could provide funds for infrastructure improvements, past experiences suggest that service quality improvements are not always immediate.

References:

Reported By: https://www.legit.ng/business-economy/technology/1643184-tariff-hike-solution-nigerias-telecoms-industrys-survival-tobe-okigbo/
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