BOOSTING DIGITALISATION AND ECONOMIC GROWTH

 Folalumi Alaran argues that an enabling policy and regulatory framework are critical to realising the full potential of Nigeria’s digital transformation

In the face of serious economic and developmental challenges, the Nigerian government through the Strategic Blueprint of the Federal Ministry of Communications, Innovation, and Digital Economy has identified digitalisation as a key enabler to stabilize and strengthen the macroeconomic environment. It is pursuing structural reforms, creating an environment conducive to private and public sector growth and job creation, while concurrently recognising the need to diversify away from the reliance on the oil and extractives sector. This shift towards diversification underscores the digital sector’s significant role in steering Nigeria towards a more resilient and dynamic economic future.

The largest contribution of the digital sector to Nigeria’s overall GDP is through the impact digitalisation has on the productivity of other sectors. For example, in the short-term, measures such as cash transfers to citizens can be done more quickly and efficiently using mobile money payment platforms. Digital technologies also boost productivity in the agricultural sector through increased use of agricultural inputs, better storage facilities and more coordinated support across agencies with the use of digital technologies to communicate and support small-scale farmers. 

It is estimated that, in 2023, the telecoms sector was contributing 13.5% to the GDP of Nigeria. Considering the direct and indirect contribution of the mobile ecosystem, as well as the productivity impact throughout the economy, the telecom sector’s contribution to Nigeria’s overall economic activity is much greater, estimated at 33 trillion NGN in 2023, with 2.4 trillion NGN in tax revenue contributions. 

The GSMA recently published its latest report ‘The role of mobile technology in driving the digital economy in Nigeria’ which 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. Connectivity to mobile services, including Mobile Money is the foundation on which digitalisation is built. The Mobile Network Operators (MNOs) are committed to investing to support the realization of the digitalisation ambitions that will unlock economic growth and development in the country.

To unlock these economic opportunities, connectivity and mobile financial services are crucial foundations. The GSMA’s report emphasizes that while 29% of Nigerians are regularly using mobile internet, there remains untapped potential, as 71% are not accessing these services on a regular basis. An improved policy environment has the potential to help the industry boost coverage and adoption, resulting in 15 million additional internet users by 2028. 

However, the sector faces challenges to infrastructure deployment. These include: Complex and costly process of securing Rights of Way (RoW) significantly increases the time and costs associated with rolling out infrastructure. 

The complex tax environment in Nigeria, providing for high and increasing costs of tax compliance because of the complex and overlapping tax structure within the country.

Increasing costs are making it difficult for the industry to maintain sustainable levels of investment. 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, increased government fees and levies, and increased demand for forex, in an import-dependent environment, due to contractual obligations for network infrastructure and services that are denominated in USD.

Transforming Nigeria into a digital economy, an enabling policy and regulatory framework will be critical to realizing the full potential of Nigeria’s digital transformation, as recognised in Nigeria’s Strategic Plan 2023 – 2027 as well as the Federal Ministry’s National Broadband Alliance for Nigeria (NBAN). Without universal access to digital connectivity, a broader digital transformation of the Nigerian economy is not possible. 

It is clear that the mobile industry is a key partner for the government in achieving its objectives and can contribute to some of the key elements of the government’s plan. The value of this contribution can significantly increase with the necessary support from the government required to overcome the obstacles outlined above. 

To this end, the report recommends initiatives to support policymakers in creating an economic and regulatory environment that supports growth, investment, and competition. These include implementing a legal framework for critical national infrastructure to address challenges in building network infrastructure; simplifying and improving the process for issuing RoW and standardizing it across the country; reducing the industry’s tax burden to help cut operating costs; and creating a regulatory environment that supports sustainable investment. 

Head of sub-Saharan Africa at the GSMA, Angela Wamola, said: “High-speed connectivity is the bedrock of any digital nation, and the Nigerian government recognises the mobile industry’s role in laying key foundations on which digital transformation is built. Future policies should be geared towards reducing the cost and complexity of infrastructure rollout to encourage investment and boost the adoption of mobile broadband. The impact of such actions would go far beyond mobile, driving productivity gains across the economy and creating millions of new jobs in Nigeria.”

Alaran writes from Lagos