FX crunch for telecoms slows down N1.4trn expansion drive

FX crunch for telecoms slows down N1.4trn expansion drive

Posted by Sylvester on Monday, December 29, 2014 0

Sponsored Advertisement?

The recent ban on import of electronics, and telecommunications equipment with official Foreign Exchange (FOREX) by the Central Bank of Nigeria (CBN) is slowing down on-going network expansion initiatives across the country, as the cost of infrastructure procurement and rollout rises, market observers say.

The implication of the ban is that importation of these items would no longer be funded with FOREX purchased from the bi-weekly Retail Dutch Auction System (RDAS) sessions conducted by the CBN.
According to the CBN, the decision was specifically aimed at maintaining existing stability in the FOREX market, whilst strengthening the ailing naira and conserving foreign reserves.

Mobile operators have warned that the ban, which is one in a series of steps taken to cushion the impact of falling oil prices, will drive up the cost telecoms equipment and 3G smartphones.
This outcome is however not in consonance with the larger objectives of the National Broadband Plan (NBP).
The Federal Government has already set the target of an 80 percent growth penetration in 3G services by 2018, in consonance with the NBP. “Mobile operators will need more naira to buy foreign exchange.

It simply increases the cost of telecoms equipments and certainly affects rollout plans”, said Akinwale Goodluck, corporate services executive at MTN Nigeria, in an interview with BusinessDay. According to Goodluck, telecoms operators in the country still have a lot of ground to cover, in terms of mobile network coverage and access. According to the ministry of communications technology, 40 million Nigerians still lack access to basic Information Communications Technology (ICT) services.

Market observers are however of the view that the apex bank’s ban on import of equipment with foreign exchange is particularly worrisome, considering the limited number of Base Transceiver Stations (BTS) in Nigeria, Africa’s most populous nation. The country has an estimated 30, 000 BTS.
This figure, they say, is grossly inadequate to meet the communications needs of over 130 million active mobile phone subscribers in the country.

“Nigeria’s telecoms operators, put together need over 60,000 functional telecoms towers to be able to deliver top-notch services to their growing subscribers”, said Olusola Teniola, chief executive officer, Internet Solutions Limited, in a report. Estimates are that it cost about N24.75 million to install a single base station, along with its tower, special antennas and two generators to power the site.
Industry experts told BusinessDay yesterday, that telecoms towers are like the central telecoms towers are like the central nervous systems of communications because they allow mobile subscribers across the country make and receive calls.
To deploy 60, 000 base stations, mobile operators will however require an estimated N1.4 trillion in order to meet the Quality of Service (QoS) mandates of the industry regulator, the Nigerian Communications Commission (NCC).
According to O.I Gbadamosi, director of Trade and Exchange Department, CBN, in a circular, titled, ‘Exclusion Of Transactions From RDAS Window’, the decision to move in this direction is however necessitated by the need to strengthen the various policy measures already initiated by apex bank.
Mobile operators say that the apex bank’s decision only adds more complexity to network deployment. They further say that the industry is still grapling with other issues which hinder the deployment of critical network infrastructure.
 These, they say, include multiple taxation and regulation, delays in site approvals and inordinate Right of Way (RoW) charges. Beyond this, Goodluck says the CBN’s recent declaration on imports will have a massively negative impact on Nigeria’s broadband plans and targets. The broadband plan seeks to promote cheaper access devices from Original Equipment Manufacturers (OEMs) by challenging the industry to produce sub-$30 smartphone devices.

According to Goodluck, the country’s low smartphone penetration will remain a tough nut to crack in view of the CBN ban, as the cost of smartphones will rise. MTN, the nation’s largest mobile operator, with about 56 million customers, says that there are only 12 million 3G smartphones in Nigeria, out of a population of 170 million.
“The ban would mean that smartphones and devices will remain unaccessible to the majority of Nigerians.” In recent times, telecoms companies in Nigeria, have urged handset makers operating in-country to drive down the cost of smartphones in order to trigger greater usage of 3G (Third Generation) data services.

High smartphone acquisition cost has been identified as the major barrier hindering widespread adoption and usage of 3G data services in the country.