The hyper-inflation in the Nigerian economy that has impacted negatively on the purchasing power of consumers has shown its ugly face even in the most unlikely sector.
Since its inception in the nation’s economic system, the telecoms sector has always sustained wonderful growth and huge contribution to the GDP.
But that has also changed in the past one quarter of the year as citizens battle to fix more pressing needs with their little income its purchasing power has seriously diminshed.
However, even with the bad weather it faces, it still contributed a large chunk to the GDP at the time under review.
Its slowdown was essentially in the 2023 Q3. The contributions of the sector, in real terms, declined by N219.97 billion. This is a 8.38 percent quarter-on-quarter decline and coincides with the increasing foreign exchange loss recorded by telcos.
During the period, telecoms contributed N2.63tn to real GDP, a slight decrease from the N2.85tn it recorded in Q2, 2023.
Nigeria’s GDP grew by 2.54 percent (year-on-year) in real terms in Q3 2023, driven largely by the service sector (that includes telecoms), which recorded a growth of 3.99 percent and contributed 52.70 percent to the aggregate GDP.
Commenting on the growth of the Information and Communication sector, which constitutes telecoms, the National Bureau of Statistics said, “The sector in the third quarter of 2023 recorded a growth rate of 6.69 per cent in real terms, year-on-year.
“From the rate recorded in the corresponding period of 2022, there was a decrease of 3.84 per cent points. On a quarter-on-quarter, the sector exhibited a growth of -10.30 per cent in real terms.
“Of total real GDP, the sector contributed 15.97 per cent in the 2023 third quarter, higher than in the same quarter of the previous year in which it represented 15.35 per cent and lower than the preceding quarter in which it represented 19.54 per cent.”
The growth of the telecoms sector in recent years is evidenced by its sustained contributions to GDP. However, a challenging macroeconomic environment is now threatening this.
Record high inflation has reduced purchasing power and a currency reevaluation has cut margins.
In the first nine months of the year, MTN Nigeria and Airtel Africa (the only two telcos publicly traded) lost N479 billion to currency revaluation and recorded reduced profit margins.
On its part, Airtel recorded a loss of $13m. The firm said, “Loss after tax was $13m driven largely by a foreign exchange loss of $471m recorded in finance cost before tax and $317m after tax because of the devaluation of the Nigerian naira in June 2023. This impact has been classified as an exceptional item.”