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Inflation: Telecom tariff hike imminent as operators await NCC’s clearance

Telecommunications operators in Nigeria are preparing for a tariff increase for voice and data services, reflecting the current economic conditions.
A cost-based study by KPMG, commissioned by the Nigerian Communications Commission (NCC), is nearing completion and is expected to recommend higher tariffs due to various economic pressures, including high diesel costs and the depreciation of the naira.
Telecom officials emphasize the urgency of the tariff revision, warning that delays could jeopardize the viability of telecom businesses.

Telecommunications operators in Nigeria are preparing to increase tariffs for voice and data services to reflect the current economic conditions in the country.

We learned that a cost-based study conducted by KPMG, the consultant hired by the Nigerian Communications Commission (NCC), is nearing completion.

This study aims to recommend the most appropriate pricing structure for the industry based on its findings considering the economic variables of the operating environment.

Officials from various telecom companies, speaking to Nairametrics, indicated their anticipation for the NCC’s decision based on the study’s outcomes. They expect the study to recommend an increase, citing several industry indicators that point towards the need for higher tariffs.

According to these officials, adjusting prices upwards is essential for sustaining the telecom business amidst current economic challenges, such as the high cost of diesel and the significant depreciation of the naira against the dollar, which affects equipment imports.

A matter of urgency

An official from the telecom sector, who preferred to remain anonymous, expressed to Nairametrics that the planned price increase has become critically urgent. Delaying it further, he warned, could threaten the viability of some telecom businesses.

The official highlighted that with the majority of their costs in dollars and earnings in Naira, sustainability is impossible without a tariff revision, especially as equipment importation becomes increasingly costly.

“We are earning in Naira and about 80% of our costs are in dollars. There’s no way we can have a sustainable business without increasing our prices with the value of the Nigerian currency falling every day.
“Already, it’s becoming very difficult to import equipment as costs continue to increase. So, increasing tariffs is no longer a matter of choice. It is a matter of urgency because a further delay will be at the detriment of the industry,” he said.

Another industry source, who also spoke in confidence with Nairametrics said:

“You know we are a heavily regulated industry. While the increment has been due since 2022 when the cost of diesel that powers our base stations jumped to N800 per liter, we had demanded for an increment, but the regulator said no.
“But they have also realised that the survival of the industry is at stake and that was why the cost-based study was commissioned. What we are waiting for now is the report of the study, which will give us the idea of a new floor price.”

ALTON’s call for price increment

The Association of Licensed Telecommunications Operators of Nigeria (ALTON) has been advocating for a tariff hike, citing rising operational costs.

In a recent meeting with Dr. Bosun Tijani, the Minister of Communications, Innovation, and Digital Economy, ALTON Chairman Engr. Gbenga Adebayo argued that the tariffs set by the regulator are insufficient in light of escalating operational expenses.

He pointed out that, unlike the telecom sector, other heavily regulated industries like power and insurance have seen price increases to reflect macroeconomic changes and the increased cost burden on operators.

While noting that the current price of services as pegged by the Nigerian Communications Commission (NCC) is unsustainable, the ALTON Chairman said:

“Insurance prices have risen 200% with power raising prices by over 40%. Telecommunications is the only sector that has not experienced a pricing regulatory framework review raising prices notwithstanding local and global macroeconomic realities.
“Not only has this impaired investor confidence and depleted available investible funds necessary to optimize infrastructure for improved service delivery, but it also threatens the very sustainability of our members’ operations.”

Price regulation in the telecom sector

In line with the provisions of Sections 4, 90, and 92 of the Nigerian Communications Act (NCA) 2003, which entrusts the Commission with the protection and promotion of the interests of subscribers against unfair practices including but not limited to; matters relating to tariffs and charges, regulates tariff in the telecom industry.

The Commission said it makes sure that the price regulation is guided by regular cost-based and empirical studies to determine the appropriate cost (upper and floor price) within which service providers are allowed to charge their subscribers for services delivered.”

“The Commission ensures that any cost determined, as an outcome of such transparent studies is fair enough to enhance healthy competition among operators, provide wider choices for the subscribers as well as ensure the sustainability of the Nigerian telecoms industry,” it added.

Rising inflation

Double-digit inflation has hit virtually every product in Nigeria with consumers feeling the pinch from higher prices while a weaker naira currency has added to the costs. In January this year, Nigeria’s headline inflation rate surged to 29.90%, surpassing the previous month’s rate of 28.92%.

The year-on-year comparison also reveals a significant rise, with the January 2024 inflation rate being 8.08% points higher than the rate recorded in January 2023 (which was 21.82%)1.

On a month-on-month basis, the inflation rate for January 2024 stood at 2.64%, slightly higher than December 2023’s rate of 2.29%1. These figures highlight the ongoing inflationary pressures in Nigeria.