IMPACT OF TELECOMMUNICATION LIBERALIZATION IN NIGERIA

BY

AKINYOMI, OLADELE JOHN

Department of Financial Studies, Redeemer‟s University, Km 46, Lagos/Ibadan Express-Way Ogun State,

Nigeria; GSM: +2348038673767; E-mail: delejohn21@yahoo.com

&

TASIE, CHUKWUMERIJE

Harmony Steel & Construction Company Limited, 143 Aba Road, Port Harcourt, Rivers State;

GSM: +2348037881872; E-mail: tasiechukwumerije@yahoo.com

Abstract

This study examined the impact of the telecommunication liberalization in Nigeria. The goal of the study

was to examine telecom contribution to gross domestic product (GDP), volume of local and foreign direct

investment, employment generation and the availability of telecom services to the majority of the citizenry.

Secondary data were used for the study while descriptive analytical tools were employed in the data

analysis. Findings from the study revealed that telecommunication liberalization has increased employment

opportunities to many Nigerians. The numbers of people that have direct access to telecom services in

Nigeria have also increased tremendously. The study further revealed that the total revenue accruing to the

government in form of tax and other charges from the telecom sector has increased greatly. Moreover, the

study revealed that the liberalisation of the telecommunication sector has boosted local and foreign direct

investment (FDI) in the country. Likewise, the contribution of telecommunication sector to real GDP has

increases tremendously. Finally, the study showed that telecommunication sector plays important role in

social transformation in Nigeria by bringing connectivity to remote areas and to lower‐income strata of the

population. The main recommendation, which is to the Federal Government of Nigeria, is the full

liberalization of the power sector.

Key Words: Liberalization, Telecommunication Sector and Nigeria

Introduction

In recent times, the service industry has become prominent in global economy as its contribution to gross

domestic product (GDP) has increased significantly. According to Adesanya (2011), services currently

represent over 60% of gross national product (GNP) in most of the developed economies, while the sector

remains an influential factor in the performance of manufacturing and resource industries in most countries.

All the world‟s leading economies (excluding China) have one thing in common; their service sectors are the

leading contributors to their GDP. The United States, Japan and Germany, three of the world‟s top four

leading economies; have the services sector contributing 76.9, 76.5, and 72.3 per cent of their GDPs

respectively. Among the emerging markets, the situation is not different. India, Russia, Brazil and South

Africa, four members of the BRICs group (Brazil, Russia, India, and China), have the service sector

contributing 54.9, 60.5, 68.5, and 65.9 per cent to their GDPs respectively (see Gržinic, 2010; Williams,

2011; Kotler & Armstrong, 2006).

In Nigeria, the privatization of public enterprises as well as the pursuit of deregulation/liberalization policies

has contributed immensely in the rapid growth of the country‟s service sector (Mohammed, 2007. Until the

full liberalization of the industry in 1999, the telecommunication industry in Nigeria, similar to other

developing nations had only one telecommunication service provider (see Otieno & Atigula, 2006; Lahcen,

2005). However, as a result of the liberalization of the sector, there are thirty-eight telecommunication

operators in Nigeria as at May 2011 (Blackherald, 2011). The story is the same in other service sectors like

health, aviation, road transportation and tourism which have all witnessed private operators in large

numbers.

Problem Statement

Although the liberalization of the Nigerian telecom industry has been applauded by many practitioners and

investors, however, there is need to provide empirical evidence on how the liberalization of the industry has

impacted the Nigerian economy and the Nigeria society at large. There are limited studies in this area. It is

this gap which this study sets out to fill.

Objectives of the Study

The reform of the telecom sector according to Ndukwe (2007) is expected to lead to improved services,

attract local and international investment, generate revenue for the government, increase sector efficiency

through competition and extend services to under-served and un-served areas. Therefore, the objective of

this study is to determine, with empirical evidence, the impact of the telecom liberalization in Nigeria.

Specifically, the study will examine telecom contribution to gross domestic product (GDP), volume of local

and foreign direct investment attracted to the economy through the sector, and the availability of telecom

services to the majority of the citizenry.

Research Questions

The research questions which guide this study include the following:

1. What was the state of the Nigerian telecom industry before liberalization as compared with what it is

now after liberalization?

2. What impact has the telecom liberalization on employment in Nigeria?

3. What impact has the telecom liberalization on foreign direct investment in Nigeria?

4. What impact has the telecom liberalization on the gross domestic product (GDP) in Nigeria?

Methodology

Data used for this study were obtained essentially from the secondary sources. The sources include: National

Communication Commission data-base, Pyramid Research data-base, Newspapers, Journals, Central Bank

of Nigeria (CBN) Statistical bulletin, Quarterly Reports of the Telecom Operators and the Internet.

Descriptive statistics were used in the analysis of the data collected.

Telecom Liberalization

The concept of liberalization is often used in place of deregulation. Deregulation is the process of removing

restrictions on prices, product standards and types, and entry conditions (see Ikpe & Idiong, 2011 and

Parkin, et al., 1997). It has been introduced where the existing regulation is thought to cause a barrier to

entry in a market thereby reducing competition. According to Wikipedia (2009), liberalization refers to a

relaxation of previous government restrictions, usually in areas of social or economic policy.

Liberalization can take place via unilateral or multilateral arrangements. Unilateral liberalization is initiated

by a given country without any external influence. According to Oyejide & Bankole (2001), the driving

force of such an approach is the strong need to restructure and reposition the economy for sustainable

growth, achieved through the establishment of pro-competition regulatory and institutional framework. On

the other hand, multilateral liberalization is when external government(s) or international institution(s) exert

pressure on a given country to reform trade or social regulations. Multilateral approach is superior to the

unilateral approach because it assists countries to lock in or sustain reforms, and enhance their predictability

and stability as well as transparency (Oyejide & Bankole, 2001).

Pre-Liberalization Era of the Nigerian Telecom Industry

The journey to success in Nigeria telecommunication milieu has been long and tortuous. Telecommunication

facilities in Nigeria were first established in 1886 by the colonial administration. At independence in 1960,

with a population of roughly 40 million people, the country only had about 18,724 phone lines for use

(Ajala, 2005). This translated to a tele-density of about 0.5 telephone line per 1,000 people. The telephone

network consisted of 121 exchanges of which 116 were of the manual type and only 5 were automatic

(Nigeriafirst, 2003 and Ajiboye et al., 2007).

From 1960 to 1975, telecommunication did not receive required government attention in terms of

infrastructural development. However, the third national development plan of 1975-1980 targeted significant

improvements in capacity and infrastructure in telecoms. In 1984/85, the telecom service was

commercialized and thus, the Department of Post and Telecommunication became separated. Nigeria

Telecommunication (NITEL) was created as government owned monopoly operator to provide a range of

services such as Fixed Telephone, Telegraph, and Payphone. The installed capacity improved to 400,000

lines, while the connected lines stood at between 205,000 and 250,000 lines in 1987 (Ndukwe, 2003). It

could be argued that the low number of connected line was as a result of poor services provided by NITEL.

Ndukwe (2003) remarked that between 1987 and 1992, no remarkable improvement was recorded in

performance by NITEL and consumer demands were largely unmet. This prompt the Federal Government of

Nigeria under the military administration of General Ibrahim Badamasi Babangida to embark on market

oriented reforms by partially liberalizing telecommunication sector.

Post-Liberalisation Epoch

The Nigerian Communication Commission Decree (NCCD) 75 was promulgated in 1992 and became the

main legislation governing the telecommunication sector (Oyejide & Bankole, 2001). The decree liberalized

various aspects of telecommunications activities including the installation of terminals or other equipment;

provision and operation of private network links employing cable, radio communication or satellite

exclusively within Nigeria; provision and operation of public mobile communication (GSM standard);

provision of community telephones; provision and operation of value – added network services; repair and

maintenance of telecommunications facility; and cabling. Thus, the establishment of a strong and

independent regulator becomes a prerequisite to enforce rules and regulations (Ndukwe, 2003). That was

why NCCD also set up the government regulatory agency in the telecommunication sector - Nigeria

Communication Commission (NCC). NCC regulates the sector but it is supervised by the Federal Ministry

of Communications. The NCC seeks to create a proper regulatory environment for the supply of

telecommunication services and facilities, promotes fair competition, establishes technical standards and

promotes Nigeria telecommunications. It is empowered to license private-sector operators, draw up technical

standards and rules as well as approve rates charged by operators. The NCC accredits foreign bodies and

provides type approval for telecommunications equipment and facilities for use in Nigeria. The body also

licensed all operators with the exception of NITEL in 1998 (Ndukwe, 2003).

However, the Federal Ministry of Communications is responsible for frequency allocation as well as

numbering plans and interconnection rates. NITEL takes charge of the technical management of frequencies

and requires the signing of an inter-connecting agreement between it and private operators before the later

can connect to national network (Oyejide & Bankole, 2001). The actual licensing of network operators or

service operators began in 1996 but NITEL continued to retain monopoly over voice Telephony in National

long distance, international long distance and mobile telephony (Ndukwe, 2003). Despite the huge potentials

offered by the Nigerian telecom market, progress was very slow. Private investment in telecommunication

was mere US$ 50 million dollars as at 1999, an average of just 1 telephone line to 250 inhabitants as at that

year; about half of the functional connected lines were held by government organizations and corporate

bodies; an estimated 4 million lines were concentrated mostly in some selected urban centres; weak

infrastructure base and poor quality of service in forms of low call completion rate and billing inaccuracy

(Ndukwe, 2003). Later, a series of liberalization measures were implemented in the telecom sector.

In 1999, Nigeria moved to join the digital age with the enthronement of democracy. The democratically

elected government showed keen interest in the full liberalization of the telecommunication sector. The

implementation of the policy has resulted in opening up to competition all the incumbent operator such as

national and international long distance services and mobile services. Table 1 below shows some of the

major milestones in the Nigerian telecom industry.

Table 1: Major Milestones in Nigerian Telecom Industry 1992 Enactment of Nigerian Communication Act (NCA) establishing the NCC to regulate the telecom

Industry

NITEL: Monopoly of telecom services in Nigeria 1 telephone to 440 people

1993 NCC Inaugurated: Starts issuing licences for various services including provision of payphone

services, community telephone services.

2000 National Telecoms Policy –short & medium term objectives to promote ICT

2001 DML auction-licences granted at US$285 million each to MTN and Econet now (Airtel); M-

Tel/NITEL‟s licence reserved. GSM services start in August 2001-MTN 1stNetwork to launch

2002 SNO carrier licence „auction‟ –Globacom granted licence at US$200 million

Long distance carrier licence –NEPSKOM & MTS 1stWireless

Regional Fixed Wireless Access Licences auction, awarded 50 licences

2003 NCA 2003 passed into law (amending 1992 Act), privatization process of NITEL commenced

2006 End of DML „exclusivity‟ period; introduction of Unified Licensing Regime

Post 2006 Convergence of technologies, 3G, 3.5G

Source: Dozie Pascal (2009): ICT Technology and Development: Implication for Nigeria. Retrieves from:

http://www.cbcglobal.org/CBCG_Library/Presentation by Pascal Dozie at ABF2009.pdf

One great achievement of the 1999 – 2003 democratic administration was the licensing of three (3)

companies – MTN, Vmobile and M-Tel by NCC in January 2001 to provide GSM services in Nigeria

(Nigeriafirst, 2003). However, the first GSM communication call was made in Nigeria in August, 2001

(Ajala, 2005). At the end of 2001, the total number of connected lines for mobile GSM telephones was

266,461 (NCC, 2008). In another development, Globacom Ltd. was granted Second National Operators

license in May 27, 2002 (Nigeriafirst, 2003). This had contributed to the rapid rise of the connected lines

from 266,461 in 2001 to 1,569,050 in 2002 (representing 488.85% increase). As at April 2011, the

connected lines have risen to 117,303,160 (see table 2).

Table 2: Snapshot of the Nigerian Telecom Industry Status of Industry 2000 2001 2007 2009 April 2011

Connected lines:

-Mobile

-Fixed

520,000

30,000

490,000

866,782

266,461

600,321

57,687,544

54,413,784

3,273,760

65,514,537

58,286,444

5,873,144 CDMA

1,354,949 Wire

117,303,160

103,347,158

11,793,523 CDMA

2,162,479 Wire

Teledensity 0.04% 0.73% 30% 46.80% 64.70%

Source: Dozie Pascal (2009): ICT Technology and Development: Implication for Nigeria http://www.cbcglobal.org/CBCG_Library/Presentation by Pascal Dozie at ABF2009.pdf

Tele-density which measures the proportion of telephone lines in relation to population, stood at 64.70% in

April 2011, up from 0.04% as at December, 2000. This means that 647 out of every 1,000 Nigerians have

access to telephone today, as against 4 out of every 1,000 in year 2,000. This is remarkable, in other words,

access to telecommunication by Nigerian has improved tremendously since the inception of the

liberalization policy. This situation is similar to that of Morocco as reported by Lahcen (2005).

Impact of Full Liberalisation

The full liberalization of the telecommunication has impacted on the economy in a number of ways. First, it

provides employment to many Nigerians. Mobile operators contribute to the economy by creating

workplaces and jobs that rely on the distribution of mobile technology and services. This contribution also

takes the shape of employment beyond the telecom operator ranks, by enhancing entrepreneurship,

productivity and other commercial skills. The use of mobile phones enables professional and economic

agents to multitask and carry out various activities simultaneously. In total, telecommunication operators

employed around eight thousand (8,000) people directly and around three million indirectly in 2008.

Although direct employment is easier to quantify, indirect employment has a wider and more profound

impact.

There are several groups, which can be divided into two sub-groups, which earn their living from mobile

services. These groups include:

• The top category of indirect employment encompasses equipment sales, infrastructure deployment,

advertising, marketing and public relations as well as security workers who are involved in the protection of

base stations. Reportedly, in 2008 Zain (now Airtel) employed as many as eight thousand (8,000) security

guards.

• At the base of the pyramid, there are mobile service resellers, recharge card distributors, retailers, phone

booth operators as well as street vendors. The so‐called mini call centres consist of simply one or a few

mobile phones and airtime bought in bulk from the operator. Call centre operators allow other people to use

the phone for a fee and quite often will take a message, also for a fee.

In the third quarter of 2007, Globacom alone provided direct employment to 2,500 people (see Pyramid,

2010). It could be inferred that the number employments directly and indirectly created by the telecom

operators have increased in manifolds. MTN Nigeria also provides a good example of how mobile operators

spur indirect employment. The operator has reorganized its distribution network, bringing down the number

of appointed distributors from 202 in 2007 to 111 in 2008. On top of that, there is a second and third level to

the distribution channel, amounting to around 5,700 contractors and more than 30,000 identified informal

distribution points as well as probably several hundred identified points that are currently being incorporated

into MTN records (see MTN, 2008). Many of these people are involved in selling prepaid scratch cards. It is

common in Nigeria to see people selling scratch cards among the cars trapped in a traffic jam or positioned

on street corners under an operator logo‐branded umbrella, selling airtime vouchers. Airtime for mobile

operators, including MTN, Globacom and Airtel is available via umbrella stands among other points of sale.

Secondly, the numbers of people that have direct access to telecom services have increased tremendously.

Prior to full liberalization, the total tele-density was 0.04 line per 100 inhabitants in 1999 (Ndukwe, 2003),

but increased to 1.89 in 2002 after full liberalization (NCC, 2008). By 2009, ten years after full liberalization

the total tele-density was 46.80 lines per 100 inhabitants in Nigeria, this rose to 64.70 lines per 100

inhabitants in April 2011. This implies that out of every 100 inhabitants, 64 are actively connected to

telecom services.

Thirdly, the total revenue accruing to the government in form of tax from the telecom sector has increased

tremendously after the liberalization of the sector. Licensing fees rank high among the direct ways in which

mobile operators contribute toward the economy of their host countries. In Nigeria, since the introduction of

GSM in 2001, the government has received more than $2.5bn from spectrum licensing fees. In 2007 alone,

the Nigerian federal government received a total of more than $1bn from the sale of licenses. The operating

licensing fees are of two categories. The first category is national mobility, the licensing fee for this amount

to 260 million naira. The second category is regional mobility, and the licensing fee ranges between 33

million naira and 9 million naira, depending on the state (NCC, 2006).

According to Pyramid (2010), telecommunication tax contribution to the total tax received in Nigeria in

2006, was 35% (total tax comprised import duties, employment taxes, value added tax and companies

income tax). For example, in 2005 MTN paid N9.8 million tax to the Federal Government of Nigeria, while

the company‟s workers paid about N1.1 billion as taxes to the government (see Table 1 and Bottom-line

2007). In the same year, the company paid N34.8 billion to government in the form of license fees, duties,

taxes, and other statutory payments to government at various levels. In 2007, a total tax of N150 billion was

paid to the Federal Government of Nigeria by MTN since it began operations in the country in 2000

(Bottomline, 2007). Also, the Federal Government has earned over N242 billion from spectrum licensing

fees (NCC, 2008).

Fourth, the liberalisation of the telecommunication has boosted local and foreign direct investment (FDI) in

the country. Since the introduction of GSM services in Nigeria, mobile operators together have invested

several billion dollars in infrastructure deployments, network rollouts, upgrades and expansions. To support

the mobile infrastructure, operators have also embarked on building backbone networks. These consist

predominantly of fiber‐optic cables, base stations and satellite connections, transmitting traffic between

cities and to other countries. MTN‟s famous Yellow Bahn fiber‐optic cable, for example, is more than

5,500km (3,400 miles) long.

Pyramid (2008) estimated that capital investments in mobile networks and operations have accounted for

80% of total telecommunications foreign capital investments (a total of more than $12bn by the middle of

2008) since the Nigerian government successfully liberalized the industry in 2001. As at March 2010, the

NCC reported $18bn in telecom sector capital expenditure, $16bn of which is invested by mobile operators.

In 2008, MTN increased its number of base transceiver stations (BTS) by 1,560, to reach 4,776; in 2009

additional 1,220 BTS were built, reaching a total of almost 6,000. In addition, MTN Nigeria has prioritized

the rollout of 3G sites, and 551 3G sites were operational in 2008. MTN is also building metropolitan fiber

rings around important commercial cities such as Lagos, Abuja, Ibadan, Port Harcourt, Kano, Aba and

Warri. Additionally, MTN Nigeria‟s total capital expenditure for 2009 was $1.2bn and it estimates its total

investment in network improvement in 2010 to be roughly $0.8bn. Zain Nigeria (now Airtel) is also

investing a significant amount of resources in its network. The operator has more than 4,000 base stations

and has contracted Nokia Siemens Networks to roll out its fiber‐optic backbone, which will soon reach

4,000km. New network rollouts require multimillion‐dollar budgets, estimated to cost $2bn.

Fifth, the contribution of the telecom sector to Real GDP has improved significantly. Table 3 and 4 below

showed the quarterly contributions of the telecom sector to real GDP from 1960 1980 and 1981 to 2009

respectively. In the first quarter of year 2000, telecom contributed merely 0.76% to real GDP, however, the

contribution increased to 2.17% and 3.51% in the last quarters of 2007 and 2009 respectively. As at 2010,

the contribution of telecom to real GDP was put at 8.2 per cent (Adesanya, 2011).

Table 3: Quarterly Contribution of Telecom Industry to Real GDP in Nigeria (1960-1980)

Year Q1

Telecom

Q2

Telecom

Q3

Telecom

Q4

Telecom

Q1 TGDP Q2 TGDP Q3 GDP Q4 GDP

1960 2.2 2.2 2.0 2.0 585.3 636.4 633.1 634.3

1961 2.3 2.3 2.1 2.1 589.0 639.6 633.2 639.3

1962 2.6 2.6 2.3 2.4 607.5 684.2 658.5 667.4

1963 3.0 3.0 2.7 2.7 659.2 721.3 716.1 729.1

1964 3.5 3.5 3.2 3.2 695.3 751.3 742..0 758.9

1965 4.0 4.1 3.6 3.7 744.2 800.8 787.0 814.8

1966 4.1 4.1 3.7 3.7 728.4 775.0 755.1 786.3

1967 2.3 2.4 2.1 2.2 598.1 642.6 629.8 656.9

1968 2.5 2.5 2.2 2.3 600.8 649.6 632.2 661.3

1969 2.5 2.5 2.3 2.3 770.8 820.0 796.8 837.9

1970 2.8 2.9 2.5 2.6 1028.0 1071.6 1035.2 1084.2

1971 3.6 3.6 3.2 3.3 1168.3 1195.6 1152.9 1198.4

1972 3.9 4.0 3.5 3.6 1214.2 1239.5 1185.0 1254.1

1973 5.5 5.6 5.0 5.1 1319.8 1344.9 1275.4 1369.9

1974 8.2 8.3 7.4 7.5 4164.6 3952.3 3749.2 4053.6

1975 11.4 11.6 10.3 10.5 7225.9 6752.9 6458.5 6734.7

1976 13.3 13.5 12.0 12.3 7766.4 7219.9 6897.2 7263.0

1977 13.6 13.8 12.3 12.5 8371.9 7798.5 7455.8 7894.1

1978 15.0 15.2 13.5 13.8 7642.0 7252.4 6879.7 7438.2

1979 15.3 15.5 13.8 14.1 7829.8 7414.8 7009.8 7693.6

1980 15.2 15.4 13.7 14.0 8059.8 7808.8 7380.4 8297.7

Source: CBN Statistical Bulletin for the various years. Real GDP was compiled from 1960 to 1973 using 1962/63

constant basic prices; while 1974 to 1980 using 1977/78 constant basic prices.

Table 4: Quarterly Contribution of Telecom Industry to Real GDP in Nigeria (1981-2009) Year Q1

Telecom

Q2

Telecom

Q3

Telecom

Q4

Telecom

Q1 TGDP Q2 TGDP Q3 GDP Q4 GDP

1981 30.3 30.7 27.4 28.0 53020.6 50928.0 49429.9 51843.5

1982 29.7 30.1 26.8 27.4 50900.7 49573.7 48192.9 51018.6

1983 19.2 19.5 17.3 17.7 47931.7 46102.2 44889.5 46674.7

1984 28.2 28.5 25.4 26.0 47793.3 45541.4 44396.0 45831.7

1985 33.9 34.4 30.6 31.3 51640.5 49927.8 48956.0 50511.9

1986 33.7 34.1 30.4 31.1 52748.6 51200.3 50341.8 51679.7

1987 34.1 34.5 30.7 31.4 52504.8 50848.2 49928.8 51524.9

1988 34.4 34.8 31.0 31.7 56069.6 54619.0 53669.1 55517.9

1989 35.1 35.5 31.6 32.3 60668.7 58849.3 57697.3 59514.3

1990 35.8 36.2 32.3 33.0 69200.3 66533.4 64939.3 66877.0

1991 3.6 37.0 32.9 33.6 67998.7 66054.4 64540.8 66785.3

1992 37.8 38.3 34.1 34.8 69743.4 67535.1 66037.0 68050.1

1993 39.1 39.6 35.3 36.0 70732.7 68389.5 66940.9 68770.0

1994 39.5 40.0 35.6 36.4 70737.6 68588.2 67189.6 68935.1

1995 41.5 42.0 37.4 38.2 72413.8 70122.8 68697.0 70173.8

1996 43.5 44.1 39.3 40.1 75716.1 73219.3 71703.8 73106.1

1997 46.1 46.7 41.6 42.5 77805.3 75334.2 73778.6 75104.4

1998 48.4 49.1 43.7 44.7 80217.8 77564.1 75983.5 77124.6

1999 51.0 51.6 46.0 47.0 80059.4 77992.1 76474.8 77657.2

2000 54.1 54.8 48.8 49.8 84673.6 82253.6 80550.2 81741.2

2001 625.2 633.2 564.0 576.3 91399.4 89281.0 87717.3 88596.6

2002 777.5 787.4 701.5 716.7 107423.1 108976.9 108668.6 108134.9

2003 986.7 999.2 890.1 909.4 118970.3 119880.7 119733.9 118948.1

2004 1357.8 1455.2 1552.7 1650.2 114617.6 123702.9 142373.6 146881.9

2005 1769.2 1896.7 2027.0 2158.7 120048.9 128755.5 153933.6 159193.4

2006 2355.5 2553.6 2731.6 2927.9 128579.8 135438.6 162498.8 169304.4

2007 3186.0 3414.4 3670.5 3955.0 135774.7 142790.5 173067.5 182618.6

2008 4215.0 4579.0 4962.2 5402.9 143627.6 150264.9 183457.7 197537.7

2009 5576.4 6144.2 6709.9 7382.0 148470.6 161748.4 196670.5 210146.9

Source: CBN Statistical Bulletin for the various years Real GDP was compiled from 1981 to 2009 using 1990 constant basic prices.

These results reflect the rising status of the telecom sector as the contributor to Nigeria‟s gross domestic

product (GDP). The telecommunication sector contributed 8.2 per cent to the GDP in 2010 (see Business

Day, 2011), this figure exceeded the combined contributions of manufacturing, banking and solid minerals

put at 3 percent, 4 percent and 0.4 percent, respectively.

Adesanya (2011) reported that the Ministry of Finance, in its medium-term Fiscal Strategy Paper for 2011-

2013, projects that the telecommunication sector will maintain an 8.2 per cent contribution level in 2012 and

2013 as competition remains stiff. This means that the growth in the telecommunication and other services

sectors is crucial to Nigeria attaining its aspiration of becoming one of the 20 leading economies in the

world by 2020.

Lastly, telecommunication has also play important role in social transformation in Nigeria by bringing

connectivity to remote areas and to lower‐income strata. In less than a decade, mobile technologies have

enabled network access for a large share of the country‟s population, thanks to the inherent ability of these

technologies to reach remote and sparsely populated areas both faster and more cost‐effectively than fixed

infrastructure.

Challenges Facing the Telecommunication Sector

The major difficulty faced by operators in this sector is that of infrastructural shortage. ALTON (2010)

reported that the existing infrastructural facilities in Nigeria are not sufficient to support telecom operations.

Similar to the situation in Kenya, as observed by Otieno & Aligula (2006), operating costs of mobile service

providers are also high due to poor infrastructure and high cost of electricity. To overcome this, both the global

system of mobile communications (GSM) and the code division multiple access (CDMA) operators, which have

between them 15, 000 base stations in the country, have had to resort to heavy-duty generators to meet their

power needs. Oketola (2011) reported that telecoms operators spend 3.63 billion naira monthly on diesel to fuel

their 20,000 generators. The generators which consume 25 million litres of diesel monthly are installed in 15,000 cell

sites across the nation. This means the operators are spending between about 100 billion naira annually on diesel to

power their generators, in order to maintain round-the-clock seamless operations. Such an overhead is considered

too heavy for the operators. The near absolute reliance on self-generated power supply for their operations helped

to create a warped cost profile for these companies.

One of the leading telecoms operators in the country, MTN Nigeria, had last year said it spent over 12

billion naira in acquiring generators to provide power for its many base stations nationwide. The company

added that it was expending 500 million naira monthly on diesel procurement and generator maintenance,

adding that it had 7,000 base stations covering 85 per cent of Nigeria‟s landmass, which must be constantly

powered. Available records show that the cost of generating power for each base station is 35 percent of its

construction cost and 68 percent of its operational cost. This huge overhead is the major reason for both the

high tariffs Nigerians have to pay for using mobile telecoms services and also the poor quality of services

the operators provide.

Conclusion and Recommendation

This study examined the impact of telecom liberalization in Nigeria. Among the objectives set for the study

was to examine telecom contribution to Gross Domestic Product (GDP), volume of local and foreign direct

investment attracted to the economy through the sector, and the availability of telecom services to the

majority of the citizenry. Secondary data were used for the study. Findings from the study revealed that

telecommunication liberalization has increased employment opportunities to many Nigerians. The numbers

of people that have direct access to telecom services in Nigeria have also increased tremendously. The study

further revealed that the total revenue accruing to the government in form of tax and other charges from the

telecom sector has increased tremendously after the liberalization of the sector.

Furthermore, the study revealed that the liberalisation of the telecommunication sector has boosted local and

foreign direct investment (FDI) in the country. Likewise, the contribution of telecommunication sector to

real GDP has increases tremendously (put at 8.2 per cent as at the end of year 2010). Finally, the study

showed that telecommunication sector plays important role in social transformation in Nigeria by bringing

connectivity to remote areas and to lower‐income strata of the population.

The main recommendation is in respect of the epilepsy power supply. It is recommended to the Federal

Government of Nigeria to speed up its power sector reforms, as doing so will bring great relief to the entire

economy. Full liberalization of the power sector is recommended to the Government. If Government will

provide uninterrupted power, then, the tariffs charged by the telecom operators for their services will

drastically reduce and quality of services provided by the operators will also improve tremendously.

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