Economy loses N18bn FDI to foreigners in telecoms

Economy loses N18bn FDI to foreigners in telecoms

In spite of the significant growth recorded in Nigeria’s telecommunications industry after it was successfully liberalised in 2001, very little of the $18 billion Foreign Direct Investment (FDI) in the sector over the years has been retained in the country, industry analysts have said.


This, according to the industry analysts, is due to the dearth of a local content law in the sector, and has resulted in enormous capital flight.

London-based research firm, Pyramid Research, highlighted that revenues generated by the telecoms industry amounted to $8.6 billion in 2010. This, according to the research company, shows an increase of 6.7 percent over the revenues generated by telecoms operators the previous year.

Going forward, Pyramid Research predicted that revenues would hit $11 billion (N1.7 trillion) by 2013. Beyond this, Nigeria ’s highly competitive telecoms (ICT) sector is clearly dominated by foreign players, which according to industry analysts accounts for the huge capital flight recorded in the sector. There are strong reservations in the telecoms industry that what Nigerians derive from this industry has been diminishing over the years due to low levels of local participation in the sector. Industry analysts have however criticised the Federal Government’s failure to formulate and implement enabling policies geared towards strengthening local content and encouraging the patronage of locally manufactured ICT products.

But more importantly, industry watchers have called for the formulation of a telecoms version of the Petroleum Industry Bill (PIB), which is essentially aimed at enhancing increased local participation in the oil and gas industry. BusinessDay further gathered that the country’s ICT landscape loses N68.4 billion annually to bandwidth purchase from organisation and businesses abroad.

Omobola Johnson, Minister of Communication Technology, had earlier disclosed that Nigeria’s purchase of foreign-made phones, SIM cards, computers and software maintenance had gulped over N59 billion. BusinessDay investigations reveal that the fences used to secure the telecoms masts (base transceiver stations) are imported into the country by operators.

Emmanuel Ekuwem, past president of the Association of Telecommunications Companies of Nigeria (ATCON) confirmed this, saying, “It is a worrisome situation for us in this country. It is true the fences built around telecoms mast are imported. Do you know that some of the network components that could be manufactured locally are imported? Just think about the spin-off jobs that could be created by manufacturing some of these things locally. It is a shame because any serious nation that intends to take its place in the comity of nations must develop IT products and solutions.

“The bad news is that very little of the much talked about $18 billion investment remain in Nigeria because of very low local content contribution to the sector.

“The industry is import-intensive. We keep on carrying cartons of manufactured products into the country. There is an urgent need for Nigerian content development in the ICT industry. We need an equivalent of the PIB in the ICT/telecoms industry. What is good for the petroleum industry is also good for the ICT industry. Our governments at all levels must begin to patronise made-in-Nigeria ICT goods. We must patronise Nigerian experts. Very often, we pay them peanuts, while paying their foreign counterparts that we engage a hundred times over.”

Lending her view to the issue, Funke Opeke, chief executive officer, MainOne Cable Company, told BusinessDay that Nigeria remains largely a consumer of telephony services.

“ Nigeria contributes minimal local content to the services enjoyed. Telecom has become a larger part of our Gross Domestic Product (GDP), so it creates some jobs and income; however, the significant gains from providing the initial capital, network and subscriber equipment, software and specialised services are gained offshore. This trend, in all honesty cannot foster discernible economic growth.”

For Dagogo George of the National Office for Technology Acquisition and Promotion (NOTAP), it is disturbing to the discerning mind that what Nigerians celebrate as huge FDI in telecoms may have in actual fact led to unrestrained capital flight.

“Yes, it is true that through FDI, investible funds, technical and managerial expertise, as well as know-how are brought into a country but the receiver-nation must have the ‘magnet’ to absorb and retain some of the funds, the expertise and the know-how in order to depend less on importation and fast-track the development of its economy. Without such a ‘magnet’ a country cannot benefit from FDI, no matter how huge it may worth. This is why Nigeria has not benefited much from the said $18 billion FDI in the telecoms sector”, he explained.

Industry analysts are all agreed that the wholesale importation of ICT products used in the country is a vivid indication that Nigeria is not benefiting much from the huge FDI at its disposal.

The Federal Government, through the Ministry of Communications Technology had only recently released a draft National ICT Policy aimed at fast-tracking growth in the industry. The policy states that inadequate local content development is one of the challenges facing the nation’s ICT industry. The draft policy document further states, “ICT local content is grossly underdeveloped in Nigeria . This has resulted in over-dependence on the foreign importation of software and hardware and diminished opportunity for capacity building in ICT content creation. In addition, there has been the related drain on the Nigerian foreign exchange.”

To tackle the challenges, the policy document specifies that efforts must be made to ensure that local content, including the production of local software and hardware, is properly developed through appropriate local content laws; content development in indigenous languages; and encouragement of the industry to focus on solutions and services that meet the needs of the society.


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