Nigerian telecom operators are grappling with severe financial losses, with projections estimating a staggering $11.3 billion revenue erosion between 2022 and 2026. This crisis stems from an 11-year delay in approving a critical tariff adjustment, as revealed in an internal report by MTN Nigeria, obtained by TechCabal. The primary culprits behind this financial downturn are the sharp devaluation of the naira and prolonged regulatory inaction by the Nigerian Communications Commission (NCC), both of which have placed immense strain on operators’ ability to sustain their businesses.
Mounting Financial Pressure
Industry leaders, including MTN Nigeria’s CEO Karl Toriola and Airtel Nigeria’s CEO Dinesh Balsingh, warned that the delay in tariff approval had pushed the telecom industry to the brink of collapse. The rapid rise in operational costs rendered their financial positions unsustainable.
“The price increase, which was highly needed for the survival and continued growth of the industry, will enable us to continue investing in network infrastructure, expanding coverage, and delivering improved products and services that meet the evolving needs of our customers,” said Balsingh.
Impact of Naira Devaluation
A tariff adjustment became inevitable following the naira’s devaluation in 2022, coupled with liquidity challenges that often forced operators to rely on the parallel market for forex. By 2023, the exchange rate had plummeted to $1 to ₦900, further exacerbating costs and slashing profit margins. Given that telecom companies depend heavily on imported equipment, they found themselves trapped in a cycle of escalating expenses and shrinking revenues.
In 2023, MTN Nigeria posted its first loss since its 2019 IPO, recording a ₦137 billion deficit, primarily due to forex losses. Airtel Africa also reported its first-ever loss in Nigeria, with a post-tax deficit of $89 million for the financial year ending March 31, 2024.
“We were borrowing at 120% to fund our operations, which was unsustainable,” Toriola said during a media conference in Lagos on Tuesday. The forex crisis also impacted shareholder returns, as MTN Nigeria, which had consistently paid dividends from 2007 to 2022, saw payouts decline from ₦530 billion in 2022 to ₦196.67 billion in 2023.
Declining Government Revenue
Beyond industry losses, the tariff delay also led to a drastic reduction in government tax revenue from telecom operators. Although tax contributions initially rose from ₦329 billion in 2023 to ₦428 billion in 2024, they are projected to plunge by 92% to just ₦29 billion in 2025. This sharp decline could have significant implications for government finances.
Toriola noted that MTN Nigeria had explored various cost-saving measures, such as seeking import waivers, but these efforts were insufficient to counteract rising expenses from power costs, taxes, and right-of-way fees. “Any relief from waivers would have come at a cost to the government, which would have been irresponsible,” he explained.
Delayed Tariff Increase and Industry Rebound
In response to worsening conditions, telecom operators initially proposed a 40% tariff hike in 2022. However, as the naira continued its downward spiral, a 100% increase became essential for the sector’s survival. According to the MTN report, total industry revenue plummeted from $7.62 billion in 2022 to $6.87 billion in 2023 and dropped further to $3.55 billion in 2024.
After years of advocacy, the long-awaited tariff increase was finally approved on January 20, 2025, offering a lifeline to the struggling sector. With the new pricing structure in place, telecom revenues are projected to recover, rising to $6.67 billion in 2025 and reaching $8.33 billion in 2026.
However, industry experts warn that the prolonged delay has caused lasting damage. The economic impact of the revenue losses, reduced investments, and eroded confidence may take years to fully reverse, leaving both the telecom sector and the Nigerian economy to grapple with the consequences of prolonged regulatory inaction.