The tariff hike in Nigeria’s telecom sector has sparked widespread debate about its potential impact. While telecom operators argue that the increase is essential for business sustainability, many Nigerians fear it will worsen their already strained finances. TEMITOPE AINA writes
Telecommunication tariffs in Nigeria have long been considered affordable, particularly when compared to other sectors where prices have steadily risen. However, the prevailing economic challenges, rising inflation, the removal of subsidies and increased energy costs have made it increasingly difficult for telecom companies to maintain profitability. As a result, operators have pushed for tariff hikes, a move that has raised concerns among consumers struggling to manage daily expenses.
Operators struggle for survival
The Director and Chief Economist at Proshare Nigeria LLC, Teslim Shitta-Bey, described the telecom operators’ predicament as a “Catch-22,” a situation where they are faced with two bad choices. He explained that while inflation has surged, the cost of telecom services has remained relatively stagnant for over 12 years, making the sector’s operations unsustainable.
“Inflation rates have increased significantly, and in the past 12 years, the cost of services to users has not gone up. This has become unsustainable for the telecom sector,” Shitta-Bey said.
He further noted that telecom companies, especially the major players, are operating in a high-cost environment. From soaring energy prices to the rising cost of imported equipment, maintaining quality service without passing on these costs to consumers has become increasingly difficult.
“For telecom companies, a tariff hike is seen as the only viable option to restore profitability and ensure future growth,” Shitta-Bey warned.
The Minister of Communications, Innovation, and Digital Economy, Bosun Tijani, recently confirmed that telecom tariffs will increase, although not by the 100 per cent proposed by operators. He emphasised the government’s role in balancing consumer protection and ensuring that telecom companies remain profitable enough to continue investing in the sector.
Inflation, rising costs push tariff hike
The Secretary-General of Private Telecommunications and Communications Senior Staff Association, Okonu Abdullahi, harped on the industry’s struggles but also warned that the situation was far more complex than usual.
“While as trade unionists we oppose any tariff hike, the current circumstances are different,” Abdullahi explains.
He noted that the removal of subsidies and hikes in electricity tariffs have skyrocketed operational costs, affecting telecom companies, adding that these sectors contribute directly to the cost of telecom operations, and the rising costs have started taking a toll on workers.
“Employers are unable to adjust workers’ salaries as they too are struggling with rising costs,” the unionist adds. If the hike is not implemented, the telecom sector’s stability could be at risk.
Consumers will inevitably feel the impact, but the unionist remains confident that Nigerians will adjust to the new circumstances. The trade-off, however, remains steep: an economic strain on the public in exchange for the sector’s survival.
Growing financial burden on Nigerians
For many Nigerians, the prospect of higher telecom tariffs is unsettling, especially in light of the broader economic pressures they are already facing. With inflation eroding purchasing power and households struggling to meet basic needs, the added cost of telecom services could worsen financial strains.
On X, formerly Twitter, Nigerians expressed frustration over the potential tariff hike, with many questioning why telecom operators, despite their revenues, struggle to provide satisfactory services.
“FG has just approved a hike in telco tariffs. Banks are raking in billions; telcos are reporting billions yearly, even with abysmal services, especially Etisalat (9Mobile). How they still make a profit has to be studied at Harvard. Nigerians are getting poorer on a daily basis. We are doomed,” wrote @Jack_ng01.
Another user, @OpeyemiAni, pointed out that the telecom operators’ push for tariff hikes was driven by a weaker exchange rate, rising operational costs, and the need to restore profitability. “Telcos want tariff hikes because flat tariffs + a weaker exchange rate = lower ARPU in dollar terms. This + rising operating costs have crushed EBITDA margins. Tariff hikes are their push to restore profitability.”
Also, @DanielRegha wrote, “The govt approving “tariff hikes” for telecom operators is just pathetic, especially since these network providers have done nothing to improve bad network services. The gross incompetence is sickening.
Tariff hike threatens consumers
As Nigeria’s telecom sector faces mounting operational challenges, Shitta-Bey added that while a tariff hike may be necessary to save the industry, it could further strain consumers.
However, he points out the potential impact on Nigerians, particularly in the creative economy, where skit makers and musicians rely on affordable telecom services to thrive.
He warns that if the costs go up, it will directly affect users, especially students who rely on the internet for research and education. “The rise in these services will wipe out the increase in minimum wage and affect households across the country,” Shitta-Bey noted.
This price increase is provoked by the removal of subsidies, which has exacerbated inflation and the exchange rate crisis. With the pressure mounting on both telecom companies and consumers, Shitta-Bey argues that while the hike may be unavoidable, it could ultimately harm those who can least afford it.
Future outlook
Analysts contend that the telecom tariff hike is unavoidable, arguing that the current economic climate, characterised by subsidy removals and rising costs in other sectors, has left telecom operators with few options.
“Several employers did not adjust salaries because they were also struggling. If the tariff hike is not implemented, the security of the telecom sector will be at risk,” Shitta-Bey cautioned.
Although Nigerians will feel the effects of higher tariffs, analysts believe the country will ultimately adjust to the new reality. “Naturally, we will adjust to whatever circumstances we find ourselves in,” he concluded.
The debate over the telecom tariff hike remains on the front burner as Nigerians await further government action and the sector grapples with the balance between profitability and consumer protection.