Unexploited telecoms markets
The Q1 2016 data from the National Bureau of Statistics (NBS) has some interesting facts for telecoms firms in Nigeria. In the first place, it indicates that the sectoral gross domestic product (GDP) of the telecoms sub sector fell by 3 percent in that quarter when compared with Q4 2015. This doesn’t surprise us since the Nigerian economy now can best be described as an “economy in transition” which is undergoing so many structural changes.
Our analysis of the quarterly GDP figures for this sub sector from 2013 to Q1 2016 shows a sector with a unique business cycle. Otherwise, how could we describe a sector that its quarterly GDP growth rate fell in Q1 2015 and Q1 2016 respectively? Apart from that, why did its growth rate consistently fall particularly in Q3 2013, 2014 and 2015?
The pattern this sub sector has displayed since 2013 is an indication that a specific business cycle is beginning emerge from that sub sector. In 2013, its Q3 GDP fell by 30 percent and a decline in GDP growth rate was also recorded in Q3 2014 when it fell by 26 percent. Also in Q3 2015 it declined by 26 percent.
For a number of reasons, the Q3 of this sector has consistently declined since 2013. The first question we asked was: what could be responsible for this pattern? A number of reasons could be adduced. One of them is the summer holiday that most Nigerian elites embark upon about June-July of every year. Another is the preparation for school resumption in September by most parents. And in the last three years, the Muslim Hajj Pilgrimage fell within the third quarter.
During the summer, most holidaymakers don’t roam their lines and the same applies to pilgrims most of who belong to the Nigerian working class from whom the telecoms companies make their money. Also, payment of school fees at home and abroad will be topmost on most parents’ scales of preference before September of every year. All these could have acted in concert to reduce the momentum of growth in the telecoms sub sector in the third quarter.
An industry analyst who does not want his name in print attributed this phenomenon to heavy rainfall and reduced capital expenditure by telecoms firms. “The third quarter of the year is characterised by heavy rainfall which disrupts telecom signals and construction activities. The weather condition of this period of the year affects voice calls and hinders the construction of telecoms infrastructure”, he said.
Above all, the consistent decline in Q3 GDP growth rates since 2013 may be revealing a salient feature about the sector that may be outside the range of the aforementioned factors which will require special studies or surveys to unravel. This is just an overview of the sector.
Now, let’s go back to the focus of this write up, which is the most important states to telecoms firms in Nigeria. Using the disaggregated data on active telephone lines per state in Nigeria, we employed three parameters to determine the most important states to telecoms firms in the country. The criteria are the total active telephone lines per state, teledensity and GDP per capita. The first parameter informs us about the level of development of telecoms infrastructure and economic prosperity in each state proxied by the number of active lines. The second parameter selects the states the telecoms firms should direct their future investments while the third parameter shows the states where the telecoms firms make their money.
Therefore, based on the first parameter, Lagos, Ogun, Kano, Oyo and Kaduna are the topmost states having the highest number of active telephone lines as at March 2016. Lagos, Nigeria’s commercial capital had 19.05 million lines by March 2016 thereby accounted for 12.9 percent of the entire active telephone lines in the country.
Ogun State, Nigeria’s industrial base had 8.54 million active lines. For this reason, it accounted for 5.8 percent of the active telephone lines as at March 2016. Kano State had 7.81 million active lines to account for 5.3 percent of the active lines in Nigeria. Oyo and Kaduna states had 7.54 million and 6.79 million active lines respectively to account for 5.1 percent and 4.6 percent of the total active lines in Nigeria during the period under review. Others are Abuja, 6.03 million; Rivers, 5.85 million; Niger, 5.14 million; Delta, 4.93 million and Edo, 4.74 million. Then we have Anambra, 4.25 million; Benue, 3.81 million; Osun,3.71 million; Ondo,3.47 million and including Kwara, 3.33 million active lines, we have the fifteen states with the highest active telephone lines by March 2016.
Furthermore, Abuja, Ogun, Lagos, Nassarawa and Edo states have the highest teledensity in that order based on the 2016 population figures released by the NBS. Teledensity is a number of telephone lines available for every 100 inhabitants in a particular region. On the contrary, Bauchi, Borno, Zamfara, Katsina and Jigawa states are at the bottom of the ladder on this parameter. In fact, Kaduna State is the only exception from the North West while in the North East, Taraba and Adamawa states are the exceptions. Put differently, most of the states in the North West and North East have the least number of telephone lines available for every 100 inhabitants in the nation.
Take Ekiti State for instance, there are only 44 telephone lines available for every 100 people the state. Also, in Kano State, 60 telephone lines are available for every 100 individuals in that state. By implication, out of 100 people living in Ekiti State, only 44 have telephone lines whereas only 60 have telephone lines out of 100 in Kano State.
Another important parameter is the GDP per capita. The first thing we did was to apportion the quarterly GDP between voice calls and internet subscription (data bundle). Our analysis shows that voice calls accounted for 62 percent of the N1.94 trillion Q1 GDP while internet subscription was responsible for the remaining 38 percent.
Consequently, how much of the telecoms GDP came from each caller in each state? This varies disproportionately across states. Our analysis shows that callers from Abuja, Ogun, Lagos, Nassarawa and Edo spent the most whereas those from Bauchi, Borno, Zamfara, Katsina and Jigawa spent the least.
In monetary terms, on the average, a subscriber in Abuja spent N152.40 per day on calls and that was the highest in the country in Q1 2016. It was followed by Ogun State where a subscriber spent N147.21 per day on the average. Lagos, N136.59; Nassarawa, N116.35 and Edo, N100.81 complete the list of topmost five states with the highest telecoms spend per day. On the bottom of the table are Bauchi,N37.83 per day; Borno, N36.96; Zamfara, N33.46; Katsina, N33.13 and Jigawa, N28.11.
Source: NBS, BRIU
Priority states for telecoms firms to invest
Growth in internally generated revenue (IGR) is an indication of an increasing prosperity in a state of the federation. In 2015, eleven states recorded an increase in their IGR over the previous year. Some of these states include Borno, Bauchi, Sokoto, Taraba, Niger and Kogi. Borno State grew its IGR in 2015 by 27.9 percent. Bauchi’s IGR went up by 11.1 percent just as Sokoto’s grew by 10.8 percent. Taraba, Niger and Kogi recorded 9.4 percent, 4.1 percent and 3.1 percent growth rates respectively in their IGR. This means that the prospect for telecoms companies to recoup their investments in some of the northern states is getting brighter, hence the need for more investments in telecoms infrastructure in those states.
Apart from that, BRIU is of the opinion that another way telecoms firms can get the best from states in the northern region is for them to come up with regional specific products. Imagine if a telecoms firm could come up with a product that will help cash or food crop farmers get the best out of the farming practice, it means nearly all the adults in the northern region will subscribe to such a product. Apart from that, thousands of their buyers in the southern parts will also subscribe. With much emphasis now being placed on agriculture, this may be a worthwhile suggestion for Nigeria’s telecommunications firms.
Author: TELIAT SULE
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