Nigeria’s Telcos—Bound By Stiff Pricing Rules For Years—Seek To Take Off Leash

After more than a decade of contending with a short pricing leash, Nigerian telecom companies are mounting an urgent push to loosen regulatory constraints as they grapple with crippling economic realities. Inflation is near a 30-year high, and the naira continues to depreciate. The telecom sector, essential to Nigeria’s digital economy, faces mounting losses that threaten its sustainability.

For years, operators like MTN Nigeria, Airtel, Glo, and 9Mobile have called for price adjustments to align with escalating operational costs. The regulatory freeze, however, persisted for over a decade. Now, with inflation surging to 34.6% in November 2024 and food inflation exceeding 39%, the Nigerian Communications Commission (NCC) is finally leaning towards approving long-requested tariff increases starting in January 2025.

This marks a turning point for an industry stretched to its limits. MTN Nigeria’s NGN 514.9 B (over USD 300 M) loss in the first nine months of 2024 demonstrates the dire financial strain. The cost of doing business has risen sharply, fueled by currency devaluation, surging energy prices, and inflation.

“We’ve put forward requests of approximately a 100% increase,” Karl Toriola, CEO of MTN Nigeria, said in an interview with Arise TV recently. “There’s no way that the industry could continue to sustain itself and provide the required quality of service under the present structure.”

Under the proposed adjustments, telecom tariffs could as much as double, affecting millions of Nigerians. However, this would-be relief for telecom operators comes at a time when consumers are already struggling with skyrocketing living costs. There are concerns that these price hikes could reduce internet usage, a critical tool for education, commerce, and communication in a country prioritising digital inclusion.

The NCC insists it is striking a balance. “This announcement will benefit the subscribers and operators because we have taken into account the proposals from the industry and the public,” a source at the NCC told TechCabal late last year.

Meanwhile, the Nigerian telecom sector’s regulatory shift coincides with the decision by global satellite internet upstart Starlink to double its monthly subscription prices in the country. From January 27, 2025, its lowest-tier subscription will rise from NGN 38 K to NGN 75 K, making it far less accessible for the average Nigerian household.

Starlink, which faced rejection for a price hike in October 2024, justified the increases as necessary for infrastructure investments and service quality. While satellite services like Starlink cater to a niche market, their pricing strategies add a new dimension to the competitive landscape.

Telecom operators have been lobbying for tariff increases since pricing rules were last updated 11 years ago. The prolonged inaction has left telcos absorbing rising costs without passing them on to consumers, leading to deteriorating service quality and reduced investments in network infrastructure.

Industry leaders like Gbenga Adebayo, president of the Association of Licensed Telecommunication Operators of Nigeria (ALTON), argue that cost-reflective pricing is necessary to ensure long-term service quality. “The current pricing structure discourages the investments needed to meet demand and expand coverage,” he said.

If implemented, these tariff hikes could significantly reshape Nigeria’s telecom landscape, with stakeholders hinting at bolstering services amid an improved pricing structure. However, affordability concerns remain. Higher costs may exacerbate the digital divide, leaving low-income households and rural areas with limited access.

The lifting of pricing constraints offers Nigerian telcos a lifeline in an economy that has battered their profitability. While this shift could pave the way for improved service quality and expanded infrastructure, the burden on consumers is undeniable. As the telecom sector finds itself at a crossroads, the NCC’s balancing act between consumer affordability and industry viability will be crucial..