Breaking new ground: Developing the indigenous ICT market is a national priority

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The creation of a sustainable, local ICT industry is a primary long-term objective of the Federal Ministry of Communication Technology (FMCT), which is working to boost Nigerian participation. Local private involvement is also on the rise, as firms work to tap into the rapid expansion of mobile data subscribers. Both the FMCT and the private sector have focused on a handful of key segments, including development of mobile applications, web content and software.

The focus on broadening local involvement is a direct response to the fact that foreign firms – and primarily Western and Asian multinationals – have dominated the industry since the liberalisation of the telecoms market began in the early 2000s. “Traditionally the government has shown preference for private service providers with an international affiliation. However, many homegrown Nigerian firms are more than capable,” Adebola Akindele, the group managing director of Courteville Solutions, told OBG.

According to Omobola Johnson, Nigeria’s minister of communications technology, the ICT industry lacks a sufficiently competitive operating environment, which puts local companies and entrepreneurs at a disadvantage. “Local content remains grossly underdeveloped,” she said at the eNigeria conference in Abuja in November 2012. “There is an overdependence on foreign importation of both software and hardware, and this has led to diminished opportunities for domestic economic empowerment and contributed to limited capacity building.”

SOFTWARE IMPORTS: According to the National Office for Technology Acquisition and Promotions, Nigeria has lost approximately $1bn to foreign software imports and maintenance contracts on an annual basis over recent years. Large-scale buyers of foreign software include companies in most of Nigeria’s major industries, including financial services and banks, manufacturing, oil and gas, telecommunications, ministries and the ICT industry itself, which relies almost entirely on foreign operating systems.

Foreign manufacturers also supply most of the ICT-related hardware that is bought in Nigeria. According to Johnson, as of mid-2013 foreign firms accounted for around 70% of the PC market and 100% of the mobile handset market, which is dominated by multinationals such as Nokia, Samsung and Research in Motion, which makes the BlackBerry.

Of the four largest mobile network operators, all but one – Globacom, which is headquartered in Lagos and provides mobile services under the brand name Glo Mobile – are subsidiaries of foreign firms.

In both software and hardware, the global market for ICT products is highly concentrated. However, there is scope for expansion in Nigeria, particularly when viewed against the success seen in countries elsewhere on the continent – whether in Egypt, where start-ups like online payment portal Fawry have done well, or South Africa, where the Ubuntu operating system was developed. Taking into account the rapid growth in the industry in general over the past decade, the development of the local ICT market could have a transformative impact on Nigeria’s economy.

The industry is expected to continue expanding for the foreseeable future. According to the FMCT, ICT-related economic activity contributed 6% of GDP in 2012, up from 5.6% in 2011. Beating the ministry’s 7.5% annual estimated forecast, ICT contributed 8.3% to Nigeria’s GDP by the second quarter of 2013.

As of June 2012 – the most recent data available – the country had 48.4m internet users, according to the International Telecommunication Union, the UN’s ICT agency. This is equal to just over 28% of the nation’s population of more than 160m, which points to considerable potential for ongoing uptake, particularly in mobile. Indeed, in a July 2013 report released by the US-based research firm International Data Corporation, Nigeria’s software market is forecast to post a compound annual growth rate of 9.7% through 2017.

TO THE FORE: While ICT development in Nigeria has been driven mostly by the private sector so far, the FMCT and other government agencies are set to take a lead role in the coming years. “The ministry’s focus is to drive local content and skills development to create employment and sustain the industry,” Johnson told local media. “We also want to increase the contributions of the ICT industry to GDP. To achieve this, we would focus on software, mobile apps development, entrepreneurship and innovation.”

The government has introduced various ICT-focused initiatives in recent years. For example, in April 2013 the FMCT, in conjunction with the National Information Technology Development Agency (NITDA) and private sector players, launched the Information Technology Developers Entrepreneurship Accelerator (iDEA) programme, which aims to identify Nigerian ICT entrepreneurs and help them establish successful businesses. iDEA centres will focus on software development, and particularly mobile applications, enterprise solutions and software related to linguistics, education and business intelligence.

Individuals admitted to the iDEA programme will be given better access to capital, training, mentorship programmes, business advisory services, shared tools, facilities and, if necessary, work space. iDEA, which is providing incubation and accelerator centres, will collaborate with other innovation and pre-incubation centres such as the Co-Creation Hub and Wennovation to provide support. As of August 2013 two iDEA centres were on-line – one in Lagos and one in Calabar – though the government plans to establish four others across the country in the future.

The government is also about to establish the first ever ICT innovation catalytic fund to assist tech start-ups and entrepreneurs. It will be managed by EchoVC, a private equity fund manager.

NITDA will support the iDEA centres for the first three years of operation, at which point they will seek counterpart funding from the private sector. The government’s goal for the programme is for it to lead to the creation of 25 successful ICT businesses by 2015.

OTHER INITIATIVES: In August 2012 the FMCT announced the establishment of a $15m venture capital fund to finance local ICT projects. The fund, which is under the oversight of an independent fund manager, was launched in April 2013 with an initial investment of $3.6m from NITDA. The balance will come from local and international investors. The fund will be used to finance projects with commercial potential from iDEA incubation centres and on an independent basis, with the goal of investing in firms that will eventually stage initial public offerings. Financing from the fund could eventually be put toward internal research and development projects at larger companies.

Work has also continued on the government’s Abuja Technology Village (ATV) initiative, which was first announced in the mid-2000s. Currently in the early stages of development, the project involves the development of a custom-built campus in the capital city that will eventually house ICT, biotechnology and energy companies, and related organisations. The models for the project include Silicon Valley, a major technology centre in the US state of California; and the numerous similar ICT cities and villages in Bangalore, India. In August 2013 the Federal Executive Council approved some $13.2m in funding to complete a water treatment plant and other water supply infrastructure at the ATV site. A number of major local and foreign technology players have committed to commencing operations in the village upon its completion. According to the FMCT, as of mid-July 2013 around 65% of the groundwork at the ATV site had been completed.

DEVELOPMENT PARTNERS: In addition to ATV, which was developed and will be led by the public sector, in late 2012 the government announced the establishment of the Techlaunchpad initiative, a public-private partnership developed in conjunction with a number of private firms, including oil and gas heavyweights Chevron, ExxonMobil, Shell and Total; global consulting firm Accenture; and local financial institutions Access Bank and First Bank, among others.

The project, which will be supported in part by the $15m ICT-aimed venture capital fund and will function alongside the iDEA centres, aims to identify and support new, locally developed software that might benefit the Nigerian energy and financial services sectors, both of which are major economic contributors. In particular, Techlaunchpad financing will be put toward projects that have positive implications for banking analytics, payment and collection systems, digital marketing, subscription monitoring and fraud management. The programme will also fund software projects aimed at streamlining real-time monitoring in the oil and gas industry.

The first phase has kicked off with the admission of eight tech-start-ups to the iDEA centre in Lagos, having gone through rigorous evaluation and selection processes by the CEOs of the partners, which are members of Techlaunchpad’s steering committee.

In future iterations of the scheme, the government is planning to expand the programme’s purview to include software developed for use in other sectors.

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The Report: Nigeria 2013

IT & Telecoms chapter from The Report: Nigeria 2013

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