A strong ICT ecosystem provides the foundation for an efficient modern economy, significantly enhancing business procedures, public services and job creation. With this in mind, Nigeria’s government is following a long-term development blueprint with the aim of harnessing digital technological capabilities to diversify the economy and reduce dependence on hydrocarbons revenue. Sector-specific strategies and roadmaps are designed to boost ICT infrastructure. The telecommunications segment is key to driving sector expansion, with its major players influential in facilitating enhanced broadband coverage, particularly in rural areas.
Unlike most areas of the economy, the ICT sector underwent solid growth during the Covid-19 pandemic, given the demand for digital education, work, retail and health care services. Public and private operators are now keen to use that growth as a catalyst for deepening digital transformation. The start-up ecosystem will be key to that drive, while the presence of 5G capabilities has the potential to enhance cross-sector performance. Macroeconomic headwinds and low average ICT proficiency among the population present challenges that will require timely, effective solutions, with enhanced public-private collaboration vital to helping the country to compete in a global digital economy.
Structure & Oversight
The Ministry of Communications and Digital Economy oversees the ICT sector, with the many government entities involved in its operation working under its purview. The ministry established Galaxy Backbone (GBB), an ICT services provider, in 2006 to oversee the expansion of digital infrastructure. Its mandate is to build a centralised network and platform through which all government entities can carry out digital procedures and collaborations. The GBB has been integral to the government’s digital transformation. Its role also expands into the private sector; its provision of integrated infrastructure and digital services for entities of all sizes and its collaboration with major telecoms companies are important to both the sector and the country’s development.
The Nigerian Communications Commission (NCC) oversees and regulates the telecoms segment. Its mandate, which is embedded in the 2003 Nigerian Communications Act, is to create and enable a fair, safe and dynamic regulatory environment for consumers and the companies operating in the ICT sector. In addition, the NCC’s mandate affords it the role of national telecoms service provider, making it responsible for developing and maintaining all relevant infrastructure. The NCC’s successful implementation of projects such as the State Accelerated Broadband Initiative and the Wire Nigeria Project has facilitated access to ICT tools and services for consumers and market operators. Organisational agility is a prerequisite to efficient ICT regulation, and the NCC’s core capacities include the ability to grant and revoke licences, enter into contracts with companies and individuals, and establish subsidiary organisations necessary for it to carry out its duties.
Another important agency, the National Information Technology Development Agency (NITDA) works to implement ICT policy. Under the provisions of the 2007 National Information Technology Development Act, it is responsible for the planning, research, development, standardisation, application, coordination, monitoring, evaluation and regulation of domestic ICT practices and operations.
Strategy
The National Digital Economy Policy and Strategy 2020-30 is central to the government’s plan to diversify the economy away from its dependence on oil- and gas-related activities. Public entities are tasked with executing the strategy, working to develop a regulatory framework, improve digital literacy and capabilities, boost hard and soft digital infrastructure, expand digital services, promote and develop local content, and harness emerging technologies for the creation of a digital society.
The NCC formulated the National Broadband Plan 2020-25 to facilitate implementation of the aforementioned strategy. By 2025 the NCC aims to deliver download speeds of 25 Mbps in urban areas and 10 Mbps in rural areas. Additionally, it is targeting minimum coverage of 90% of the population by that time. In pursuit of those goals, the NCC has licensed private telecoms infrastructure companies including MainOne Cable Company, IHS, Zinox Technology and several others to extend broadband penetration throughout the country, with each focusing on specific regions and zones.
Infrastructure
Private stakeholders have emphasised that the creation of a dynamic digital economy necessitates both a comprehensive strategy and effective implementation .
“Significant gaps in our infrastructure remain the primary cause of low penetration,” Tola Yusuf, co-founder and executive director of Infratel Africa, a Lagos-based telecommunications service provider, told OBG. “Policy currently focuses on connecting rural areas, which is important but not the only issue. Even today we have connectivity issues in Lagos. Stakeholders need to deploy appropriate models and find methods to monitor their efficacy,” he added.
At the beginning of 2022 the internet penetration rate stood at 51%, accounting for around 109m active users and representative of 4.6% year-onyear (y-o-y) growth. According to internet speed test and research organisation Ookla, the median mobile connection speed for the same period was 17.4 Mbps, while for fixed connections it was just over 10 Mbps, marking y-o-y increases of 4.9 Mbps and 2.4 Mbps, respectively. The worldwide median mobile speed at the beginning of 2022 was 29 Mbps, up 32% y-o-y, and the global median fixed connection speed was 58 Mbps, for a 40% y-o-y increase.
NCC data shows that broadband penetration rose from 39.9% in September 2021 to 45.1% in October 2022, with around 87m broadband subscriptions. Given that many users have more than one subscription, total internet subscriptions in Nigeria rose from 142m in December 2021 to 152m in August 2022. Of that latter figure, mobile service providers accounted for 152m, followed by voice-over-internet-protocol (VoIP) subscriptions (360,000); wired and wireless internet service providers (191,000); and fixed-line connections (14,800).
However, while robust growth in terms of both penetration and subscriptions is taking place, a report published by the Alliance for Affordable Internet in February 2022 found that just 12.1% of the population had access to steady and fast internet, with that figure reaching 16.4% in urban areas and 6.6% in rural areas. The study also highlighted a gender disparity: 15.5% of men had such a connection compared to 7.2% of women.
5G Launch
Establishing reliable, comprehensive internet and broadband coverage remains a key objective. In the future, 5G infrastructure will be required to support a host of advanced technologies. In August 2022 telecoms provider MTN Nigeria announced that it had established 5G sites in Lagos, Abuja, Port Harcourt, Ibadan, Kano, Owerri and Maiduguri. The following month the company announced that it had partnered with Swedish telecoms equipment firm Ericsson to launch 5G services. The first phase of the rollout focused on parts of Lagos, with the aim of strengthening the education, health care and manufacturing sectors.
The private sector is looking to collaborate with the government to enable broader implementation of 5G-enabled technologies to take place. Investment in cloud infrastructure and related services would enable both public and private entities to scale operations at the pace demanded of an aspiring information economy, offer advanced cybersecurity and data-analytics capabilities, and bring significant cost savings. According to Muhammad Abubakar, CEO of the GBB, public-private partnerships will be an important tool for the country to expand its digital infrastructure to position itself as a globally competitive digital economy.
The GBB partnered with Zadara Edge Cloud in July 2021 to improve access to advanced cloud services, while the arrival of Amazon Web Services in October 2022 marked another significant step (see analysis). Meanwhile, construction and real estate industry observers have noted an ongoing upward trend in the number of data centre developments. The country spends an average of $450m per year on foreign data storage, and reversing that trend through the localisation of data storage would bring substantial benefits and help to lower the foreign exchange deficit. Global end-user spending on cloud services is expected to reach $398bn by the end of 2022.
Telecoms Market
Telephone subscriptions rose from 191m to 210m between September 2021 and August 2022. During that same period, based on the NCC’s 2019 baseline population of 190m, teledensity rose from roughly 100% to 110%. Mobile subscriptions accounted for 209.6m of the aforementioned August 2022 total, while fixed wire accounted for fewer than 100,000 and VoIP connections accounted for approximately 251,000. The mobile market is represented by four licensed network providers. In August 2022 MTN Nigeria represented the largest share, at 38% of the market, with 79.6m active subscriptions; Globacom had 28.1% of the market, or 58.9m subscriptions; Airtel Nigeria was next with 27.9%, or 58.4m; while 9mobile had 6.1%, or 12.6m. The fixed-wire market, for its part, is controlled by MTN Fixed, Glo Fixed, ipNX and 21st Century.
In December 2020 the NCC directed telecoms companies not to sell or reactivate SIMs, an initiative designed to enable the commission to manage the country’s telecoms infrastructure better and protect national security. Users were informed that any SIM not linked to a national identity number would be deactivated. After multiple deadline extensions, the rule was enforced in March 2022, with more than 72m domestic users affected.
Performance & Size
The National Bureau of Statistics (NBS) divides the ICT sector into four activities: telecommunications and information services; publishing; motion picture; sound recording and music production; and broadcasting. According to NBS data, the sector recorded real growth of 6.6% in the second quarter of 2022, an increase of 0.99 percentage points from the same period of 2021. The sector’s contribution to overall GDP also displayed steady growth, rising from 17.9% in the second quarter of 2021 to 18.4% in the second quarter of 2022. That latter figure represents a y-o-y increase of approximately 0.52 percentage points. The telecoms segment accounted for 15% of GDP in the second quarter of 2022, giving an indication of its importance to the national economy.
Public & Private Investment
The government announced in late 2021 that it would spend N150bn ($357m) on the ICT sector by 2025, including priority projects and ministry budget allocations. It also revealed that it was seeking $140bn of private investment in the ICT sector, with a strategic focus that could help to ease socio-economic challenges.
NBS data for the first half of 2022 shows that the telecoms segment attracted $211m in imported capital during that time. Around $154m of that was achieved in the second quarter, accounting for 10% of all imported capital for that period and representing a 166% quarter-on-quarter increase for the segment. IT services, meanwhile, attracted roughly $1m during the first half of 2022, with $700,000 coming in the first quarter.
In terms of venture capital, a report on Nigeria’s start-up ecosystem by research company Disrupt Africa found that 107 firms secured a total investment of $748m in the first eight months of 2022.
Human Capital
According to a 2022 PwC report titled “Nigerian Brain Exports: The Optimal Path to Growing Nigeria’s Economy”, Nigeria has a so-called brain capital advantage over many leading Western economies due to its average age of 19. The report suggests that the country could develop and export, both remotely and physically, ICT brain capital into high-value international value chains as a means of boosting foreign exchange in the country through traditional remittances and remote workers being paid in foreign currency. Private sector stakeholders, however, believe that such a dynamic exacerbates a serious problem, given the requirement in a global information economy for a diverse, locally deployed pool of skilled ICT professionals.
“Workforce retention is a key issue. Due to the challenging economic conditions Nigeria currently faces, much of its leading ICT talent has been headhunted by Western firms, leaving both a skills shortage and an insufficient number of professionals to train younger generations,” Adedeji Olowe, founder of lending platform Lendsqr, told OBG. Given the low average ICT proficiency of the broader population, the federal Ministry of Education has pledged to support private sector initiatives designed to raise the technical competency of the workforce. Further supportive policies target sustainable improvement at all levels of the local education system and talent pool (see Health & Education chapter).
Education Technology
While the country works to address its ICT literacy deficit, its dynamic tech start-up ecosystem is equipped to respond to pressing national challenges. Indeed, there has been an upsurge in venture capital funding for education technology (edtech) start-ups since 2018. Of the 481 start-ups tracked by Disrupt Africa for its 2022 report on Nigeria’s start-up ecosystem, 35, or 7.3%, belonged to the edtech space, making it the fourth-largest segment behind financial technology (fintech), e-commerce and e-health.
In July 2022 digital education platform GetBundi was launched across Africa, with the aim of preparing students for the global information economy by improving skills relating to fields such as science, technology, innovation, engineering and mathematics. A top Nigeria edtech company, uLesson, secured $22.5m across its Series A and Series B funding rounds in 2021. The company announced that its user base expanded by 600% that same year, bringing total downloads of its app to 2m. Meanwhile, another edtech company, AltSchool Africa, teamed up with several established African universities to offer free training and recognised certification to tech talent across the continent.
Fintech
Fintech is the largest segment in the start-up ecosystem, accounting for around 60% of total investment in 2022. The segment’s rapid expansion in recent years is attributed to a large extent to banks’ investment in an integrated digital infrastructure that is conducive to innovation. “Facilities already exist that enable fintech entities to layer their own services and applications on top, making the segment an attractive space for investors and entrepreneurs,” Olowe told OBG.
Payment services is currently the most active vertical, followed by lending platforms and software solutions, while insurance technology offers significant potential moving forwards. Credit card ownership in Nigeria is low, as is mobile money uptake relative to other areas of Africa. While the latter presents an opportunity in itself, those two factors combined have contributed to growth in the “buy now, pay later” space, with anticipated future uptake forecast to see the segment’s value rise from $325m in 2021 to $1.2bn by 2028. E-commerce and retail tech are key beneficiaries of the burgeoning fintech scene, with the platforms available fuelling growth during the pandemic (see Retail chapter).
Digital Health Care
The pandemic placed enormous strain on health care systems worldwide, giving rise to increased demand for digital health care services (see Health & Education chapter). Developments such as digitising medical records are fundamental to raising health care efficiency. At the same time, expanding national telecoms infrastructure and deepening broadband and internet penetration are creating the foundations for targeted solutions to challenges such as the national shortage of trained doctors and medical staff Indeed, moving forwards, of the multiple verticals that constitute the e-health space, telehealth is forecast to see the most significant expansion due to the agility it affords health care providers and its capacity to improve access to health care services for underserved rural communities.
In 2021 Lagos-based pharmaceuticals distribution start-up DrugStoc was awarded $4.4m in Series A funding, with health tech start-up Reliance Health securing $40m in its Series B funding round the following year. The expansion of medical logistics company Lifebank suggests sizeable potential for investors looking to enter the segment; Africa’s health tech market is set to reach $11bn by 2025.
Outlook
With a population of close to 220m and an internet penetration rate of 51%, Nigeria’s existing ICT consumer market is large while still offering room for growth, making it an enticing prospect for local and international investors, particularly with the population forecast to exceed 400m by 2050. Inadequate policy implementation has long prevented the sector from reaching its potential, but the government’s willingness to enter into public-private partnerships gives cause for optimism.
Moving forwards, Nigeria’s burgeoning, responsive fintech space and wider start-up ecosystem are bright spots in the wider domestic economy. Greater public-private cohesion in those areas would afford the government the opportunity to collaborate with the country’s most innovative minds in order to develop effective solutions to some of the macroand socio-economic challenges the country faces.
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