A combination of losses, naira devaluation and high operating costs shrank the growth of the telecommunications sector’s gross domestic product (GDP) in 2024, BusinessDay has found.

Growth in the telecoms sector fell from 10.72 percent between 2021 and 2022 to 6.25 percent between 2023 and 2024.

MTN Nigeria’s revenue surged 103.16 percent to N3.36 trillion in 2024 from N1.65 trillion in 2021. Airtel Africa’s revenue grew 4.99 percent to $4.76 billion from $4.53 billion over the period.

However, MTN Nigeria recorded a loss after tax of N400.44 billion, a 192.25 percent increase from the N137.02 billion in 2023. Its foreign exchange loss stood at N925.36 billion.

Airtel Nigeria’s revenue fell 40.34 percent to $738 million in 2024, thanks to naira devaluation.

The naira depreciated from N415.07/$ in 2021 to N1,500/$ in 2024.

The sector has long been one of the pillars of the Nigerian economy, which is heavily reliant on its services sector.

But record losses influenced by the naira’s depreciation and rising operational costs have stifled growth.

“Telecoms growth and contribution to overall growth are now shrinking. This trend started in the third quarter (Q3) of 2023,” said Abdulazeez Kuranga, regional economist, West Africa at Standard Bank Group.

The telecoms sector played a crucial role in helping the country exit a recession in the fourth quarter (Q4) of 2020. “As a major contributor to our country’s GDP, the telecommunications industry is critical to the development of our nation as it helps to spur innovation and promote digital inclusion among Nigerians,” said Bosun Tijani, minister of communications, innovation and digital economy.

But things changed for the industry after COVID-19. The slow growth led to a decline in the performance of the information and communication sector, which is composed mainly of the activities of telecom operators. “Overall, the sector grew by 5.42 percent in 2024, lower than the 7.91 percent recorded in 2023,” the National Bureau of Statistics (NBS) stated.

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The decline in the telecom sector’s performance has been attributed to a harsh operating environment exacerbated by foreign exchange fluctuations and high diesel costs. MTN Nigeria’s operating cost jumped 76.6 percent to N1.52 trillion from N860.32 billion. Airtel Africa noted that average diesel prices in Nigeria increased by about 60 percent.

It noted that this was due to currency devaluation in Nigeria, Malawi, and Zambia. “In particular, the Nigerian naira devalued from a weighted average NGN/USD rate of 677 in the prior nine-month period to NGN/USD 1,532 in the current period,” it said.

“A sustained reduction in industry revenue has implications that go beyond just the service providers… The direct contribution of the industry to the total GDP of the country is also reduced,” GSMA explained. “A slowdown in the mobile industry will have a further negative impact on the GDP of the country… If the industry suffers, this will feed through into lower rates of digital adoption, and the country will miss out on the potential boost to GDP that it would have delivered.”

This reduction in service revenue, which translated to slow GDP growth, is also responsible for the decline in network quality.

“The telecoms sector is struggling at the moment. Foreign exchange-related issues have dampened sentiments, and most players are very unlikely to grow capital expenditure,” tweeted Olaolu Boboye, lead economist and fixed-income strategist with CardinalStone Partners.

To mitigate this financial strain, the Nigerian Communications Commission (NCC) approved a 50 percent tariff hike on January 20, 2025. The regulator noted that tariff rates had remained unchanged since 2013 despite rising operational costs.

It stated that the adjustment was aimed at addressing the gap between operational costs and current tariffs and ensuring that service delivery remains uncompromised.

“These adjustments will support the ability of operators to continue investing in infrastructure and innovation,” the NCC stated.

Operators anticipate that the hike will improve their financial position. MTN expects to generate an additional N1.34 trillion in revenue from the adjustment. According to Karl Toriola, CEO of MTN Nigeria, and Dinesh Balsingh, CEO of Airtel Nigeria, the increased revenue will be used to enhance network quality and secure the sector’s future growth.