Telecommunications companies in Nigeria have increased their borrowing from local banks by 200%.
In 2023, telecommunication and other information and communication companies in Nigeria significantly increased their borrowing from local banks. This surge was driven by a challenging economic climate and a devalued naira, which made foreign loans more expensive.
Key Statistics and Trends
- Increase in Loans: Loans to telecommunication and information companies rose by 207.12%, reaching N768.54 billion in 2023, up from N250.24 billion in 2022.
- Overall Credit Growth: The sector’s total credit to banks increased by 63.56%, reaching N1.98 trillion by the end of 2023.
- Private Sector Credit: Private sector credit surged from N15.09 trillion in 2023 to N44.54 trillion.
Sector Contributions and Foreign Investment
- Telecoms’ GDP Share: The telecommunications segment was responsible for 84.68% of the information and communication sector’s GDP contributions.
- Decline in Foreign Investment: Foreign investment in the telecom sector dropped by 70.5%, from $456.83 million in 2022 to $134.75 million in 2023.
Economic Impact and Company Performance
- Naira Devaluation: In 2023, the naira lost over 40% of its value, making foreign loans more expensive and prompting a shift to local borrowing.
- Financial Performance: Both Airtel and MTN Nigeria reported significant losses due to the naira devaluation, rising inflation, and macroeconomic challenges. Airtel recorded an $89 million loss, and MTN Nigeria reported a N137 billion loss for 2023.
- Increased Borrowing: Local borrowing by telcos rose from N1.38 trillion in April 2023 to N1.74 trillion by July 2023. Additionally, MTN increased its issuance of commercial papers from N22.44 billion to N234.11 billion.
Expert Opinions and Industry Insights
- Tony Emoekpere, President of ATCON: Highlighted that telcos need to borrow continuously due to the nature of their business, which requires constant technological improvements.
- Economic Impact: Emoekpere noted that local borrowing is beneficial for the economy, but emphasized the need for single-digit interest rates to support sustainable growth.
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