Nigerian Communications Sector: FG, NCC push for Indigenous Content to check capital flight
In the bid to further draw attention to efforts being made to promote local content in country, the Nigerian Communication Commission (NCC) has published a federal government document on National Policy for the Promotion of Indigenous Content in the Nigerian Telecommunications Sector.
According to the report on the Commission’s website, the growth of indigenous content in the digital sector will go a long way in accelerating the growth of the sector and ensure that the nation can stem the tide of capital flight and increase the value addition of indigenous content to the sector.
The overall objectives of the policy are as follows: “To create a framework for supporting indigenous telecom businesses to become world class service providers; ensure compliance with existing regulatory guidelines for indigenous content; to highlight and promote indigenous capacities in the telecommunications sector; to foster collaboration between global Original Equipment Manufacturers (OEMs) engaged in the manufacturing of telecommunications equipment and indigenous players; to ensure strategic partnerships with relevant regulatory agencies to create joint efforts to promote indigenous content; to enable the indigenous telecom industry to contribute significantly towards the overall development of the telecom industry; and to encourage and incentivise the participation of indigenous telecom institutions in relevant Standards Development Organisations.”
Addressing the state of affairs of the Nigerian Telecom Sector, the report has it that “The Nigerian telecom sector has experienced a lot of growth over the last two decades. For example, the sector has experienced a significant increase in the number of subscribers and an exponential increase in the inflow of Foreign Direct Investment (FDI). The Nigerian Communications Commission, acknowledging the country’s FDI gains stated that the industry moved from a paltry $60 million private sector investment in 2000 to about $68 billion in 2016.”
There was however concern about the issue of capital flight, “Much as there has been a lot of progress in the sector, it is still useful to identify the areas where much progress can be made. One of such is the area of capital flight, which has also been significant.”
It noted that the Federal Government is committed to reducing this amount significantly, in line with the mandate of His Excellency, President Muhammadu Buhari GCFR that we “produce what we eat and consume what we produce”.
From the report document, available statistics provided by the leadership of the Association of Telecommunications Companies of Nigeria (ATCON), the annual outflow of foreign exchange for the telecommunications sector amounts to approximately $2.16 billion.
“A breakdown of the forex spending is as follows: CAPEX Programs- $750m; Network Software Licensing- $250m; Management Fees- $800m; Managed Services (Tier 2 & 3 Support)- $157m; Miscellaneous (International circuits, roaming and terminations reconciliations etc) – $200m.”
The statistics were based on the average annual reports of a sample of industry players in the telecommunications space over a 5 year period. This is a significant portion of the country’s average annual budget and it is critical that this trend is reversed.
A survey of industry players conducted by the Nigerian Communications Commission (NCC) in 2018 resulted in the following findings:
“The ratio of Nigerians to Foreigners (for Senior, Line, Contract and Outsourced staff) in the industry is high in absolute terms (i.e. 98% to 2%). However, it should be noted that the larger operators (especially the Mobile Network Operators) have a healthier balance than smaller licensees and service providers”
“There is also a higher percentage of foreigners among top management staff when compared with other staff, with Nigerians making up 31%, in relation to foreigners who make up 69%”
“For software, 77% of software in use are foreign, while only 23% are obtained locally”
“With respect to hardware being used by the companies interviewed, 86% of them are foreign while 14% come from local companies”
“Data on Base Transceiver Stations (BTS) also revealed a dominance of foreign products over those produced locally, as 88% are foreign with only 12% being manufactured in Nigeria.”
In order to successfully promote indigenous content in the telecommunications sector, this Policy focuses on key areas where the development of such capacity will have the greatest level of impact.
They include the following: “Manufacturing; Subscriber Identity Module (SIM) cards, smartphones, recharge cards, parts, fibre optic cables, masts, etc.”
“Services and Software for Telecom sector; Business Support Services (BSS), Operations Support Systems (OSS), Performance Monitoring, Customer Resource Management, Data Analytics and Network Inventory Management, etc.”
“People: An emphasis on skills rather than degrees, a support for emerging technologies, etc.”
“Research and Development for Digital Innovation and Entrepreneurship: Defining “Indigenous” within the Context of the Policy. It is important that this Policy provides clarity on the scope of interpretation of “Indigenous” in the context of the implementation of the Policy as this will assist in the monitoring and enforcement of compliance.”
According to the report, “Indigenous” in the context of this Policy, and in line with the Presidential Order 005 of February 2018, refers to companies that meet the following criteria, amongst others: “incorporated or otherwise organized in Nigeria; having its principal place of business located in Nigeria; and having at least 51% of its equity held by nationals of Nigeria.”