Nigeria’s telecom industry stakeholders expect additional investments this year due to the FX market’s relative stability at the end of 2024.
Industry professionals are certain that the worst of last year’s volatility in the foreign currency market is behind us, even though stability is predicted to persist this year.
They claimed that the primary issue was the high volatility in the foreign exchange market, which made budgeting highly challenging for many telecom providers, rather than the Naira’s dropping value.
The official exchange rate at the Nigerian Foreign Exchange Market (NFEM) was between N1,535 and N1538 to the dollar at the end of last year. The exchange rate was stable, averaging between N1,650 and N1,655 to the dollar on the black market, where it is traded informally.
Stability to facilitate expansion
Mr. Tony Emoekpere, President of the Association of Telecommunications Companies of Nigeria (ATCON), expressed hope for 2025 and pointed out that FX stability affects the business more than the exchange rate itself.
“Instability is the primary problem with currencies. There has been some stability in recent months. “I think it’s enough for any organisation to plan and help us to attract more investments now that we have a kind of range—almost like a top and bottom ceiling,” he added.
Emoekpere emphasized that continued stability and the successful application of naira-stabilizing policies could portend expansion for the telecom industry.
“It will be a good indication for investors to enter if we continue to see the kind of stability we saw towards the end of last year,” he continued.
- Mr Karl Toriola, CEO of MTN Nigeria, expressed similar opinions and forecasted a more stable foreign currency situation in 2025.
- According to Toriola, who reflected on the difficulties of 2024, the worst of the volatility may have passed, and a recurrence of the instability is not anticipated in 2025.
“The volatility we saw last year, which was fuelled by the shift to a more liberal foreign exchange market, is not something I expect to happen again,” he said.
Toriola thinks the industry can adjust to a steadily dropping currency as long as stability is preserved.
“A reversal is not necessary. All we require is a comparatively stable currency. We can control that and look for further sources of efficiency,” Toriola continued.
Factors that will influence currency stability in 2025
Financial experts’ predictions for the year suggest that the telecom industry’s players’ optimism for FX stability may not be entirely unjustified.
- The Centre for the Promotion of Private Enterprises (CPPE) stated in its 2025 economic outlook that the Central Bank of Nigeria’s (CBN) sporadic market intervention and some regulatory adjustments have substantially stabilized the currency rate between July and December last year.
- Dr. Muda Yusuf, the creator of CPPE, claims that the forecast for the exchange rate in 2025 is favourable due to the steady improvement in foreign reserves, which are currently above $40 billion.
- The rate would be constant, he continued, provided that accretion to reserves improved due to better inflows from IMTOs and remittances from the diaspora.
- Yusuf claimed that in addition to the beneficial effect of the 2 billion Euro Bond revenues on reserves, the market will benefit from the CBN’s enhanced ability to control rate volatility by sporadic intervention.
“Other dynamics to improve the country’s foreign exchange rate in 2025 include the successful $500 million domestic dollar bond and the CBN’s clearance of legacy obligations totaling approximately $7 billion.”
He added, “The Dangote and Port Harcourt refineries’ import substitution effect will subsequently ease demand pressure on the foreign market and the gradual recovery of the non-oil export sector.”
What To Note
- Although the telecom operators may benefit from the expected forex stability, they also anticipate that the Nigerian Communications Commission (NCC) will enact a tariff adjustment that would result in higher rates for voice and data services.
- The telecom operators had already suggested to the regulator a 100% rise to compensate for the growing operating expenses.
- However, considering the economic situation and the damaged purchasing power of many Nigerians, it is doubtful that the telecom authority would sanction such a move.
