Telecoms attract $105.6m foreign investments in Q2

•FDI down 33% on COVID-19 impact

The telecommunications sector attracted a total of $157.48 million in foreign direct investments in the second quarter of this year, New Telegraph has learnt. This shows a huge increase in investments year-on-year when compared with the paltry $4.50 million recorded in Q2’19.

However, the sector recorded less foreign interests in the second quarter of this year compared with the first quarter, as investments declined by 33 per cent. Data by the National Bureau of Statistics (NBS) revealed that the sector attracted a total of $157.4 million in the first quarter. Industry analysts attributed the second-quarter decline to the outbreak of coronavirus, as the economy was shut down between April and May this year. The investments in telecoms represented 8.16 per cent of the total capital importation into the country for the period under review.

NBS revealed that the total value of capital importation into the economy stood at $1.29 billion in the second quarter of 2020, representing a 77.9 per cent decrease when compared to $5.85 billion recorded in the first quarter. According to NBS, the largest amount of capital importation by type was received through other investment, which accounted for 58.77 per cent ($761.03 million) of total capital imported, followed by portfolio investment, which accounted for 29.76 per cent ($385.32 million) and foreign direct investment (FDI), which accounted for 11.47 per cent ($148.59 million) of total capital imported in Q2’20. For the first time in five years, the sector had recorded an increase in FDIs in 2019, as it attracted $944 million against $114.43 million recorded in 2018.

This renewed interest had been sustained in the first half of this year despite the COVID-19. Until last year, the sector had witnessed a consistent decline in investments over the last four years. For instance, the $544.6 million attracted by the sector in 2017 was 42 per cent less than $931.2 million recorded in 2016.

The sector also witnessed a marginal decline in 2016 as the figure went down by 0.7 percent from $938.1 million recorded in the preceding year. In 2015, capital importation into the sector had decreased by 5.7 per cent from $994.3 million it got in 2014.

This was in spite of the government’s sustained efforts at wooing foreign investors into telecoms, with broadband infrastructure at the heart of various international campaigns. Stakeholders had blamed the past years’ downtrend in the sector on several challenges confronting players in the sector, noting that the environment was no longer conducive for more investments. Specifically, President of the Association of Telecommunications Company of Nigeria (ATCON), Mr.Olusola Teniola, had expressed worry that the lull in foreign direct investment was also affecting operators’ efforts at deepening broadband penetration in the country. Teniola emphasised that Nigeria, more than any other time, currently needed FDI in the telecom sector to bridge the infrastructure gap. According to him, Nigeria needs FDI to be able to bridge the gap of 225 markets/communities yet to receive or make a voice call. The people in those areas, he said, represent almost 20 million Nigerians without internet facilities. “One of the things we need to do continuously is to ensure that we make our industry attractive to FDI by ensuring we have a very conducive and stable environment.

The stable environment will mean that policies have to be consistent and seen to be working,” he said. Emphasising the need for more investments in infrastructure to enhance the quality of service, especially, with more traffic on the networks due to COVID-19, Teniola noted the operator might not be able to do more to increase their capacity except they get more funding from investors. “We have always said this in the past before Coronavirus came to our shores that we need the government to create an enabling environment, to create the right incentives that will continue to attract foreign direct investments.

“We have seen a gradual drop in investments over the last three years. It got to a level where FDI is just focused on mergers and acquisitions and nothing more than bringing money for portfolio management,” he said. “Investments in equipment and infrastructure have been targeted at those areas where investors could see the quickest rate of return and that has meant that coverage has suffered and there hasn’t been much increase in capacity deployment because investors are shying away from investing on the long term because of uncertainties involved in the business environment due to government policies,” he added.