Nigeria as one of the largest and fastest growing markets offers particularly attractive opportunities, starting with the fact that less than 40 percent of the country has been covered with telecommunications access as well as its large population which is the basis for telecommunications business.

In spite of huge success recorded so far in the sector especially in the mobile space of the industry growing to about 53 million, there is need for more investors and existing operators to increase their investment in providing capacity. Existing players in all market sectors require additional funding for expanding their networks and services at record pace in order to keep up with demand, and the unified licensing regime opened up new opportunities to existing and new players alike for the provision of next-generation converged mobile, fixed and Internet services.

The few investors who entered the Nigerian market in 2001 and 2002 when it was still considered very risky have experienced triple-digit growth rates every year and amassed huge profits. In the improved economic and operating environment, the market is now also attracting strong interest from leading global telecoms players and international investors, but new technologies, a decline in infrastructure costs and continuing deregulation will maintain opportunities for smaller players as well. This report provides potential investors with an overview and analysis of the Nigerian telecommunications market and delivers insights into current and future investment opportunities that exist in the various market segments while at the same time pointing out the problems and risks involved.

The first seven years of the 21st century have continued to witness an upsurge in the application and use of telecommunications and information technology in nearly all aspects of human endeavor. The wireless revolution, the pre-paid billing platform and the Internet phenomenon have accelerated access to information resources and changed the way people live and transact business. Telecommunications/information technology industry has therefore continued to take center stage in world affairs and will continue to be so far into the foreseeable future.

The wave of Market liberalisation sweeping across the world has positively impacted the continent with several countries opening up to foreign direct investment in the telecommunications sector. It is reassuring to note that it is now widely acknowledged that Africa currently represents a most fertile ground for telecom investment. Notable success stories have been recorded since several African countries embraced market liberalisation, thus encouraging others to move in the same direction.

For instance in Nigeria, Engr Ernest Ndukwe, executive vice chairman, Nigerian Communications Commission (NCC) said that the country’s telecom sector currently growing at 6 million per year which is standing at peak-high level of 45.9m by end of March 2008, both fixed and mobile. Active subscriber rate, by December according to him, will stand at 55 million.

Giving a tip of what the market can still offer, Ndukwe pointed out that the market is expected to hit 8 million subscribers annually for the next five years.

But what the NCC plans to do, according to him may increase the figures. Explaining that the role of the Commission is to encourage investment and protect all stakeholders in the industry, he explained that the advent of new technologies like broadband would encourage penetration to remote areas of the country and help bridge digital divide.

He promised new regulations that would urgently promote broadband technology and encourage investors to come into the sector.

Today, owing to several factors including government’s genuine deregulation policy, and the huge potential of the Nigerian market, so much has been achieved within a very short time. Through the national regulatory authority, the Nigerian Communications Commission (NCC), government has proved itself fully committed to the liberalization of the telecom market. Since year 2000, Nigeria has transparently licensed major competitive operators, settled interconnection disputes, constantly held open consultations with stakeholders, enacted new telecom laws, regulations and guidelines, and provided custom duty concession on equipment imports, among others.

These activities have encouraged investment and promoted competition in the industry, resulting in the exponential growth in the number of subscriber lines. It is instructive to note that the growth in subscriber lines has come as a result of a boom in private investment in the telecommunications sector. Recognizing the huge unmet demand and hunger of consumers for phone services and the potential of the Nigerian market, investors pumped in close to $4.00 billion USD into the sector by December 2003. Today, investment in the telecom sector ranks second only to that in the oil industry. According to Ibrahim Nakande, Minister of State for Information and Communications, since the liberalization of the telecom sector and the advent of GSM in Nigeria, Direct Foreign Investment of over $12 billion has flowed into the country. Aside the $2.6 billion generated through licensing fees alone notable investment witnessed in the sector especially through acquisition of local operators by foreign operators these include, Telkom of South Africa acquisition of 75% equity in Multi-Links for $280 million, MTN acquisition of VGC Communications at $65 million, MTN acquisition of XS broadband for $32.1 million and Zain acquisition of over 60% stake in Vmobile for $1billion among others. These are outside huge investment made by these operators and others in the sector in building their network as well as expansion.

In summary seven years of Telecom Sector Reform has brought about substantial private sector investment, increase in number of market players, Unprecedented Growth in the Network, Expanded geographical coverage, empowerment of the citizenry, employment Creation and economic Stimulus.

The role of a regulator in a developing economy is typically very demanding and encompasses far-reaching and multi-disciplinary issues. To be successful, the function should be based upon a well defined set of objectives which typically includes attracting investment, infrastructure planning and development, sector efficiency improvement, quality of service improvement, encouragement of competition, eliminating barriers to market entry for new operators, protection and empowerment of the consumers and promotion of the general socio-economic well being.

Regulatory functions cover virtually every aspect of telecommunications network and service provision including tariff, technical standards, allocation of scarce resources, fair competition and inter-operator issues such as interconnectivity and interconnect termination rate.

The state has a duty to encourage investment in the sector with the sole aim of making access to good quality Information and Communications Technology resources available to all its citizens at affordable prices. Regulation therefore draws its relevance from the widely accepted role of the State as a motivator and impartial umpire.

In order to optimize and accelerate growth in telecoms sector in Nigeria, attention must continue to be paid to key issues that affect investment flow such as: sound economic and fiscal policies; minimum investment risk; guaranteed investment protection; improved support infrastructures; minimum political and bureaucratic interference; stability of government and government policies; independent and strong regulatory institution; good enabling laws for the sector, and so on.

Telecommunications technology has been nationally acknowledged as presenting copious opportunities for the creation of unprecedented wealth for Nigeria. Thankfully, former president Obasanjo’s government demonstrated the political will necessary to foster an environment conducive for investment in this sector. Nigeria has progressed from the telecommunications dark ages before the year 2000, to a telecommunications revolution that is opening up new possibilities and frontiers across business, political, social and economic landscape.

The sector today requires massive inflow of private investments for infrastructure upgrade and expansion. Half-hearted market liberalization measures have denied many African countries access to investment dollars that could have been available to the sector both from within and outside such countries. Governments must therefore resist pressures to protect incumbent operators to the detriment of timely establishment of truly competitive markets.

The need for Government to provide the right environment that will attract serious investors and for market forces to thrive cannot be over emphasized. All policies must of necessity be aimed at attracting new sources of capital, accelerating network expansion, improving pricing, enhancing quality of service, introducing of new technologies and providing access to ICT resources to all citizens at affordable prices.

The expansion of our telecommunications facilities must go side by side with the development of the human resource capacity that will support the industry. We must develop knowledge, skills and competencies to understand, plan and deploy the complex networks of wireless systems, fiber optics, satellite systems, computers, Internet webs and a host of other telecommunications and information technologies.

Manpower requirements for ICT infrastructural development does not only stop with the engineers and technicians. Well trained personnel in other specialist areas such as financial planning, law, accountancy consultancy services, business management, personnel management, among others, are also required. Such skilled staffs, which are mostly needed in the middle and upper management levels, need to be well trained and up-to-date. Network operators should see development of human capital as an integral aspect of their investment in network expansion in order for such network elements to perform optimally.