Inflation erodes telecoms sector N1.94trn gain

Despite its growing contribution to the Gross Domestic Product, inflation is endangering the telecoms sector’s ability to thrive.

As a result, the telecoms sector lost N262.88 billion, or 636.85%, of the N1.94 trillion gain it had earned in the first quarter of 2023 due to inflation.

The telecoms and information services sector’s nominal GDP contribution in Q1 2023 was N5.60 trillion, up from N3.67 trillion in Q1 2022 by a year-over-year gain of 52.83 percent.

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The sector’s actual GDP contribution climbed from N2.25 trillion to N2.51 trillion over the review period, however the gain after accounting for inflation only amounted to an 11.71 percent increase.

According to economists, Nominal GDP is the market value of goods and services produced at a particular period while Real GDP is gotten after inflation has been factored into nominal GDP. They state that real GDP is the true reflection of the economic status of a country.

In March 2022, headline inflation was 15.92 per cent according to the National Bureau of Statistics. This increased to 22.04 per cent in the corresponding period of 2023 on the back of a surge in prices of food, electricity, gas, and more.

In Q1, 2023, Nigeria’s GDP growth rate fell to 2.31 per cent y-o-y, from the 3.11 per cent that was recorded in the corresponding period of 2022, in real terms.

The NBS attributed the reduction in growth to the adverse effects of the cash crunch experienced, a result of the Central Bank of Nigeria’s naira redesign policy, in the quarter.

The service sector, of which telecoms is a subsector, drove the performance of the country’s GDP. It recorded a growth of 4.35 per cent and contributed 57.29 per cent to the aggregate GDP.

According to the former Minister of Communications and Digital Economy, Isa Pantami, the ICT sector (composed largely of the activities of the telecoms sector) currently contributes thrice as much as the oil and gas sector to the country’s GDP.

He stated, “For over 50 years, Nigeria relied so much on oil and gas. But today, we have reached a situation where the contribution of ICT to our gross domestic products in Nigeria is almost three times the contribution of oil and gas to the country’s GDP.

“In the last three years, we have set up three unprecedented records with regard to ICT contributions to the GDP.”