Rewane: Telecoms tariff hike will reduce inflation, increase productivity

Bismarck Rewane, chief executive officer (CEO) of Financial Derivative, says an increase in telecoms tariff would help reduce inflation, currently at 34.6 percent.

On April 25, 2024, telcos said their services were overdue for price increases as rates have not been raised in the last 11 years.

The Association of Licensed Telecommunications Operators of Nigeria (ALTON) and the Association of Telecommunications Companies of Nigeria (ATCON) had urged the Nigerian Communications Commission (NCC) to consider reviewing tariffs upward to address rising operational costs.

On January 3, Karl Toriola, chief executive officer (CEO) of MTN Nigeria, said telcos want a 100 percent tariff hike.

Prior to this, the operators had warned of service shedding if their demand was unmet.

At a meeting with stakeholders on Wednesday, Bosun Tijani, minister of communications, innovation, and digital economy, said telecoms tariffs will be increased — but not by 100 percent.

Speaking during Channels Television’s Business Morning on Thursday, Rewane emphasised that the move would make the telecom sector more sustainable.

“More importantly, the tariff increase and additional investments will boost the sector’s sustainability,” he said.

“This will lead to higher productivity, which may indirectly help moderate inflation.

“The goal is to reduce inflation, and we’ve heard clear statements from policymakers like Bosun Tijani that this is about building a sustainable industry.

“Yesterday, the price of MTN shares rose by 10% to 220. Investors have already factored this in and are anticipating positive outcomes.

“And don’t forget, you’ve seen the Band A adjustment some days ago, electricity, and one of the major costs of telco operation is power.

“As the power supply situation improves and the tide is increased, you will see that this particular sector is going to contribute significantly. But please note that for two years, there have been no dividends from the telco.”

GRADUAL PROFIT FOR TELCOS

However, Rewane said a tariff hike would not immediately “reflect in the profitability of the companies for another year”.

“So, it’s a long hard road to travel, but definitely the longest journey in the world starts with the first step,” he added.

“And we should look at it in the context of the fact that, one, there’s been an increase in wages, which is not satisfactory, but it’s somewhere.

“Secondly, also, there are tax concessions going to be given to the telcos as well, so that they can actually amortize some of their taxes or actually wage some of the taxes as well, reduce their tax liability.

“The details will be worked out between the regulator and the operator. But the important thing is that we need investments.

“And if we go further to say what we call the what-if analysis, if you do not do this, what is the likely outcome and unintended consequences? Drop calls, the entire payment system, the mercy of the telcos and the switch, the airline booking system, the medical tourism, the education, all of these things mean that we must begin to invest in this sector that enables and actually catalyzes growth.’

Rewane said the changes must be implemented as soon as possible, stressing that “it is so important and imperative and must be done like yesterday”.