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The Dearth of Forex, The Death of ICT Growth


In the past few years, one of the major challenges ICT industry players have been saddled with is the difficulty in acquiring foreign exchange (FX) to transact their businesses.

No doubt, ICT in Nigeria today is import dependent. It is well understood that the country’s journey to growth is highly premised on its ability to develop its infrastructure. We are still building infrastructure.

Burdened with other inhibiting challenges as power, multiple taxation, investment deficit and unfavourable policies, the ICT industry have made several calls on the financial regulatory body, the Central Bank of Nigeria (CBN) and the federal government to set policies that will engender growth in the industry that is seen as the nation’s next cash cow.

Telecom companies had in the past requested for priority allocation of foreign exchange to telecommunications industry from the CBN since the business is grossly import dependent.

In November 2014, the Central Bank of Nigeria (CBN) excluded ICT equipment from the Retail Dutch Auction System (RDAS), where the exchange rate was N155/$. Operators were mandated to purchase FX from Interbank at the rate of N199/$. The CBN subsequently introduced a floating FX regime at the interbank market and cleared 3 months backlogs at N280/$ and this technically moved the exchange rate from N199/$ to N280.


The CBN subsequently issued another circular mandating Banks effective August 22, 2016 to sell 60% of all FX availability irrespective of source of inflows to the manufacturing sector and the balance of 40% to other sectors. This directive tactically closed FX inflows even from Parent Companies of telecommunication firms, thereby aggravating the impact of the Illiquid FX market on operations and the ICT industry at large.

Following this move, the squeeze on FX became so much that ICT companies like Spectranet, nTel and others had to shelve some of their projects for lack of FX for infrastructure import.

The squeeze also led to increase in operation cost, and with telecom, when they are not able to honour their roaming charges in foreign currency they will be disconnected. Some foreign vendors have issued notice of disconnection, demanding for advance guarantee before they can honour your services since your country is in problem. You now have to prepay a deposit in other to accommodate payment when due.

As the Chief Executive Officer, Spectranet, David Venn lamented: “The major challenge with the dollar drought is that the technology firm has the cash in naira but cannot get dollar to buy to pay for goods and services.” According to him, international bandwidth requisite for the delivery of super-fast broadband internet services and equipment are sourced from outside the country in dollars, therefore the forex squeeze is disorganising the capacity expansion plans of the firm.

Also making a case for the industry, the Association of Licensed Telecommunications Operators of Nigeria (ALTON), led by its Chairman, Engr. Gbenga Adebayo presented reasons why telecoms and ICT as a whole should be considered for priority allocation of FX by the CBN.

According to him, ICT companies need to renew their licences, procure equipment, honour foreign obligation to suppliers and if we don’t do that we can’t improve the quality of service. “We need the foreign currency to services those obligations because we don’t do everything here. In all of these, we can’t increase tariff, we can’t increase rate. We have the disruptive technology OTT that is taking away part of the revenue.” The country do not manufacture equipment such as, RS coverage equipment for BTS, BSC, Core equipment, mobile city centre, Spare parts, Media gateway, Optical fibre, transmission equipment, microwave, Planning tools, customer planning equipment, SIM cards, network tools, among others.

This big challenge has also either killed some ICT companies or turned some of them into unprecedented debtors. Some of them cannot get FX to pay off loans, thereby accumulating undue interest on loans. Also the case of Etisalat (now 9Mobile) was a glaring example of the damage FX issue can cause on the industry.

It is alleged that since the beginning of 2017, no ICT firm has made a major investment announcement to expand network due to the forex issue confronting them.

Investment in ICT can be accelerated if special attention is paid to the forex need of operators in ICT business, how easily they can access it, its availability and rate.

It is due to this funding need that the NCC started contemplating the establishment of Communications Bank, which will be a development bank that will assist in the financing of ICT companies based in Nigeria.

However, in the bid to approve unfettered access to Forex for ICT companies, extreme care should be taken to ensure that the approved forex must be put into infrastructure development. It will be unfortunate if the Forex window is opened and some ICT firms use it as a means of acquiring foreign products that will further kill the country’s quest for improved local content/ patronage drive. It will be abysmal if such forex will be used to import software and other products that could be easily be acquired in the country and sign them off to foreign companies under partnership agreements.

Also, the NCC and other government agencies need to put a halt to foreign currency demand as mode of payment for Spectrum, licenses and sundry charges.

It is very important to ensure that the call to join the global train of countries that are going to use ICT as a driving force and platform to achieve exponential economic growth and global innovative reckoning, should not just be by word of mouth and paper signatures, it also has to do with visible policy changes and walking the talk.

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