Since President Olusegun Obasanjo launched the National Economic Empowerment Development Strategy (NEEDS), which is the government's policy initiative for transforming the Nigerian economy, very few players in the economy are yet to examine what the strategy expects of them and how they think such expectations can be met.
The GSM Consultative Forum (GSM CF) made up of the major GSM companies in the country, have taken a bold step in this direction by analyzing and identifying with the goals and objectives of the NEEDS document.
Thus, the GSM CF is the vanguard of drawing public and government attention to the importance of the NEEDS document to the growth of the economy in general, and the development of the telecommunications sector, in particular.
Given its importance in the management and sustenance of contemporary economies, a nation's economy can be said to be as developed as its telecoms sector. Generally speaking, there can be no developed nation without a developed and efficient telecoms sector. Conversely, developing nations often suffer inadequate growth of the te! lecoms sector.
In recent years the Global System of Mobile Telephony (GSM) sub-sector has come to occupy a unique and important position in the development of many nations. The sub sector has created an extensive value chain of inter-relationships and businesses that impact every facet of the economy.
Indeed, telecommunications growth in Nigeria in the last four years has been largely driven by the GSM sub sector, with a market share of over 90% at the beginning of this year.
The sub sector's contribution to the National Treasury is conservatively estimated at N200 billion. Currently said to be one of the fastest growing markets in the world and given the right working conditions, forecasts for the Nigerian market envisage that the sector is likely to be grow to a US$7 billion market within the next few years.
At its current level, it has created over 120,000 viable businesses including dealers, distributors, retailers, suppliers and contract providers. The potential is even higher, while the social impact may be difficult to quantify in monetary terms.
It is for these reasons, that the GSM CF surmises that the telecom sector, particularly the GSM sub sector, is vital to success of NEEDS.
On their part, GSM operators are not unaware of the daunting tasks and challenges ahead, against a backdrop of heightened public expectation.
The general consensus among the key players in this field is that if they are to meet the expectations of NEEDS, government is duty bound to put in place certain measures and to also implement specific policies. Their argument is hinged on the peculiarities operating in a difficult business environment, in spite of the huge potential market that exists here.
Succinctly, the GSM CF submit that contrary to public perception, sustained growth in profitability is impaired due the inadequacy of vital infrastructure, which telecoms companies are obliged to provide.
Indeed, GSM operators estimate that it may take an average of seven years from inception for most companies to break even. Yet the projected capital investment required to develop a robust communications infrastructure is enormous. According to experts, although operators have spent close to $4 billion to date, a minimum of $3 billion is required annually over the next five years.
Ironically, sourcing such huge funds is a mammoth task in these shores. Currently the cost of borrowing is between 19-24 per cent - rates considered high by international standards. Certainly these high interest rates will not encourage those seeking long term financing for capital-intensive projects. The problem is worsened by equally high rates of inflation (approximated at an average of 16.13% between 2001 and 2004), and depreciation of the naira.
The situation is further compounded by the poor state of infrastructure resulting in operators obliged to build three separate networks in order for them to operate -the core telecom network, a transmission network and a proven generation grid. The sheer cost of providing this infrastructure poses significant challenges in terms of cost of maintenance, return on assets/investments employed, and cash flow.
In light of these issues key operators under the aegis of the GSM Consultative Forum articulated a seven- point plan aimed at engaging the Government to deliver its promises inherent in the NEEDS document, in turn for a more favorable operating environment to enable telecoms sector produce its deliverables encapsulated in NEEDS document.
It is difficult to fathom why the unpalatable situation of things in Nigeria is such that the following issues need to be highlighted at all, as they are entirely sensible:
Current power supply is inadequate to meet the needs of the Nigerian mobile sector. NEPA currently provides only 16.87% of the requirements of operators. In other words, operators have to invest heavily in generators in order to meet 84% of their power needs. They estimate that the 138% increase in power generation by NEPA in 2007, will still not satisfy the power requirements of the mobile telephony sector given the projected growth rate of the sector. Power sector reform must therefore be accorded national priority status in our developmental plans.
The power sector reform process must address appropriate performance milestones for licensees including rural penetration targets. Additionally, government may need to guarantee power supply agreements with NEPA/or its replacement if operators are to rely on them. Finally, there must be synergy between the NCC and the power sector regulator to avert the occurrence of a multiple regulatory regime.
Customs Reform: 95% of mobile telephony equipment is imported. The pace of network rollout obligations and the need to maintain / improve the quality of network standards demands a speedy importation process. Imports are however currently subjected to a tedious clearance process, which could slow down network deployment.
The only solution is for Government to simplify tariff classifications, standardize Forex rates, reduce CRI lead-time to 24 hours after shipment; allow clearance from payment of duty subject to requisite conditions; and expedite Ports concession under Ports reform.
However, in return operators should, commit to supporting the implementation of ASYCUDA and provide digital/ICT support to port reform processes.Currently, operators contend with demands for taxes, levies and various charges at all tiers of Government, which results in double and regressive taxation. Government must as a matter of urgency, determine which tier should collect specific taxes. More importantly, clear parameters for tax collection must be established and a comprehensive tax reform bill addressing these issues must be enacted.
The associated challenge is the dramatic increase in statutory levies and charges. Recently, a Federal Government Agency sought to increase fees by between 1000 per cent to 5000 per cent! Clearly, there is a need to establish the basis for annual tax increments indexed against inflation and other relevant economic indicators.
The entire exercise would be more meaningful if operators are invited to provide practical input into the harmonisation process and support Government e-taxation initiatives. The inadequacy of NITEL infrastructure has led to operators constructing their own microwave and fibre optic network to meet network rollout obligations and provide efficient services. To date fibre optic networks span over 20,000 km across Nigeria. The development of a national communication and telecommunications backbone is identified as critical in the NEEDS document.
In order to achieve this and encourage further investment in that area, Government must provide adequate incentives. The advantages of building such facilities are numerous, including providing support for full multi-media and data capability. In this case, operators agree to provide industry guidelines for self-regulation so as to ensure the optimal efficient use of such backbone infrastructure.
The need to encourage indigenous industry has been critical for many years. The need is more pronounced in the telecoms industry, which imports 95 per cent of its equipment at an estimated value of N541.88 billion (2004).
The only way out of this position would be to actively promote a local content policy for the manufacture of telecom equipment and supplies supported by the provision of supporting incentives, grants, loans, tax holidays and subsidies; and the encouragement of information and communication clusters.
A comprehensive industry survey with phased targets would greatly assist in achieving this goal. On their part, operators would commit to supporting local industries, and encouraging equipment suppliers and manufacturers to establish local production plants and facilities.
• Balogun writes from Lagos
This article had been published by ThisDay Newspapers: http://www.thisdayonline.com/nview.php?id=23611