Information, communication, and technology firms, including telecommunications companies in Nigeria, owed Deposit Money Banks N1.69tn as of September 2024 amid telcos’ calls for a hike in the tariff payable by subscribers for data and voice calls.

Figures obtained from the Central Bank of Nigeria’s quarterly statistical bulletin indicate that the indebtedness of the telcos and the other ICT firms represents a year-on-year decrease of N68.04bn, or 3.9 per cent, compared to the N1.77tn owed in September 2023.

The decline reflects the impact of the CBN’s repeated interest rate hikes, which has tightened monetary conditions and discouraged borrowing within the sector.

Month-on-month, however, there was a slight increase of N31.61bn, or 1.9 per cent, from the N1.66tn recorded in August 2024.

The year-on-year analysis shows that credit to the ICT sector experienced mixed trends throughout 2024.

In January, credit stood at N2.47tn, marking a significant increase of N1.23tn, or 99.3 per cent, compared to N1.24tn in January 2023.

However, by February, credit had declined to N2.35tn, though it still represented an 88.4 per cent increase year-on-year, with a difference of N1.10tn compared to February 2023.

By March, the pace of borrowing slowed further, with credit falling to N1.67tn. This represented a year-on-year increase of N385.24bn, or 30 per cent, compared to March 2023.

The trend continued into April, where credit remained relatively stable at N1.66tn, up N241.90bn, or 17 per cent, year-on-year.

In May, credit rose slightly to N1.68tn, reflecting an N308.38bn, or 22.4 per cent, an increase compared to the same period in 2023.

From June, year-on-year figures began to show a decline. Credit to the sector dropped to N1.64tn in June, representing a decrease of N81.59bn, or 4.7 per cent, compared to June 2023.

July saw a further decline to N1.69tn, down N48.93bn, or 2.8 per cent, from July 2023.

In August, the decline deepened, with credit falling to N1.67tn, a reduction of N107.37bn, or six per cent, compared to the N1.77tn recorded in August 2023.

By September, the year-on-year decrease of N68.04bn drew attention to the cautious borrowing stance adopted by firms in response to persistent economic uncertainties and high interest rates.

The decline in credit to the ICT sector throughout 2024 can be attributed to the CBN’s tight monetary policies, which have raised the cost of borrowing.

The apex bank has consistently hiked interest rates in a bid to curb inflation, with its monetary policy rate standing at a record high for most of the year.

CBN Governor Yemi Cardoso, who assumed office in September 2023, has overseen six interest rate hikes in 2024.

In February, the Monetary Policy Rate increased by 400 basis points, moving from 18.75 per cent to 22.75 per cent, the largest single hike of the year.

This was followed by another increase in March to 24.75 per cent. In May, the rate was raised again to 26.25 per cent, and by July, it reached 26.75 per cent.

The tightening cycle continued with an increase to 27.25 per cent in September, and the most recent hike in November brought the rate to 27.50 per cent.

These cumulative increases, totalling 875 basis points, are part of efforts to combat inflation and stabilise the economy.

This has had a direct impact on the borrowing capacity of firms, particularly those in capital-intensive sectors such as ICT.

Also, macroeconomic challenges, including exchange rate volatility and rising operational costs, have further constrained borrowing activity.

Despite these challenges, the ICT sector remains a critical driver of Nigeria’s economy, contributing significantly to Gross Domestic Product growth and employment.

Activities in the ICT sector contributed 16.35 per cent to Nigeria’s real GDP in Q3 2024, a decline from the 19.78 per cent it added in the previous quarter.

The National Bureau of Statistics disclosed this in the Q3 2024 GDP report.

The contribution was, however, higher than the 15.97 per cent contributed by the sector in the same period of last year.

According to the NBS, the ICT sector comprises the four activities of Telecommunications and Information Services: Publishing, Motion Picture, Sound Recording, and Music Production, as well as Broadcasting.

In the third quarter of 2024, the sector recorded a growth rate of 5.92 per cent in real terms, year-on-year.

This was driven largely by activities in the telecommunications sub-sector, which contributed 13.94 per cent to the GDP in the real term.

According to NBS, the telecom industry was the third-largest contributor to the real GDP in Q3 2024, coming behind only crop production and trade industries, contributing 26.51 per cent and 14.78 per cent, respectively.

The telecom industry, which is dominated by mobile network operators including MTN, Globacom, Airtel, 9mobile, and Internet Service Providers, is also driving a lot of activities in every other sector of the economy.

The closest sub-sector to telecoms in the ICT sector in terms of contribution was Broadcasting, which added 1.37 per cent.

The NBS data further revealed that the ICT sector contributed 11.30 per cent to the total Nominal GDP in the third quarter of 2024, lower than the rate of 11.57 per cent recorded in the same quarter of 2023 and lower than the 14.19 per cent it contributed in the preceding quarter.

In nominal terms, in the third quarter of 2024, the sector growth was recorded at 14.51 per cent (year-on-year), a 25.75 percentage points decrease from the rate of 40.27 per cent recorded in the same quarter of 2023 and 2.65 percentage points higher than the rate recorded in the preceding quarter.

Despite being a major contributor to the country’s GDP, the Nigerian telecommunications sector recorded an 87 per cent decline in foreign investments for the third quarter of 2024, marking a significant downtrend from the previous two quarters of the year.

The NBS data for capital importation showed that the sector attracted only $14.4m in capital importation in Q3, a sharp decline from the $113.42m investments recorded in Q2.

Year-on-year, the Q3 2024 capital importation for the telecom sector also represents a 77 per cent decline compared to the $64.05m recorded in the same period last year.

Despite the decline in the third quarter, the telecom sector has had better foreign investments this year than in previous years.

The NBS data showed that the sector attracted a $191.5m capital inflow in the first quarter of this year, marking a significant 769 per cent increase compared with $22.05m received in Q1 2023.

The investments recorded in the first quarter alone surpassed the total investments recorded by the sector in the full year 2023, which stood at $134.75m.

This came after years of consistent decline in investments, even with a gaping infrastructure gap requiring billions of investments to bridge.

In Q2 2024, FDIs in the sector stood at $113.4m. While this is lower than the inflow recorded in the preceding quarter, it represents a 339 per cent increase over the $25.81m capital inflow recorded in the same period last year.

Between January and September 2024, MTN Nigeria’s core capital expenditure dropped 27.79 per cent to N217.64bn, while Airtel’s capex fell 36.59 per cent to $149m.

This investment decline is tied to a N514.93bn loss between January and September 2024 for MTNN and a 46.9 per cent decline to $755m in Airtel Nigeria’s revenue in the period.

To adjust to these harsh economic realities, telcos renewed their push for tariff hikes this year.

According to the Association of Licensed Telecom Operators of Nigeria and the Association of Telecommunication Companies of Nigeria, telecom operators have advocated for higher prices for the last 11 years.

The telcos stressed the need for cost-reflective tariffs in the face of adverse economic headwinds like high inflation of 34.6 per cent in November 2024 and losses resulting from foreign exchange fluctuations.

However, telecommunications companies in Nigeria were mandated to increase their investments in network infrastructure following the approval of a tariff hike after 11 years of lobbying.

This follows an assertion by Bosun Tijani, the minister of communications, innovation, and digital economy, that tariff hikes will happen in the interests of the industry’s sustainability. “Tariff will go up,” he said.

The condition of this increase has been tied to a commitment by telcos to increase investments in the sector.

By Francesca Hangeior

Asian and European markets sank Monday after an outsized US jobs report dealt another blow to hopes for more interest rate cuts, while oil extended a rally sparked by new sanctions on Russia’s energy sector.

The equity sell-off tracked hefty losses on Wall Street, where all three main indexes finished more than one per cent lower as the new trading year continued to falter.

Keenly awaited data on Friday showed the US economy created 256,000 jobs last month, a jump from November’s revised 212,000 and smashing forecasts of 150,000-160,000.

The figures followed news that the crucial US services sector picked up in December, with the prices component soaring more than expected to the highest level since last January, while another report showed job openings hit a six-month high in November.

Hopes that the Federal Reserve will continue cutting rates through 2025 — having made three trims last year — were dashed when in December it indicated just two reductions over the next 12 months, down from four tipped previously.

The hawkish pivot came as inflation continues to hover above the bank’s two percent target, while there are also concerns that president-elect Donald Trump’s plans to slash taxes, regulations and immigration will reignite prices.

“Given a resilient labour market, we now think the Fed cutting cycle is over,” said Bank of America’s Aditya Bhave and other economists.

“Inflation is stuck above target: in the December (summary of economic projections), the Fed not only marked up its base case for 2025 significantly, but also indicated that inflation risks were skewed to the upside. Economic activity is robust.

“We see little reason for additional easing.”

Markets in Sydney, Singapore, Seoul, Mumbai, Taipei, Manila, Bangkok and Jakarta all sank. Tokyo was closed for a holiday.

Hong Kong and Shanghai also fell but pared initial losses as data showed Chinese exports and imports topped forecasts in December.

London, Paris and Frankfurt fell at the open.

On currency markets the pound was wallowing around lows not seen since the end of 2023 owing to fading hopes for US rate cuts as well as worries about the British economy. The euro struggled at its weakest since November 2022.

Surging oil prices added to unease, with both main contracts jumping more than percent — extending Friday’s gains of more than three percent — after the United States and Britain announced new sanctions against Russia’s energy sector, including oil giant Gazprom Neft.

However, commentators do not expect prices to spike too much, even amid speculation that Trump will hit Iran with fresh sanctions.

“A significant and perhaps underpriced risk to crude oil prices is the potential for supply to outstrip demand, especially given OPEC+’s intention to reintroduce barrels to the market,” said Stephen Innes at SPI Asset Management.

“Even if US sanctions curtail Iranian oil production by 1.5 million barrels a day — a scenario similar to that during Trump’s previous presidency — this amount could easily be compensated by OPEC+, which is currently holding back 5.8 million barrels a day, or 5.3 percent of the total global production capacity.”

However, he added that some issues could lead crude to rocket, including an escalation of the Middle East crisis, a significant reduction in Russian output or exports and a strategic about-face by OPEC+ to slash production.

The Dollar to Naira exchange rate remains a critical indicator of Nigeria’s economic landscape, reflecting persistent challenges in the country’s foreign exchange market.

As of January 13, 2025, here is the latest update on the official exchange rate and the black market rate, alongside an analysis of current market trends.

Current Exchange Rates

Official Exchange Rate (CBN)
₦1,542/$1 – This is the Central Bank of Nigeria’s (CBN) rate used for official transactions through authorized channels.
Black Market (Parallel Market) Rate
Buying: ₦1,647/$1
Selling: ₦1,656/$1
The black market rate continues to reflect the realities of supply and demand outside the formal financial system.

Market Analysis and Trends

The gap between the official rate and the parallel market rate underscores ongoing pressures in the forex market. Despite the CBN’s policies to stabilize the naira, the demand for dollars in the black market remains high, driven by limited supply and speculative activities.

Key Factors Affecting the Dollar to Naira Exchange Rate

Limited Dollar Supply: Restricted access to forex through official channels pushes many businesses and individuals to the black market.
Import Dependency: Nigeria’s reliance on imports creates a consistent demand for dollars.
Inflationary Pressures: Rising inflation erodes the naira’s purchasing power, increasing demand for the more stable U.S. dollar.
Speculation: Traders hoard dollars in anticipation of higher rates, fueling further volatility.
CBN Policies and Interventions

The CBN has implemented several measures to stabilize the naira, including:

Forex Restrictions: Limiting access to dollars for non-essential imports to conserve reserves.
Promoting Export Earnings: Encouraging non-oil exports to generate forex inflows.
Diaspora Remittance Incentives: Streamlining remittance channels to boost dollar supply.
Despite these efforts, the significant disparity between the official and parallel market rates persists, pointing to structural challenges within the economy.

Economic Impact

The high Dollar to Naira exchange rate in the black market has far-reaching consequences:

Rising Costs: Importers pay a premium for dollars, leading to higher consumer prices.
Volatility in Investments: Uncertainty over exchange rates complicates business planning and investment decisions.
Debt Burden: Dollar-denominated debts become more expensive to service as the naira weakens.
Outlook for the Naira

Experts predict that the Dollar to Naira exchange rate will remain volatile unless Nigeria boosts its forex reserves, reduces dependency on imports, and strengthens non-oil export revenues. Long-term stability will require structural reforms and targeted economic policies.

Dollar to Naira Rate at a Glance

Exchange Rate

Value (₦)

CBN Official Rate

1,542

Black Market Buying Rate

1,647

Black Market Selling Rate

1,656

Conclusion

The Dollar to Naira exchange rate today, January 13, 2025, highlights the challenges facing Nigeria’s forex market. While the CBN rate offers a regulated framework, the black market continues to reflect market-driven dynamics. Staying informed is essential for businesses and individuals navigating this complex economic environment.