An unprecedented surge in diesel prices has led to a substantial 35% increase in the expenditure of fueling Nigeria’s communication network. Telecommunication companies collectively spent N429.43 billion in 2023, a remarkable rise from N319.11 billion in the previous year.
The telecoms industry attributes this surge in energy costs to Nigeria’s economic recession in 2020 and the ongoing Ukraine/Russia crisis. These factors have significantly impacted the industry, with energy expenses accounting for a substantial 35% of the operating costs for ALTON’s members.
The price of diesel skyrocketed from N288.09 per litre in January to an astounding N1126.69 per litre in December 2023. This drastic increase directly affected the operational expenses of telecommunication operators, who collectively consume an average of 40 million litres of diesel per month to power telecom sites.
As of the end of 2022, the Nigerian Communications Commission reported a total of 34,862 towers and 127,294 base stations in the country. In that year, the telecommunications industry incurred operational costs of N2.09 trillion, with a significant portion linked to diesel expenses.
Telecom operators have been grappling with the adverse effects of escalating diesel costs on their businesses since 2022. Their plea for a tariff review to the NCC due to the surge in diesel prices was evident when the Association of Licensed Telecoms Operators of Nigeria requested a 40% increase in tariffs.
Despite their operational challenges, telecom operators have been unable to raise tariffs to offset the increased costs. Gbolahan Awonuga, Head of Operations at ALTON, emphasized the criticality of power in determining operational efficiency, highlighting the disparity between reduced revenues and unchanged tariffs.
In an effort to underline the industry’s struggle, Gbenga Adebayo, President of ALTON, emphasized the need for pricing to align with production costs, implying an imminent review of rates to reflect the current cost of inputs.
Telecommunication companies have urged the House of Representatives to acknowledge the detrimental impact of inflation, currency devaluation, difficulty in accessing foreign exchange, escalating energy costs, and heightened insecurity on their businesses. They emphasized that the existing pricing regulatory framework fails to consider changes in macroeconomic conditions and the current cost profile of operators, leading to unsustainable service pricing.
The surge in diesel costs has been attributed to foreign exchange challenges, the escalating cost of crude oil in the international market, and the implementation of a 7.5% VAT on the product, posing considerable challenges for oil marketers.
