ICT Stakeholders Complain About Forex Market Volatility
Foreign exchange market volatility has killed several telecom projects, ICT players said, even as they called on policymakers to make dollars available to local players.
The exchange rate between the naira and the US dollar crossed the threshold of N700/$1 in the parallel market on Wednesday, July 27, 2022, stakeholders revealed during the 3rd edition of the Policy Implementation Assisted Forum (PIAFO), Thursday in Lagos.
Chief Operating Officer (COO), Estream Networks Ltd, Martins Akingba said access to forex is not balanced with the big players as they are able to shift dollar spend to overseas affiliates.
“Despite this, they are still competing with smaller operators in the same space. Virtually all of these foreign players are members of a consortium of submarine cable operators and yet will be competing with local players in the same retail market space,” Akingba explained.
The COO revealed that five years ago, 80% of operators’ input costs were denominated in US dollars, adding that to date that figure has dropped to less than 20%.
He said: “The types and scale of investments that indigenous operators can make have a major role to play in their growth. Without a doubt, our ability to raise much-needed capital is one of the main reasons why local telecom operators go bankrupt. The volatility in the foreign exchange market also aggravated the situation as it killed several telecom expansion projects. How can we survive if we access the dollar at the recent rate and repay the double a few years after the start of the project, because the naira continues to depreciate daily? »
Akingba, however, instructed policy makers to make the dollar available, especially for local players in the ICT sector.
“The regulator must give us access to capital that allows us to compete effectively with foreign players,” he added.
He urged policymakers to find common ground in which foreign telecom operators who have virtually unlimited access to capital and other factors of production do not walk away with virtually all the benefits at once, stifling local players. .
“Similarly, the managers of this sector must also ensure that local investors and entrepreneurs are encouraged to invest and, at the same time, that the growth of the sector benefits those at the bottom. This can be done through carefully designed policies.
“Inclusive growth in this sector remains elusive as inequalities persist in these areas that I briefly mentioned. I argue that policy makers should want local entrepreneurs who are already disadvantaged from the outset to be intentionally motivated and incentivized to develop local and indigenous content,” he said.
Along the same lines, Omobayo Azeez, Senior Executive of PIAFO and Editor-in-Chief of Business Metrics Nigeria, said that the telecommunications sector has unquestionably become an indispensable economic enabler for the country and its people.
Despite this laudable trajectory, Azeez said the sector remains largely dependent on foreign inputs which, at the end of each year of operation, results in capital flight of more than $2.16 billion, which has placed the already struggling economy in an even more disadvantaged position.
“When traders have to rely solely on foreign talent, solutions, equipment and accessories, they will also face the hassle of accessing forex as one of the major issues. As such, operators are hurting, customers are hurting and even our dear Naira is also struggling as it continues to lose value,” he explained.
He revealed that the Federal Government has realized that there is a need to reverse this trend and that is why this policy has been developed, adding that with the policy in place, the job is only start because the effective implementation of a policy is the true measure of its success.
Azeez, however, urged policymakers to ensure that policies such as the National Policy for the Promotion of Indigenous Content in the Nigerian Telecommunications Sector come to fruition and create inclusive benefits for individuals, businesses and the economy. .