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Regulatory Issues

In 2006, the Nigerian Communications Commission (NCC) awarded four new “unified” telecommunications licences allowing recipients to offer mobile and fixed telephony, Internet, broadband, very-small-aperture terminal (VSAT) and long-distance services anywhere in the country, thus effectively ending the five-year exclusivity period enjoyed by the existing four mobile operators.[1]

On the governance front, Nigeria's first national Internet exchange (Nigeria Internet Exchange Point or NIXP)[2] is now under dispute. Interstella Communication Limited, a telecoms company, has asked a Federal High Court in Abuja, to void the NIXP on the grounds that the government gave it an Internet exchange licence, numbered IEX/001/04, dated August 24, 2004, that contained exclusive rights to, among others, construct and maintain Internet exchange switches and to exchange data traffic on behalf of Internet service providers.[3] Interstella had asked the court to order NCC to pay N10 billion damages for the alleged interference with its exclusive license.

Besides the decision, this case is interesting in revealing the complex business relations between NCC and the telecommunications companies, and how this has impinged on Nigeria’s efforts to wire the country. In its affidavit, Interstella alleged that since NIXP’s incorporation, Mr Chima Onyenkwere, Chairman of NIXP and the owner and CEO of Linkserve, has been providing Internet services through the exchange from his satellite hub in USA. This implies that the NIXP would not be able to reduce reliance on expensive international transit or to ensure faster access by channeling domestic traffic locally as it was meant to.

ICT incentives

There is apparently free entry for new participants in virtually the whole telecommunications sector, and Nigeria is open to any investment proposal that will reduce the cost of implementation and provide excellent service. Incentives[4] include:

Pioneer status for five years under the Industrial Development (Income Tax Relief) Act 1990 is offered to interested investors who want to set up plants to manufacture telecom equipment in the country.

To develop the rural areas where about 84 per cent of the population lives, Nigeria is encouraging telecommunications companies to devote 20 per cent of the network capacity they will develop to the rural areas.

However, there are calls to review the incentives, especially in the areas of reduction of import duties on ICT equipment, tax incentives for ICT companies and for investment in ICT research, development and training efforts, local manufacture of telecommunications equipment and infrastructure to encourage investment in ICT, especially in the knowledge and creative areas.[5]

The Nitel question

The Nigerian Telecommunications Limited (NITEL), the previous sole national service provider, was finally acquired by Trans National Corporation Nigeria Plc (Transcorp) in August 2006 through a 75 per cent stake for US$750 million in a negotiated deal after four years and several attempts by the federal government to privatize the national ailing entity.[6] It was the result of a different strategy of "willing-seller-willing-buyer" adopted by the Bureau of Public Enterprises (BPE).[7] The process came under much criticism, including the transaction price, the capability of Transcorp to run Nitel,[8] the admission by the Chairman of Transcorp and Director-General of the Nigerian Stock Exchange, Dr Ndidi Onyiuke-Okereke, that former President Olusegun Obasanjo invested in Transcorp through Obasanjo Farms Ltd.[9]

However, this is not the end of the issue. NITEL still has a major chunk of the country’s telecommunications infrastructure (450,000 lines) that cannot be ignored. Its performance as a national operator, or telecom provider, has been assessed to be way below standard. For the many who depend on NITEL, improvements in performance and quality of service are key.[10]

Back to Nigeria

[1] Regulatory Watch, Economist Intelligence Unit, May 16-31 2006, Vol XV, No. 10
[2] NCC, ISPs Start Internet Exchange Points, This Day/All Africa Global Media via COMTEX, May 10 2006
[3] Funso Muraina, Telecom Firm Asks Court to Declare NIXP Illegal, This Day Online, November 5 2007
[4] Telecommunication Investment Opportunities: Investment Incentives in the Telecommunication Sector, Nigerian Investment Promotion Commission (NIPC), May 18 2007
[5] Jide Awe, Nigeria: Bridging the Infrastructure Divide, Jidaw.com, February 11 2007
[6] Plans to privatise Nitel was announced in July 1999, Balancing Act News Update, October 23 2007
[7] Events That Shaped ICT Industry in 2006, January 4 2007, All Africa, and Ajayi Olatunji Olowo, AAGM: Purchase of Nitel, Good Deal, October 3 2006, This Day (Nigeria), The Financial Times Limited, Asia Africa Intelligence Wire, Factiva
[8] An example of a critical commentary is by Reuben Abati entitled The Transcorp Story, The Guardian, July 8 2006
[9] Ben Agande & Habib Yakoob, AAGM: Obasanjo Has Interest in Transcorp - Okereke-Onyiuke, September 14 2006, Vanguard (Nigeria), The Financial Times Limited Asia Africa Intelligence Wire, Factiva
[10]Ibid. Jide Awe