Equipment Suppliers and foreign vendors impose unfavourable payment terms on Telecoms Service Providers due to delayed payment occasioned by Government Forex policy
Association of Licensed Telecommunications Operators of Nigeria, (ALTON), has revealed recently that current Federal Government’s foreign exchange (forex) regime may lead to collapse of over $38 billion telecom industry.
According to a statement from the ALTON, its members face frustration in accessing hard currency since the beginning of the current policy by the Central Bank of Nigeria (CBN). In a communiqué issued at the end of its emergency general meeting to review the situation, ALTON said “The exemption of Telecommunications Equipment and Services from items to be accorded priority in the allocation of FX by the Banks has adversely impacted the industry negatively”.
According to the letter signed by the chairman of ALTON, Engineer Gbenga Adebayo, the group listed ‘Increased Operating Cost’, saying “In the absence of local substitutes for its plant and machinery, the Telecommunications Service Providers are constrained to source FX from interbank market at higher rates compared to other sectors such as Manufacturing, Aviation and Agriculture accorded priority in FX allocation at reduced rates by the CBN”.
“Owing to the prevailing economic situation in the country, ALTON members cannot transfer the increased cost burden to the consumers, thereby contracting profitability and ability to make further investment to drive growth in the industry.
Another danger stemming from the problem is the ‘Unfavourable Credit Terms’ which ALTOn said has made it very challenging for ALTON members to honour their obligations to foreign vendors as at when due.
“This has occasioned delayed payment to Equipment Suppliers and other foreign vendors, who have now resorted to imposing unfavourable payment terms on Telecommunications Service Providers in Nigeria. Some of the Foreign Vendors had issued Notice of Disconnection of service, which could disrupt service availability with attendant impact on customers’ experience. This further underscores the need for an urgent action to be taken towards addressing the lingering scarcity of FX facing the industry.
ALTON also listed ‘Delayed implementation of Network Enhancement and Improvement Initiatives’.
The group said ALTON members have made commitments intended to ensure the implementation of National Quality of Service (QoS) Fixing Project.
Explaining more, Adebayo averred that “This is a coordinated network investment plan supervised by the Commission at designated locations nationwide over a period of time by the Telecommunications Service Providers to ensure improved QoS. The continuity of this initiative is dependent on obtaining FX to import equipment required to carry out the intended National QoS Fixing Project”.
“ALTON is of the view that if proactive measures are not taken to ensure easy access to FX, the National QoS Fixing Project is likely to be adversely impacted to the detriment of the citizenry and economy.
Adebayo also noted that the prevailing forex challenges will affect National Broadband Plan which the federal government floated in 2013.
The NBP which runs from 2013 to 2018 intended to ensure the deployment of pervasive and ubiquitous broadband infrastructure nationwide to facilitate the realisation of a fivefold increase in broadband penetration from 6% as at 2012 to 30% in 2018.
“On this note, the Commission divided the country into seven (7) Zones and has licensed two Infrastructure Companies (InfraCos) for Lagos and North Central Zones to deploy metro fibre optic network. The Commission recently published a notice on the commencement of the process for the licensing of InfraCos on Open Access Model for the deployment of optic fibre infrastructure broadband network in the other zones (i.e. North East, North West, South South, South East and South West) of the country.
Another area of negative impacts of the forex regime as listed by ALTON is in the deployment of metro fibre network, as several licensed InfraCos are yet to make significant progress in the deployment of optic fibre across their respective licensed locations, hence the need for strategic support to the Telecommunications Service Providers by ensuring easy access to FX to import required equipment and undertake the pending projects. Easy access to forex will also help fulfil outstanding obligations to Foreign Vendors without further delay for the continued growth and development of the industry.
In their prayers, ALTON therefore requests the NCC to fast track the ongoing engagement with the CBN to include Telecommunications Equipment and Invisibles among the list of items/Sectors to be allocated from the 60% FX availability by the banks regardless of source of inflows.
Adebayo made it clear that the window will ensure the continued provision of world class telecommunications services to the consumers, the needed quality of service and encourage networks expansion after all.