50% Tariff Hike: Nigerian Telcos May Shift Focus to B2B Services for Survival

On January 20, 2025, the Nigerian Communications Commission (NCC) approved a 50% tariff increase for telecommunications companies—an attempt to provide some financial relief to an industry plagued by inflation, forex instability, and rising operational costs. While this move falls short of the 100% increase telcos had lobbied for, it has sparked a shift in strategy within the telecom sector. Experts now predict a strong focus on business-to-business (B2B) services, particularly data centres, as telecom operators look to diversify revenue streams and ensure long-term survival.

Amid growing financial pressures, telcos are exploring innovative solutions to optimize costs and bolster their revenues. Let’s examine the implications of this tariff hike and how the pivot to B2B services, renewable energy, and strategic partnerships could reshape Nigeria’s telecom sector.

The Tariff Hike and Its Implications

The NCC’s approval of a 50% tariff increase comes as a partial relief to telcos reeling from Nigeria’s challenging economic environment. However, the telecom industry had sought a 100% hike, signaling that the approved measure only scratches the surface of their financial difficulties.

Telecom operators like MTN Nigeria, Airtel, and Globacom have been battling the effects of currency devaluation, skyrocketing diesel costs for powering cell towers, and restricted access to foreign exchange for importing critical equipment. In 2024 alone, MTN Group reported losses exceeding $414.7 million due to rising operational costs. The tariff hike, while helpful, is unlikely to bridge the gap left by these mounting expenses, forcing telcos to rethink their business models.

A Shift Toward B2B Services

As the consumer segment faces economic constraints, Nigerian telcos are increasingly turning to B2B services as a strategic alternative. Business customers, particularly those in enterprise and government sectors, represent a more stable and lucrative revenue stream compared to individual consumers affected by rising telecom costs.

The Rise of Data Centres

Data centres are emerging as a cornerstone of this shift. The explosion of internet usage in Nigeria, coupled with growing demand for cloud storage, AI applications, and digital services, has created a fertile ground for investment in data infrastructure.

For example, Airtel Africa announced plans in March 2024 to launch NXtra Data Centres, its first data centre in Lagos. These facilities promise not only to improve connectivity but also to serve as a critical growth engine for telecom operators. Data centres allow telcos to deliver high-value services such as cloud computing, storage solutions, and hosting services to corporate clients.

Ernest Akinlola, a former executive at T-Mobile and Etisalat Nigeria, emphasized the role of data centres in stabilizing telco revenues. "With the right investment and strategy, data centres could be a game-changer for telcos looking to optimize their financial performance," he said.

AI-Driven Infrastructure

Artificial intelligence (AI) is another avenue being explored. As global demand for AI infrastructure surges, telcos are recognizing the potential of AI-driven data centres. However, high entry costs—particularly for GPUs and advanced computing technologies—pose challenges for many African telcos. Partnerships with cloud providers and hyperscalers, such as Microsoft and Amazon Web Services (AWS), could offer a feasible path to capitalize on AI while sharing investment burdens.

Cost Optimization Through Renewable Energy

Beyond diversifying revenue streams, Nigerian telcos are looking to cut operational expenses by transitioning to renewable energy. Energy costs represent a significant burden for telecom operators, especially in a country where diesel-powered cell towers remain the norm due to an unreliable national grid.

The GSM Association (GSMA) reported in 2024 that adopting renewable energy could reduce energy costs for telcos by as much as 50%. Solar-powered telecom towers, for instance, are gaining traction as a viable solution to rising diesel prices and environmental concerns.

Akinlola highlighted the "solarisation" of towers as a key strategy for telcos to enhance their financial health. "Given Nigeria’s abundant solar resources, transitioning to renewable energy is not just an environmental imperative but also a financial necessity," he said.

Several telcos have already started exploring this option. By integrating solar power and energy-efficient technologies into their infrastructure, they can mitigate energy expenses while reducing their carbon footprint—an increasingly important factor for attracting global investment.

Strategic Partnerships and Co-Investments

Partnerships are becoming a critical aspect of survival for Nigerian telcos. Collaborative models, such as co-investments with cloud providers, hyperscalers, and systems integrators, offer a way to share costs and expand service offerings.

Chris Silberberg, Research Manager at IDC, suggested a partnership model where telcos focus on providing local connectivity and physical infrastructure, while cloud providers contribute advanced services like AI computing and analytics. Similarly, Omdia, a global research firm, recommended co-investments with hyperscalers to create complementary services that meet the demands of Nigeria’s digital economy.

The Growing Role of Enterprise Clients

As telcos increasingly pivot to B2B services, enterprise clients are expected to play a pivotal role in their survival strategies. Government institutions, financial services, healthcare providers, and educational institutions are all major consumers of digital services and connectivity.

The ongoing digital transformation in Nigeria, spurred by the rise of fintech and e-commerce platforms, has created a surge in demand for robust, scalable telecom solutions. By focusing on enterprise clients, telcos can secure stable, long-term revenue streams, even as consumer segments remain under pressure.

Challenges Ahead for Telcos

Despite these opportunities, Nigerian telcos face considerable hurdles. The nation’s volatile economic environment, characterized by high inflation and forex scarcity, continues to weigh heavily on the sector. Additionally, regulatory uncertainties and inconsistent policy enforcement complicate long-term planning for telecom operators.

The approved 50% tariff hike may provide temporary relief, but without further policy support and macroeconomic stability, the financial health of the industry remains precarious.

Survival Strategies in a Challenging Environment

To thrive in this challenging environment, Nigerian telcos are adopting a combination of strategies:

• Investing in Data Centres: Building and expanding data centre infrastructure to cater to the growing demand for digital services.
• Embracing Renewable Energy: Transitioning to solar-powered infrastructure to cut energy costs and improve sustainability.
• Focusing on B2B Services: Pivoting to enterprise clients and government institutions for more stable revenues.
• Forging Partnerships: Collaborating with hyperscalers, cloud providers, and systems integrators to share costs and expand capabilities.