The Dalberg Report



Infrastructure: Nigeria’s strong international bandwidth but weak domestic coverage and last-mile connectivity suggest a relatively low performance in infrastructure rollout. The private sector led more than 95% of greenfield investments in telecoms from 1990-2010. Currently there are subsidies that support infrastructure extension and service delivery in rural areas. Given investment by operators in backhaul infrastructure, networks should be positioned to support mobile network operator rollout while moving towards uncovered areas. Suburban Telecom could lead the next wave of expansion.

Usage conditions: Nigeria has seen very strong telecom and mobile sector growth, with slightly slower uptake of the Internet due to limited accessibility. Twenty five percent of rural dwellers do not have access to cell coverage and have to travel a distance of between one to 10km to access telephone services.

Activity and impact across sectors: Nigeria shows the greatest potential in using the Internet to promote good governance, eCommerce and finance, though these sectors have not yet produced solutions that have spread across the region. The Cashless Nigeria Initiative aims to boost eCommerce and has been fairly successful in Lagos with plans to rollout to other states. Pagatech, a mobile payments company, has 200 000 users but is limited by the lack of legal protection of consumer funds within mMoney systems. In governance, the electoral commission and citizen sector have teamed up to create multiple elections monitoring platforms based on SMS aggregation.

Role of government: The Ministry of Communication Technology is playing an increasingly active role. In August 2012, it revised the national ICT policy and is considering incentives to drive the private sector to expand access to less-profitable rural areas. Consumer protection policies, however, are needed to further innovation and customer acquisition in mMoney and eCommerce.


The Nigerian economy is Sub-Saharan Africa’s second largest, posting growth of 7% over the past five years. At this rate, Nigeria’s economy will double within ten years. Growth is currently driven by agriculture, retail, oil and gas. Nigeria depends on oil exports for more than 80% of government revenue, though in 2012 its government announced a ten-year plan to cut oil dependence.4 Wholesale and retail trade, finance and insurance, telecommunications, and building and construction are other major growth sectors. Thirty percent of the country’s GDP growth last year was attributable to the ICT sector.

Nigeria faces significant health, education, infrastructure and governance challenges. Life expectancy is 52 years, with two nurses and less than one doctor per thousand people. Only three of every four primary students complete their schooling, down from nine in ten in 2006. Like many emerging markets, Nigeria has limited physical infrastructure that increases the cost of doing business. Electricity remains an issue, with only half the population with access and three quarters of businesses citing it as a major constraint to growth.6 With 84% of its people living on less than $2 per day, spending money on the Internet remains out of reach for many Nigerians. Mobile phone penetration, however, is 73%, with a large number of feature phones extending limited Internet access (ITU 2012).

ICT Sector Overview

Nigeria has a vibrant and competitive telecommunications sector. It was the largest growth contributor in the first quarter of 2012, boosted by near universal mobile phone penetration, reduction of Internet costs and improvements in telecommunications infrastructure.9 The country has fostered several leading eCommerce ventures, with incubators and venture funds available in recognition of the commercial potential of developing Internet-enabled technology solutions for the more than 160 million Nigerians.

The sector is receiving significant local and international investment. Of the five mobile providers, the largest are MTN, Glo, Airtel and Etisalat, who are regulated by the National Communications Commission (NCC). Separate is the country’s Ministry of Communication Technology that is responsible for developing ICT policy and oversight of its implementation in the country. The Broadband commission is a temporary committee set up to develop the broadband strategy for the country.

The government’s new ICT policy promotes using ICT to address social development challenges, grow the nation’s ICT industry and make Nigeria a knowledge-based, globally competitive economy.

The Ministry of Communication Technology is playing an increasing role in industry development. To boost the Internet’s impact on social and economic development, the government created a Universal Services Provision Fund to subsidise companies promoting ICT access in rural areas and has set aside $15 million to fund software development. It has achieved varied levels of success across its eight initiatives promoting access.11 Legislation mandating a certain portion of hardware and software be procured locally, similar to what is required of oil companies operating in the Niger Delta, is expected next year.

Internet adoption by the Nigerian government is low, however, despite the creation of a wholly owned company, Galaxy, providing the government with ICT services and backbone. Only 46% of ministries, departments and agencies have active websites. At the time of this publication the national government itself lacked a website.

Market Structure

The telecommunication sector in Nigeria is among the fastest growing markets in the world. In addition to a competitive mobile market, there is a range of domestic support services, including hardware manufacturers and software providers.

In addition to these mobile providers are a large number of ISPs. However, cost of access and quality of service are cited as major constraints. The availability of four international cables has increased bandwidth availability, shifting the challenge to extending that infrastructure domestically. Last mile connectivity provides an additional set of challenges that could be addressed by the government’s proposed new subsidy for infrastructure and service delivery in low coverage areas. Poor infrastructure increases the cost of distribution and limits the potential positive impacts of access. For example, Nollywood content is accessed primarily by Nigerians in the Diaspora due to slow connections that limit accessibility by local users.

Comparatively low equipment prices are driving rapid increases in the number of people online. Thanks to domestic manufacturing, computer prices are low enough in Nigeria to allow nearly one in six households to own one as of 2010. Feature and smart phones, however, are currently driving increases in Internet access. One analyst claims that smart phone sales are growing at 4% per month, aiming towards 25 million smart phones in the country by 2016. Broadband penetration, at 6%, is also increasing as the average cost dropped to $1/Mb from $7/Mb between 2010 and 2011.

Nigeria’s feature phone application market is thriving. Particularly popular is the social-networking application 2go, developed in South Africa, which hosts nine million users, 50% more than Facebook.19 Company research suggests that two-thirds of members use their phones for two hours or more every day.20 This level of engagement suggests a massive opportunity for low-bandwidth applications and platforms in the country. Incubators such as CCHUB and Wennovation Hub are fostering companies that recognize that opportunity.

This emphasis on commerce outshines progress made in other socioeconomic sectors. Little evidence suggested that Nigeria was leading in the development of health, education or agriculture applications. Interviewees often cited Nigerians’ entrepreneurial drive, attraction towards sectors that offer clear financial returns and the government’s history of developing policy that steered businesses and entrepreneurs towards financial services and commerce over other sectors.

Case Studies

  • Jobberman addresses information asymmetry but matching employers and employees more efficiently than using personal networks
  • Cashless Initiative Nigeria has pushed through private resistance to electronic payments, more than doubling the number of POS terminals
  • The Nigerian Independent National Electoral Commission’s use of social media provided real time data to address violence and monitor elections