Why ICT’s contribution to GDP dropped in Q2 2021

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Why ICT’s contribution to GDP dropped in Q2 2021

The Alliance for Affordable Internet has attributed the drop in Information and Communication Technology’s contribution to Nigeria’s Gross Domestic Product (GDP) to lower demand for Telecom services in Q1 and Q2 of 2021. 

This was disclosed by the National Coordinator, Alliance for Affordable Internet, Olusola Teniola, in an exclusive interview with the Punch.

According to him, when year-on-year, ICT contribution vis-à-vis telecoms, information services, broadcasting is compared, it will be observed that the COVID-19 impact on society in 2020 demonstrated a big demand for telecom services in particular.  

He said, “This came to the peak towards the end of 2020, which demonstrated the fact that there was a huge pent-up demand.

“However, now in Q1 and Q2 of 2021, we have noticed a gradual tapering off and a decline in between what was recorded in 2020 and the reasons are obvious. We had at the tail end of 2020, a SIM card policy that was enforced, which now monetarily is impacting both the Q1 and Q2 numbers of ICT contributions to the GDP. 

“In fact, what it has demonstrated is a downward trend from the end of the last quarter in 2020, Q1, and now Q2.  When you see Q1 of 2021 to Q2 of 2021, there is a decline. This will also be reflected in Q3 simply because the disconnect and inability of people to register in the Q4 2020 numbers is now coming through, and it is indicated in Q1 and Q2 numbers. 

“And we predict that there would be a slash in industry revenue going to Q3 of this year. This is predicted because of the impact of the SIM card policy regulation on the industry.” 

He added that the alternate reason is that during the COVID-19 period, “we had not felt the full impact of the pressure of consumer spending on the Consumer Purchasing Index. The power of the consumer to spend is now impacted due to the fact that their inability to retain jobs has affected their household incomes..

“So, if you are in a position where you’ve not had a job for a year or six months, at first there is a decision to choose between whether you are going to spend on telecom services or on food. It is becoming quite a strong argument for you to now prioritise food item purchases rather than spending on data.” 

Capital importation into the telecom industry 

Teniola explained that the Capital importation into the telecom industry fell in Q2 2021 to what might be considered the lowest seen in a while, Why was this so especially in light of expected 5G investments? 

“Capital importation is reflective of the grand CAPEX that any operator is planning. 

“Generally, FDI has trended down by about 70% year-on-year in the industry in the last four years,” he added.

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