As of September 2024, the debt of telecommunications companies (telcos) and other ICT industries to banks had dropped to N1.69 trillion, according to the Central Bank of Nigeria‘s quarterly statistical bulletin.
In comparison to the N1.77 trillion owed in September 2023, this amounts to a year-over-year drop of N68.04 billion, or 3.9%. The impact of the CBN’s frequent interest rate increases, which have tightened monetary conditions and deterred borrowing within the industry, is reflected in the fall. However, compared to the N1.66 trillion recorded in August 2024, there was a minor growth of N31.61 billion, or 1.9%, month over month.
According to the year-over-year research, credit to the ICT sector showed a range of patterns in 2024. Credit was N2.47 trillion in January, which was a substantial rise of N1.23 trillion, or 99.3%, above N1.24 trillion in January 2023. But by February, credit had dropped to N2.35 trillion, which was still an 88.4% year-over-year rise and N1.10 trillion less than in February 2023. By March, credit had dropped to N1.67 trillion, substantially slowing the rate of borrowing.
Compared to March 2023, this was a 30% increase, or N385.24 billion, on an annual basis. The pattern persisted into April, when credit was comparatively steady at N1.66 trillion, up N241.90 billion, or 17%, from the previous year. Credit increased marginally to N1.68 trillion in May, representing a gain of N308.38 billion, or 22.4%, over the same time in 2023.
BrandSpur telecom and information news reports that year-over-year numbers started to show a drop in June. In June, credit to the industry fell to N1.64 trillion, a decline of N81.59 billion, or 4.7%, from June 2023.
July saw a further drop to N1.69 trillion, which was N48.93 billion (2.8%) less than July 2023. Credit dropped to N1.67 trillion in August, a decrease of N107.37 billion, or 6%, from the N1.77 trillion reported in August 2023. By September, the year-over-year decline of N68.04 billion highlighted the cautious approach to borrowing that businesses have taken in reaction to ongoing economic uncertainty and rising interest rates.
The CBN’s strict monetary policies, which have increased borrowing costs, are to blame for the fall in credit to the ICT sector throughout 2024. To reduce inflation, CBN has raised interest rates regularly; throughout most of the year, the monetary policy rate was at a record high. Since taking office in September 2023, CBN Governor Yemi Cardoso has presided over six interest rate increases in 2024.
The Monetary Policy Rate had its biggest increase of the year in February, rising 400 basis points from 18.75 percent to 22.75 percent. In March, there was an additional increase to 24.75%. By May, the rate had increased to 26.25%, and by July, it had risen to 26.75%.
The rate increased to 27.25 percent in September as part of the tightening cycle, and it reached 27.50 percent in November after the most recent boost. The 875 basis point rise is part of a larger effort to steady the economy and fight inflation. Businesses’ ability to borrow money has been directly impacted by this, especially those in capital-intensive industries like ICT.
Additionally, macroeconomic issues like fluctuating exchange rates and growing operating expenses have made financing even more difficult. Notwithstanding these obstacles, the ICT industry continues to be a vital engine of Nigeria’s economy, making a substantial contribution to employment and GDP growth. ICT-related activities dropped from 19.78% of Nigeria’s real GDP in the previous quarter to 16.35% in the third quarter of 2024.
However, this was revealed by the National Bureau of Statistics in the Q3 2024 GDP report. However, the contribution was greater than the sector’s 15.97% contribution during the same time last year.
