Nigeria is the most populous nation in Africa with over 150 million people. Ethiopia ranks as the third most populous nation with 85 million. Like almost all African countries (except Seychelles, Mauritius and Libya), they ranked in the lower half of the ICT Development Index as reported in Measuring the Information Society 2010 by the International Telecommunications Union (ITU).
But the ICT Development Index does not speak to the burgeoning ICT markets in these countries. Nigeria’s ICT landscape has changed since the ITU reported that 65 bits per second per user of international bandwidth was available in 2008. A broadband boom for Kenya and East Africa occurred in 2009. The same is getting ready to rev up in Nigeria and West Africa this year. Between 2010 and 2011, Main One, Globalcom-1 (GLO-1), and the West Africa Cable System (WACS) undersea cable systems will add international bandwidth capacity of close to eight terabits to the market.
Currently, the West African region still lags behind Southern and East Africa in ICT infrastructure, but within the region, Nigeria is in a better position because the government has liberalised all three segments of its telecommunications infrastructure – international bandwidth, domestic backhaul, and access – which is where bottlenecks can occur, according to Guy Zibi, CEO of AfricaNext Research.
For example, there are four to five domestic backhaul providers, such as Suburban Telecom and Phase 3 Telecommunications, not including backhaul rollouts by mobile operators, says Zibi.
This brings to the forefront the government’s role in ICT development in Nigeria. Unlike South Africa, where government is heavily involved in implementing ICT infrastructure projects, Nigeria’s government focuses on policy, not implementation, opening more doors for private sector involvement.
On the demand side, Zibi says there is strong pent-up demand for broadband in the corporate market. Nwakego Eyisi, a partner at Encompass Analytics Nigeria, agrees. In recent research, Eyisi found that companies were snapping up bandwidth.
Unlike South Africa, with a mobile SIM card penetration rate exceeding 100 percent, Nigeria’s mobile penetration rate stood at around 41 percent in 2008, according to the ITU, leaving room for growth in basic cellular services. The room for growth is even greater for computers and internet access, with only about 12 percent of Nigerians owning computers and about six percent having access to the internet.
Eyisi says that while there is competition in the mobile market, prices remain high and Nigerians limit the amount of time spent on voice calls, which is a concern to mobile operators. Bharti Airtel, which recently bought Zain, sees this as a business opportunity since it has successfully implemented low-cost networks elsewhere. Airtel should be able to offer competitive pricing against the existing operators, according to Eyisi.
Another gap in the market is service to rural areas, a second strength of Airtel’s. Mobile penetration is concentrated in urban areas, yet only half of Nigeria’s population lives in urban centres, so rural markets represent a large opportunity.One of the major challenges is lack of power supply. As reported in the African Statistical Yearbook 2010, Nigeria had about 23 000 million kilowatt hours of public electricity for a nation of 150 million in 2007, while South Africa had 253 000 million kilowatt hours for about 48 million people during the same period. Also, within the limited capacity of power, it can fluctuate from day to day.
However, the Nigerian government has embarked on power sector reform with the goal of mass improvements in electrical supply within a few years. Eyisi says that if this is accomplished, “it will spur economic growth and help the ICT sector substantially.” President Goodluck Jonathan has targeted 2011 for improvements at least in managing current capacity.
In East Africa, Ethiopia represents a large potential consumer market. Ethiopia’s development is behind Nigeria’s, with only 7.7 percent of Ethiopians having a cellphone in 2010, according to the Telecommunications in Ethiopia report presented to the United Nations Conference on Trade and Development (UNCTAD) by Taye Dubale, chief development officer for the Ethiopian Telecommunications Agency (ETA). However, the government intends to raise mobile penetration to 36 percent within five years.
Computer and internet penetration has fared no better. Less than one percent of Ethiopians had a computer and internet access in 2008, according to the ITU.
So, the market potential is there, but what is holding it back? For one, the Ethiopian telecommunications market is not liberalised. The ETA has issued one licence to the parastatal Ethiopian Telecommunications Corporation (ETC).
The government seems to recognise the importance of the telecommunications sector for development, so it has expanded the national telecommunications infrastructure. This includes over 4 000km of fibre-optic backhaul. In a project with Cisco, the ETC developed the first broadband switch network in Africa. This network supports three primary government projects – WoredaNet, SchoolNet and AgriNet. WoredaNet connects government offices across the country, while SchoolNet connects over 400 secondary educational institutions.
Over 80 percent of Ethiopia’s population lives in rural areas and, logically, agriculture is the primary economic sector, so AgriNet focuses on connecting those institutions that support this sector to catalyse economic growth. A private sector endeavor, the Ethiopian Commodities Exchange (ECX) has entered the agricultural sector and is driving ICT transformation in agriculture and even financial services. ECX is an electronic exchange for agricultural commodities like coffee, connecting Ethi-opian agricultural producers to buyers around the world. To accomplish this, ECX uses ICT to connect the exchange to its warehouses across the country, which house and inventory agricultural crops.
In general, access to ICT infrastructure by consumers, or the general public, is limited. Other challenges include the cost of ICT products and services and a lack of ICT skills among the population. Christie Christelis, president of Technology Strategies International, a global ICT research firm, says: “Once the sector is liberalised and private sector investment increases, improvements in these areas should follow.”
The question is, when will Ethiopia liberalise? The World Trade Organisation (WTO) in an agreement with Ethiopia in 2006 stipulated that the telecommunications sector must be liberalised. However, Ethiopia is not a full WTO member yet and has continued to delay liberalisation and has no plan in place as yet. Christelis believes said plan will be formulated in 2011 and liberalisation will follow shortly thereafter.
While both Ethiopia and Nigeria have challenges, their large populations and low penetration rates represent significant opportunities. Firms looking for new markets should monitor the progress of these countries regularly.