MTN Nigeria CEO Karl Toriola has defended recent tariff hikes by mobile network operators, stating they are essential for the “survival” of the telecoms industry in Nigeria, despite significant criticism.
The Nigerian Communications Commission (NCC) granted mobile network operators permission to raise tariffs by up to 50% last month, a change reportedly implemented on 11 February. The increase has sparked public outrage, as mobile connectivity has become a vital necessity in daily life across the West African nation.
In an interview with Developing Telecoms on 12 February, Toriola pushed back against criticism that the price surge was excessive, arguing that tariffs should have increased by approximately 300% to reflect the naira’s sharp devaluation and the country’s soaring inflation.
Addressing the impact of currency devaluation, Toriola emphasised that MTN purchases network equipment and software in US dollars, a process that has become significantly more expensive. With the naira’s decline, operators are now receiving three times fewer dollars than they did in 2023, making operations more challenging.
In February 2023, businesses could exchange 460 naira for one US dollar, but the currency has since devalued sharply. At the time of writing, a single dollar was worth 1,510 naira.
As Nigeria grapples with the sharp devaluation, MTN has been severely affected. The company was technically bankrupt in 2023 as its liabilities surpassed its assets—a deeply concerning issue for the wider MTN Group, as Nigeria remains one of its highest revenue-generating markets.
“Because of these factors, we’ve seen our costs rise dramatically. The cost of leasing tower space and supplying energy to cell sites increased by 120% in the first three quarters of 2024. So, in comparison, a 50% tariff increase is not that high,” said Toriola.
Boycott threat
The Nigerian Labour Congress (NLC), an umbrella organisation for trade unions, condemned the tariff hikes on 11 February, describing them as a “betrayal of trust” and “disdain for the Nigerian people.” In a statement, the NLC also criticised the NCC, accusing the regulator of prioritising industry interests over consumers.
The NLC has called for the complete reversal of the tariff increases and urged Nigerians to boycott MTN, Airtel, and Globacom between 11 AM and 2 PM daily until the end of February. The union is also encouraging consumers to stop purchasing data and has demanded the return of funds it claims mobile operators have “siphoned” out of the country.
Furthermore, the NLC has threatened a “total shutdown of operations nationwide” if prices are not reversed by 1 March. However, it remains unclear how the union intends to enforce such a measure.
A complete reversal of tariff hikes has not been implemented, but MTN Nigeria backtracked on its 200% increase of its popular 15GB data bundle just two days after the NLC’s boycott call.
Industry analyst and CEO of consultancy firm Balancing Act, Russell Southwood, commented: “Nigeria is a large example of a problem affecting many African countries—high levels of debt that undermine the value of the currency, which in turn weakens the economy.
“Prices have to go up, and rising prices cause inflation, which creates political turbulence.”
Southwood noted that the tariff increase became politicised, which led to MTN reversing its price hike on the 15GB bundle. However, he added that the company’s real challenge lies in convincing subscribers that the price hikes are necessary – especially as more increases are expected.
More price rises incoming
Toriola warned that further price increases are inevitable and argued that the tariff adjustment would enable MTN to invest in improving service quality, optimising the network, and integrating AI-driven solutions.
“This initial 50% increase was crucial to ensuring the industry’s survival. We anticipate further adjustments over time,” he said.
“Yes, it’s a significant hike, but we hope to implement gradual, incremental increases tied to inflation. This will allow us to maintain service quality and continue investing in the future.”
The CEO added that Nigerians have seen their wages increase as companies attempt to keep pace with inflation.
Southwood agreed with Toriola, stating that mobile operators must continue investing in their networks annually to remain competitive or risk falling behind.
“I think every mobile operator—whether AI and other use cases had emerged or not—needs to continue investing significant sums in their networks to keep them current and maintain service quality.
“The reality is that annual capital commitments are required. Given that Nigeria is probably the largest, if not one of the largest, mobile markets in Sub-Saharan Africa, the sums involved are considerable. Any reduction in investment will create opportunities for rivals,” Southwood said.
Regarding potential consumer backlash, Toriola said it remains to be seen whether users will reduce their mobile usage due to higher costs. He cited MTN Ghana as an example, noting that despite similar macroeconomic challenges and tariff increases, mobile consumption remained stable. Although it should be noted Ghana’s currency devalued less severely in comparison to Nigeria.
Businesses in Ghana could exchange 12 cedi for one US dollar in 2023, and at present that rate currently stands at 15 cedi.
“The consumption patterns in Ghana have remained steady, or have even continued to rise, despite higher prices. We expect a similar trend in Nigeria. Additionally, disposable income has actually increased over the years despite inflation. Ultimately, the impact of the price increase will only be confirmed once we test it in the market.”
Southwood added: “Nigeria was one of MTN’s biggest contributors to revenue. To restore profitability for the overall group, the Nigerian market must be stabilised – it is central to MTN’s long-term success.”
He further noted that the downturn in Nigeria, and in turn MTN Nigeria’s financial struggles, were largely beyond the company’s control. Several large multinationals, such as Procter & Gamble and GlaxoSmithKline, have either withdrawn from Nigeria altogether or significantly downsized operations.
There has been speculation that MTN might sell off its Nigerian unit, as it did with its Middle Eastern operations. However, as a company that prides itself on being a Pan-African operator, such a move seems unlikely.
Instead, MTN appears committed to weathering Nigeria’s economic turbulence. Consumers, however, should expect more price increases, as Toriola has warned – though out of necessity, as tariff prices have remained largely unchanged since 2013. The company seems to have enough scale to endure the next 12 to 18 months of economic instability hopefully, with a better outlook ahead.
