THE PROSPECTS AND PROBLEMS OF DEREGULATION OF THE TELECOMMUNICATION INDUSTRY ON THE NIGERIAN ECONOMY
The study investigated the prospects and problems of deregulation of the Nigerian Economy, using telecommunication as case study. The researcher was guided by three hypotheses which are drawn from the problem statements and objectives of the study. Related literature are reviewed in the study. The data are sourced from both the primary and secondary sources available. Data was also collected through the use of questionnaires that were drawn up to reflect the necessary details needed. Data gotten were analyzed using the simple percentage distribution and hypotheses was tested using the chi- square distribution. The findings indicated that there is a general preference for the telecom industry after deregulation than before; deregulation has brought about increased efficiency and effectiveness of telephone services and that it has increased the nations prospects in international trade. Finally, based on the conclusion, the study recommended among others that: the industry should either be deregulated fully or not deregulated at all for efficient economic growth; their should be establishment of a regulatory framework for public or social control over its activities.
TABLE OF CONTENTS
Title page - -- - - - - - - - i
Certification - - - - - - - - ii
Approval Page - - - - - - - iii
Dedication - - - - - - - - iv
Acknowledgment - - - - - - - v
Abstract - - - - - - - - vi
Table of Content - - - - - - - vii
CHAPTER ONE: INTRODUCTION
INTRODUCTION - - - -- - - - 1
1.1 Background to the study - - - - 3
1.2 Statement of the Problem - - - - - 10
1.3 Objectives of the Study - - - - - 13
1.4 Significance of the Study - - - - - 13
1.5 Scope and Limitations of the Study - - - 14
CHAPTER TWO LITERATURE REVIEW
The Concept of Deregulation----16
Objectives of the Deregulation Programme --19
Deregulation of Nigerian Economy---20
Problems and Prospects of Deregulation--24
Deregulation of the Telecommunication Industry -28
The Telecommunication Industry and Foreign Direct Investment (FDI)------29
Telecommunication and Economic Development: Challenges and Opportunities----32
Administrative Challenges in a Deregulated Economy 35
Economic Theory and Deregulation---37
Deregulation and the Creation of Employment-39
Managing Telecommunication: Regulatory and Policy Environment ------40
Gap in Literature------48
Operationalization of the Key Concepts ---49
Theoretical Framework ------51
CHAPTER THREE: METHODOLOGY
3.1 Research Design - - - - - 54
3.2 Population of Study - - - - - - 55
3.3 Sample and Sampling - - - - - 55
3.4 Sources of Data Collection - - - - - 57
3.4.1 Primary Data - - - - - - - 57
3.4.2 Secondary Data - - - - - - 57
3.5 Method of Data Analysis - - - - - 58
3.6 Historical Background of the Area Study MTN Nigeria - 58
CHAPTER FOUR: DATA PRESENTATION, FINDINGS AND ANALYSIS
4.1 Data Presentation - - - - - - 72
4.2 Data Analysis - - - - - - - 72
4.3 Test of Hypotheses - - - - - - 81
4.4 Findings - - - - - - - 90
CHAPTER FIVE: SUMMARY, RECOMMENDATIONS AND CONCLUSION
5.1 Summary - - - - - - - - 92
5.2 Recommendations - - - - - - 93
5.3 Conclusion - - - - - - - 96
The relevance of information and communication technology (ICT) to the development of individuals, organizations, nations and the entire world cannot be over emphasized. Indeed, the world as we know it today is constantly being shaped by advancements in the field of ICT. Unsurprisingly, the biggest reference people make to ICT is the mobile phone.
With over five billion globally, this technology has been able to improve decision making, increase citizen participation in economic development, support a modern workforce, enhance social wellbeing, and largely narrow the digital divide. Nigeria is no exception to these awe inspiring developments.
In Nigeria, this push started a little over a decade ago when the government came to realize the fact that no modern economy can be sustained without ICT and more specifically access to communication services. It thus extended the market liberalization to the communications sector. When Nigeria embraced market liberalization, it was simply implementing a strategy that has been effectively and successfully utilized in several other countries across the world with significant impact on the economy.
Before the liberalization, we had government ownership of a monopoly telecommunications company, NITEL. While the company enjoyed government funding for telecom infrastructure development, it was characterized by slow pace of network rollout. Consumers, subsequently, had to contend with painfully poor quality of service delivery and endless waiting queues even to settle bills.
Immediately following the liberalization, the Nigerian Communications Commission (NCC) in 2001, licensed the digital mobile operators. Prior to this time, the number of connected phone lines in the country was a mere 450,000 for an estimated population of 120 million at the time. Experts revealed that the level of investment in the telecommunications sector was just about 50 million US dollars only.
Ten years later, the growth of the telecommunications sector is unmatched by any other sector in the economy. Available records indicate that the phenomenal growth both in terms of subscriber base and the huge infrastructural development cover every nook and cranny of the country.
Indeed, while Nigeria may not yet be on the cutting edge of the global ICT map, it has without doubt made huge progress in the effort to join the emerging information society. Today, with over 90 million connected lines, Nigeria is ranked as one of the fastest growing mobile markets in the world Banwo (2001).
Of course, it is difficult to consider the impact of the telecommunication sector on the economic development of a country without naming names. The major drivers of this revolution, as some have called it, are the firms that seemingly against all odds, sought and acquired digital mobile operator licenses in 2001. Of this group, MTN Nigeria is the acknowledge leader.
Background of the Study
Deregulation as a matter of fact has been applauded for enhancing business efficiently in most parts of the developed countries of the world. Sometimes the contribution to public revenues was emphasized, sometimes the widening of share ownership with a huge lobby group of advisers and consultants profiting from the transactions. “Deregulation” is used to described liberalization or the introduction of competition in a broader sense: it does not mean disengagement but it does involve the creation of a more arms length relationship between government and industry, most often by interposing an autonomous regulatory agency.
Over the years, it does seem though that the success or failure of deregulation is left to public opinion with reference to the developed or under-developed nature of certain countries. Governments in most parts of the world have extended their economic interests in providing goods and services, in response to market forces and sometimes in competition with private enterprises. The scope of government ownership of companies and enterprises have increased greatly over the years. As a result, government like an organization part-takes in investment of capital into various sectors of the economy. Government invests mostly on business activities, where it feels could be uneconomical for the private investors to embark upon due to the unavailability of funds their disposal and because of the high risks associated in carrying out the venture.
Prior to the attainment of political Independence in 1960, Nigeria had an economy that was based on output from agriculture and this was her major source of foreign earnings, employment and revenue according to Zayyad (1999). Industrialization was not part of the colonial economic policy, which was one that saw the colonies as mere producers of raw materials for foreign industries and importers of manufactured products. With the coming of the first indigenous administration after independence, transforming Nigeria into a modern industrial economy became one of its major tasks. This idea was later embraced by successive governments.
Before 1965, the nation relied heavily on imports to meet with its domestic needs and companies that existed within the nation were owned by foreigners. The demands of the nation could not be met by these. Thus, there were large market failures and inadequacy of essential goods and services, thereby necessitating government intervention. The government then defined the use, ownership and condition of transfer of physical, financial and intellectual assets. They also took over ownership of vital parastatals like PHCN, Railway, Nitel etc in order to boost the economy.
Before the introduction of SAP, the productivity price and income’s Board (PPIB) held a tight reign on price control. Producers were forced to sell below market price, and this discouraged reinvestment and competition in the market. The removal of price controls of the implementation of the Structural Adjustment Programme brought hope to companies that were weighed down by the regime of price controls and this increased competition in the market. The Abdusalam Abubakar administration continued the trend of deregulation when it announced on July 20, 1998 its intention to deregulate the telecommunication, electricity, petroleum refineries, tourism, and some other industries.
The democratic administration of Obasanjo had, the deregulation of various sectors of the economy as top in its agenda with agencies like Bureau for Public Enterprises (BPE) as instruments to achieving this. Previous stringent government rules have been removed to enable private sector of the economy like the telecommunication industry, banking, petroleum, tourism etc. to participate in economic activity. Banwo (2001) affirms that deregulation of the Nigerian telecommunications industry has witnessed a fundamental change in the structure over the past five years. The liberalization of the sector is gradually bringing about a structural evolution from a monopolistic to a competitive market. The successful invention of the global systems for mobile communications (GSM) network, couple with the ongoing privatizations of NITEL has opened up the potentials for the full explanation of Nigeria space resources. The telecommunication service sector has now fully emerged as a distinct sector of economic activity. There has been influx of various private companies, encouraging competition in the market and better service provision. The telecommunication industry has become a great contributor to GDP and the development of the national economy.
Odinma, (2002) states that the primary objective of privatizing a telecom monopoly is to encourage sustainable competition in the telecom industry. Beyond that are other factors that must be taken into consideration, namely rural integration, teledensity and cultural environment. The impact of each of these factors would depend upon the social agenda, which of necessity must be achieved along with the privatization. One benefit that a true telecom liberalization would bring into the industry is competition. Competition would result in cheaper telephone services, incremental telephone services which would include improvement in the teledensity and the phone service must be of a very high quality.
With deregulation, the sector has witnessed increased activities, but deregulation is only a prelude to policing and monitoring for effective service to the consumers in particular and the economy in general. Today, liberalization has opened up the telecom market and has given a diversity of products and services that has contributed, although contestable, to the economic growth of the country.
The country, until the launch of the Global System for Mobile Telecommunication (GSM) has an extremely low teledensity with an estimated 430,000 fixed lines connected and only about a third of Nigeria’s cities and towns are connected to the Public Switching Telephone Network (PSTN). This was considered as too poor for a population of over 120 million people. According to Haruna (2002), the country had the third lowest teledensity in the world. The underdeveloped nature of the telecommunications sector belittle the huge potential of the Nigerian market. In a country with a population of over 120 million, less than 2% are served with the basic telephone services. Then nearly over 100,000 registered businesses in the country have long a reliable communications network and the buoyant financial and oil sectors have had to establish private networks in order to insulate themselves against mediocre services. Nevertheless, with the deregulation of the Nigerian telecommunications industry, the sector is rapidly becoming one of the most profitable and fastest growing industries with revenue expected to reach N900 billion naira within next five years Ekony (2002). In recognition of the latent demand of telecommunication services, Nigeria has witnessed an astronomical growth in mobile teledensity moving from N375,000 lines in December 2001 to approximately 9 million liens as at July 2011. With the liberalization in the telecommunications sector, Private Telecommunications Operators (PTOs) have sprouted up providing an array of services to subscribers. Private phone booths and business centres as they are popularly called are found in street corners and at short distance in most major cities across Nigeria in the day following the entry of the PTOs people who would not afford owning telephone lines could easily stop by the nearest available centre to make calls. Ifijeh, C. (2002) asserts that in view of the fiercely competitive environment of the telecommunications industry following its liberalization and deregulation, maintaining a leadership position in the industry as well as proper positioning for potential growth opportunities and survival in the marked place will require the application of effective marketing strategies.
Ekong, (2002), posits that the growth in the telecommunications industry being experienced came as a result of the deregulation and this has brought about different telecommunication companies. Furthermore, deregulation has introduced competition and new market dynamics to the previously bureaucratic organization like NITEL that for the organization to survive and grow there should be a concerted effect on marketing of its services.
Statement of the Problem
Nigerians have for long looked forward to the time when they will join the rest of the world in enjoying the benefits of deregulation and improved telecommunications system which apart from power supply, is about the most important requirement for the economic and social development of any nation.
It can be said that the economic resuscitation of Nigeria lies in the sustenance of the deregulation policy of the federal government. The deregulation of the telecommunication industry brought life into it with the entry of companies like MTN, GLOBACOM and AIRTEL. The telecommunication system before had been very deplorable, that with the epileptic services being rendered by the Nigerian telecommunications limited (NITEL), the national carrier, which has been characterized by corruption and ineptitude in service delivery. Fideh, (2002) submits that the few Private Telephone Operators (PTOs) namely multilink, intercellular and starcoms were handicapped as they have to go through the monopoly of NITEL to deliver services, the exclusive preserve of the rich with the attendant poor services. The deregulation of the telecom industry brought life into it with the entry of companies life MTN, Globacom and Airtel into the Nigerian telecom market making telecommunication services which used to be a luxury services something that is readily available and affordable for all.
GSM is know well restricted to only just telephony. Indeed, it is an international standard that defines services in three broad areas, bearer services, teleservices and supplementary services.
Ikwue (2001) affirms that this versatility in the range of services that a GSM network is capable of providing implies a broader and more complex market. This is especially true when one considers that service providers will be dealing with a myriad of heterogeneous subscriber groups with homogenous need between them.
Amidst the apparent goodness that is resultant from the deregulation process, some problems and disadvantages arise from this. In some case, the key players in such industries are not usually carried in the design, implementation and execution of programmes and this brings about limited level of success for the programme and reforms. Also, it seems that deregulation brings about an increase in the cost and price of services which may not be easily and readily affordable for the poor masses.
Based on the above premise, the following research questions were raise to guide the study;
(1) What is (are) the rational(s) for deregulating the telecommunication industry in Nigeria?
(2) Had deregulation impacted much on job creation in Nigeria?
(3) What are the deregulation challenges faced by administrators in Nigeria?
(4) What are the recommendations bases on the findings of the study?
The objective of the Study
In view of the problems discussed in the preceding section, the broad objective of this study is to identify and examine the impact of deregulation on the Nigerian economy.
(1) To investigate the rational for deregulating the telecommunication sector in Nigeria.
(2) To analyse the impact of deregulation on job creation in Nigeria.
(3) To identify the deregulation challenges faced by administrators in Nigeria
(4) To make recommendations based on the findings of this study.
Significance of the Study
The study is of great significance in two ways namely, theoretical and empirical dimension.
a) Theoretical significance: Theoretically this research work is significance because in our opinion, it hopefully join such
other previous studies to expose the theoretical inadequacy of some of the classical existing literature on the impact of deregulation on Nigerian’s economy. In this rein, the study will be a good reference material to students and other researchers. The study will equally x-ray the impact of deregulation in Nigeria’s economy as it affects the telecommunication industry.
b) Empirical significance: The awareness of the problems and recommendations provided in this work will solve problems and correct lapses discovered and enable to handle such matters which may rise in future.
More so, it is expected that the findings of this study will be meaningful to the government for decision-making purpose and will aid in enlightening the public in the problems and prospects of deregulation.
Scope and Limitation of the Study
The study attempts to cover the following:- The economic impact of deregulation in terms of employment generation, improved services and increase production. The problems affecting deregulation of Nigeria’s economy and the prospects
that are inherent in it. This research study would be focused on the telecommunication in industry and on MTN Nigeria in particular. This is largely as a due to the limited financial resources, which will be needed for an in-depth study.
Another limiting factor that the researcher encountered was the un-co-operative tendency of the staff in releasing relevant information on the study and the usual “not on seat” excuses”. And finally the incessant power outage that almost frustrated the typing of the project. Nonetheless these were rather a nudge from behind to carry on as “nothing good comes easy”..