Liberalization And The Nigerian Mobile Phone Market

Friday, April 15, 2011 

By Japheth J Omojuwa

Why do we pay less for phone calls and more for other goods and services? The answer is simple enough – Liberalization! The market was freed from the strings of government – with government being only a watch dog through the Nigerian Communications Commission (NCC) – and investors were encouraged to come in

It was for our “common good” as a people that NITEL was set up, in order for us to enjoy the best of communication facilities at the best prices. As with most things set up by the government for “the common good,” NITEL met the expectations of the politicians and their cronies; it helped to put them in a class of their own as it made having a phone a thing of “who you know and to what length you are able to go.” NITEL was able to provide about 400,000 phone lines for all of Nigeria – a penetration of less than 1%.

In 2001 when the GSM service was introduced into Nigeria, rich Nigerians did not just pay over the odds to acquire ordinary sub-1G phones for unimaginable prices, they also paid beyond reason for the calls they made. It was normal in those days to be charged a 100 naira for a 61 second call – you paid by the minute. Despite the exorbitant prices, we were excited about the freedom offered by the service. If the new GSM companies – MTN and Econet – charged us way too much for calls we made, NITEL charged us for not even having our phones plugged. You needed to be in the good books of those in power to get a phone. When your request gets approved, you wait for as long as it would take Ibrahim Babangida to organize a transition to democracy to finally get your phone, after which you receive mind-boggling charges for calls you did not make.

The game took a new turn at Globacom’s introduction to the market. They started off with Per Second Billing (PSB), which at the time sounded more like a “Free Call”. It worked for them because the old entrants MTN and Econet had said PSB was not a possibility for the foreseeable future but I guess they had also unforeseen Glo’s bullish entry because subscribers rushed the Glo lines like Nigerians would rush to buy American visas if it were in a shop window. Many free-market induced battles later and that beginning seem like centuries ago, though still less than a decade.


I was wondering if MTN would turn the blind eye and just watch Airtel win over all their customers. Etisalat Nigeria went to the airwaves to share the unbelievable, that being 25 kobo per second calls (with a daily N20 charge). In no time Glo offered even less as they rolled out in their usual Mike Adenuga –esque bullish manner their new tariff campaign. They offered N40 for a three minute call and charges of various levels – all promising you unbelievable options. Airtel then came with 20 kobo per second (60kobo for the 1st minute of the day).

Even though it did look like MTN would not budge, they finally yielded to the new market realities, rolling out the 0k/minute call to a certain Magic number (after paying a N250 monthly charge) and 20k/sec to four select MTN numbers, one off net number and a foreign number (US/Canada).

Is there anything you buy in Nigeria today – good or service – with added value that costs less than you bought it ten years ago? If it cost N13 to make a 61 second call in 2001 and it cost N100 for the same in 2011, that would have been some 669% increase over a decade and that would have been normal in our usual rising prices economy, but for the GSM charges, the percentage is the exact reverse. It cost almost 700% less to make the call you made in 2011 and with more value added services to boot. Let us not even go into the Blackberry services and charges. It started with adverts targeted at major CEOs and top Business Executives, today hawkers on Lagos streets not only parade top of the range Blackberry phones, they are subscribers. It may not happen, but imagine if every thing else had the same result – say you get to enjoy more power supply for less. It is unimaginable when you see the current reality but it is possible.

The Nigerian telecoms market is not a free one in the real sense of it but it is the closest thing to a free market in Nigeria. We still have few players but the lure of more subscribers keeps driving the competition. The competition is a healthy one. It is curious to note that the only government GSM service provider Mtel packed up even before the race got started.

Why do we pay less for phone calls and more for other goods and services? The answer is simple enough – Liberalization! The market was freed from the strings of government – with government being only a watch dog through the Nigerian Communications Commission (NCC) – and investors were encouraged to come in. Unlike government, the investors are in it first for the profit but the quest for profit means they had to do things to make the services attractive hence the continuing attractive services and prices.

We already know the sufferings and penury that result from government’s refusal to let the economy flow freely. Like the introductory words pointed out, the common good sought by those in government is for those in government. To some, the common good is the good of the governing class over the governed.

If we are willing to suffer the unavoidable pangs and birth-pains like inconveniences that come with economic liberalization a la the N20,000 GSM lines we paid for in the early years of GSM service in Nigeria, we will enjoy the fruits of such eventually, because the Nigerian economy is such a virile ground for a healthy competition in a Free Market.

At the point of contact, GSM service was for the rich but it is now at the point of no return as indeed anyone can use a GSM phone. Just a decade ago that only looked possible in a wonderful world but isn’t it a wonderful world of telephony right now? Can we have the whole economy follow on the trail of telecom industry? We sure can, as all we need do is Liberalize the economy.

Japheth J Omojuwa is an associate of Follow him on twitter @omojuwa