Four Key Components For ICT Development In Africa

Four Key Components For ICT Development In Africa

The importance of ICT as a critical engine for productivity and growth is increasingly understood all over the world.  There is also evidence that higher rates of ICT penetration are associated with greater levels of exports,[1] and that a 10% increase in telephone penetration rate over the long-run is likely to register 0.6% higher annual growth in GDP.   InAfrica, the impact of ICT on trade, productivity, growth, incomes and efficiency are even more germane.  In recognition of the enormous potential of ICT, many African countries have taken preliminary steps to reform respective ICT markets by introducing competition and improving the legal and regulatory environment.  Reforms implemented over the last decade in Africa have unleashed competitive forces in the telecommunications and ICT sectors, fostered private sector participation in the fixed and mobile phone markets in particular, and continue to nurture new innovative industries. The result has been an unprecedented increase in investment in the telecom and ICT sectors – some US$19.5 billion between 2000 and 2007.


Nigeria’s Information and Communications Technology sector is the largest inAfrica, with over $12bn of investments and 62% of the African market.  The sector has experienced an unprecedented growth in the last five years, led by an explosion in the telecom sector where service revenue is growing year-on-year at about 19% (estimated US$7.3b of service revenue in 2007), and phone penetration has grown from about 3% to 40% (2003-2008).


The growth is largely the result of a liberalized and competitive market which has contributed to an exceptionally strong mobile sector (estimated 56% Growth rate in 2008)[2] .  The mobile sector now accounts for more than 95% of the Nigerian market and boasts some of the largest International and Regional Telecom Operators – MTN, Globacom, Zain, and Etisalat.   The highly competitive market is forcing operators to invest aggressively to expand coverage and improve quality of service.  In October 2007, MTN arranged a US$2bn five-year loan to expand network coverage and build fiber-optic transmission network throughoutNigeria.  Zain and Globacom are planning some US$1bn each on network improvements. The Government’s renewed efforts to re-privatize Nitel is likely to introduce additional competition and investment into the country’s communications infrastructure.


The impressive developments in the telecom industry is creating business opportunities in a wide range of voice, data and internet applications and services, and is also spurning a new industry of prospering ICT companies including a multitude of ISP companies and other companies that supply and service telecommunications and IT equipment, and a handful of computer assembly companies.  The impressive cluster of international and local telecom and IT companies is also making Nigeria a magnet for innovative IT applications and services.  Nigeria is hoping to leverage its strong telecommunications base, as well as its flourishing cluster of IT companies to position itself as a formidable competitor, and a niche market to capture a piece of the US$475bn global IT/ITES opportunity[3] of which only 14 percent is presently realized.  The timing of this push/positioning may be quite apt, in particular with the recent ranking ofNigeria by Merrill Lynch as one of the World’s 10 least vulnerable economies.  As the abnormal growth in the mobile sector stabilizes, investors are likely to look into new growth areas in the ICT space; the IT/ITES sector is certainly poised to attract even bigger investments given appropriate business environment and incentives.


The objective of the ICT component is to provide support to the Federal Government of Nigeria (FGN) to build on the successes of the telecom industry (contributing some 2% of GDP) and to develop a more robust IT and ITES sector which has the potential to become a significant source of growth and employment for the economy.  The support addresses key constraints to IT and ITES development inNigeria.  The support should be provided within the framework of a comprehensive IT and ITES policy which articulates issues ranging from appropriate infrastructure and incentives to institutions and skill sets for harnessing the IT and ITES industry in Nigeria.  Support to the ICT cluster will be organized around the following components:


  • Policy      and regulatory support for ITES sector development
  • IT      Parks
  • Improving      Connectivity
  • IT      Training and EntrepreneurialCapacity     Building



Component 1 – Policy and Regulatory Support for ITES Sector Development


Nigeriais in the process of revising its 2001 National Policy for Information Technology which sought to make the country “an IT capable country inAfricaand a key player in the Information Society by the year 2005’.   The 2001 document adopts a common policy for all IT and ITES issues without specific emphasis on policies for growing the increasingly lucrative ITES business potential.  Nigeriahas an opportunity to develop a separate and more targeted ITES policy and regulatory framework which a.o. articulate how the government intends to create/enforce the requisite environment, develop the institutional capacity, and engage with the private sector to harness this business potential.  Unless issues ranging from policy and regulatory instruments, institutional capacity building, infrastructure access and human resource development are tackled in a holistic and complementary manner, prospects of success of an ICT-led growth agenda will at best be limited.


The Project therefore proposes to support the development of a comprehensive ITES policy which highlights:

  • How     Nigeria’s      value proposition will be strengthened to become a significant player in      the ITES market
  • Resources      required, as well as financing options       for developing the industry
  • Incentives      to attract investment into the sector
  • Data      Protection, Consumer Privacy  and      Electronic Transaction laws which assure investors and users of the safety      and authenticity of data/transactions
  • Requisite      skills and manpower development strategies
  • How      to address infrastructure and other key constraints
  • Respective      roles of public and private sectors and areas of collaboration.


While the institutional framework for governance of the IT industry remains unclear, it is important that the key institutions that are charged with regulating the telecom and IT sectors – NCC and NITDA – have the requisite capacity to proactively regulate the sector, with a special emphasis on regulatory efforts related to decreasing the cost of international telecommunications and improving quality of service.


Additional resources could therefore support:


  • Capacity      building in key technical and economic areas
  • Enforcement      ofSLA
  • Regulation      of access to SAT-3
  • Technical      Assistance to address regulatory challenges of Media/Broadcasting      convergence (opportunities for more innovative and advanced ICT services)


Component 2 –IT Parks


Various studies have confirmed that the availability of reliable infrastructure – high quality/affordable real estate, robust telecom infrastructure, reliable power and transportation – is critical for the survival and success of the IT and IT enabled services industry.  An AT Kearney Competiveness Report which assessed Ghanaand eleven other countries, including Nigeria, in terms of their relative competitiveness and ability to become destinations of choice for ITES-BPO, highlights the challenges that Nigeriafaces with its poor infrastructure.  The Consulting Firm Mercer, for example, recently ranked Lagos as the 30th (out of 50) most expensive city in the world, only slightly less costly than New York but considerably more expensive than Los Angeles, and Washington DC.  From all indications, Abuja is not too far off.  These are 2 of the key locations where most of the country’s 250 IT companies[4] – (a significant number of them small and medium enterprises), as well as major Telecom and Outsourcing companies are located.


Leveraging IT parks to reduce the costs incurred by IT and ITES companies will be key to stimulating growth of technology intensive, knowledge based industries inNigeria.


Nigeriacurrently has a handful of locations that could be developed into IT Parks.  These includeKano,Lagos, Akwa Ibom andAbuja.  The most promising –  in terms of government commitment, capital investments, access to key city infrastructure (roads and airport) linkages with academic institutions, quality/location of Park, and management arrangements, – are the Abuja Technology Village (ATV) and the Kano IT Park.   The ATV boasts of over 700 hectares of land located within the institutional zone along theAbujaAirportexpressway.  Its close proximity to theAfricanUniversityof Science and Technology as well as other training institutions inAbujaprovides an additional advantage to tap into the institutions’ existing talent pool as well as collaborate to develop more relevant skills for its clients.Kano’s IT Park opportunity has received tremendous support from government, including contribution of a 10-storey building capable of housing more than 300 ICT businesses.  Both Parks have received the endorsement of the largest  association of private IT companies inNigeria– ITAN_ as critical infrastructure for reducing cost and improving efficiency of the IT industry.


The project proposes to support on-going government efforts for financing:

  • Detailed design of the Parks to accommodate ready- to-move-in, as well as built-to suit office space, high quality residential and other commercial facilities
  • SmartBuildingwhich will serve the dual purpose of the ATV corporate office and technology incubation center
  • Uninterrupted Power and Water Supply
  • Value-adding shared facilities, including software testing center/ tools, training facilities, and possibly render farms to reduce cost of investment for IT/IT enabled and film production companies.
  • Project Management and investment involving the private sector.


Component 3 – Improving Connectivity


Despite the impressive developments, the ICT sector is still plagued by a lack of a robust and reliable national backbone, which is resulting in the reliance on expensive satellite for transmission and backhaul capacity.  While an increasingly competitive environment is driving down prices for telecom services, average per minute cost of domestic prepaid mobile (peak) of about US$0.34 still remains above the region’s average of about US$0.24.  Internet costs are high, with only about 200,000 of the 8 million internet subscribers thought to be using broadband connections.  The high costs faced by companies are compounded by unreliable and expensive power and other utilities supply. The sector is also plagued by the high cost of international connectivity. There is currently only one major submarine fiber-optic cable – SAT-3 – connecting most of Sub-Saharan Africa (combined with SAFE) to the rest of the world. The closed-club structure of the cable has maintained high prices and limited access by competing operators to it. NITEL’s current control of the SAT 3 cable access ensures that prices for international communications are kept relatively high.


The combined lack of robust and reliable national fiber network and access to competitively priced international bandwidth, is seriously impeding the development of high-speed services (broadband services) such as high-speed internet, and constraining the development of data services and the industries which are heavy users of data services.  This is particularly important for the IT and IT enabled industry which requires large volumes of capacity, high-quality and low-prices that can only be provided on fiber-based transmission networks.   International connectivity, as well as reliable infrastructure to carry voice and data traffic in and out ofNigeriais critical for the development of this market. Without this, large data users are reliant on wireless technologies which often have technical and economic limitations.


While both the private sector and the government are aggressively rolling out national and regional fiber networks[5], the speed at which these networks are being developed does not support the current needs of the IT and ITES sector, and the sector continues to pay more than 10 times what potential competitors in India pay for bandwidth.


The project proposes to support a number of activities including:

  • Lowering the investment barrier by operators to extend broadband to specific geographic areas which target a critical mass of IT and ITES customers.  This will come in the form of financial support to connect selected IT parks to broadband networks.  In the case of the ATV, a fiber ring (about 100kms) around the Federal Secretariat, linking ATV to SAT3 could perform a dual function of also linking some 174 MDAs in the Federal Secretariat to broadband networks.  Project proposes some leveraging of ongoing investments of Galaxy backbone, a public enterprise of the Federal Government of Nigeria established to operate a single nation-wide infrastructure platform to all Federal Government MDAs, and is in an early stage of fund mobilization for a government network that could extend to ATV site.
  • Purchase of bulk international capacity on regional and international networks aimed at targeted users and in support of IT and ITES companies. 
  • Service Level Agreements with key telecom operators to ensure high quality of service standards.


Component 4 – IT Training and Entrepreneurial Capacity Building

While there are a number of impressive and Telecom and IT companies operating inNigeria, for the large part, the entrepreneurial base of the ICT sector continues to be weak.  Promising local entrepreneurs often lack technical and business expertise as well as access to venture capital funding to allow them to nurture their talents.


The Project proposes to support:


  • Business incubation grants to small IT start-up companies to acquire appropriate technical, management, financing or market knowledge skills
  • Technical assistance to assist them to plug in and capitalize on global incubation network support,
  • Creation of a network of IT business incubators inNigeriawho can support other potential incubatees.
  • A program of linking domestic industry with leading international players.
  • Training Grants program for public and private institutions to train trainers as well as professionals, with emphasis on recent graduates, in key niche areas for IT/ITES development inNigeria.





[1] Telecommunications Infrastructure and Economic Development: A Simultaneous Approach; Lars-Hendrick Röller & Leonard Waverman, American Economic Review, 2001


[2] BMI

[3] ITES defines the sector of the Information Technology Industry which aims to provide various services through the use of IT (including call centers, back office operations, claims processing, medical transcription, billing, coding etc).  ITES is often used interchangeably with BPO – Business Process Outsourcing/Offshoring.

[4] Mostly members of ITAN

[5] Four international fiber projects are racing to complete ahead of each other on the West Coast of Africa to give some much needed price competition to SAT3.

Share this post

Post Comment

Protected by WP Anti Spam