Nigeria's ICT sector is poised for substantial growth, which will attract massive investment into the sector, according to a new study published by Technology Strategies International in partnership with BroadGroup TMT Ventures.

The report, titled “Investment Opportunities in the ICT Sector in Nigeria: 2010”, says that even though Nigeria became the largest mobile market on the African continent in 2008, it still has a mobile penetration level of less than 50%, suggesting that there is ample room for expansion of the market.

Penetration in the fixed line segment is dismal and there is a vast opportunity to improve internet penetration, the report points out.

'One of the things fuelling the growth in the Nigerian ICT sector is the imminent illumination of two undersea cables, which will increase international bandwidth dramatically', says Christie Christelis, president of Technology Strategies International. 'The improvement in international connectivity will have a major impact on business in Nigeria.'

At the other end of the spectrum, there is still huge latent demand for mobile phone services. Operators in Nigeria are experiencing similar challenges to operators in other emerging economies, with declining Average Revenue Per User (ARPU) as the subscriber base broadens to include poorer segments. But companies such as MTN have demonstrated that even at ARPU levels of $12 – and declining – astute operators are able to make above superior margins.

Christelis points out that provided the political transition is well managed, it is unlikely to impede growth in the ICT sector in Nigeria. The Nigerian Government’s Vision 2020 initiative is creating an environment conducive to high growth.

‘There is huge momentum behind the growth, and even through the recent global financial crisis investors have managed to source funds for good investment opportunities in Nigeria’, he says. ‘One example is the capitalization of the infrastructure sharing venture, Helios Towers. The Helios business model could well be rolled out across other emerging economies.’

Key opportunity areas identified in the report include expanding the reach of the undersea cables, building out mobile infrastructure, turning investments into fixed wireless infrastructure into sustainable businesses, expanding the retail network for mobile, fixed wireless and internet services, and in electronics manufacturing.

Nigeria, with a population exceeding 150 million people, has enjoyed a GDP growth rate averaging more than 6% per year over the past eight years. The telecommunications market is fully liberalized, with competition allowed in virtually all segments. And there is a unified licensing regime in place, which allows operators to offer converged services. The total number of fixed lines (including fixed wireless access) was as paltry 1.4 million at the end of 2009. 

There are more than 70 million mobile subscribers in Nigeria, the largest mobile subscriber base in Africa. With the mobile subscriber penetration potential being more than 100%, there is ample room for growth in the market. National backbone coverage is limited and, in keeping with the government’s Vision 2020 initiative, there are plans underway to extend the backbone, which will provide additional opportunities for investors. The imminent lighting up of the MainOne and Glo-1 undersea cables is also likely to yield a wide range of growth opportunities in making international bandwidth more readily available. 

The Nigerian government has established a number of  investment promotion initiatives whereby it will provide funding support to investors that address certain types of investments, most notably those aimed at providing broadband access to specific stakeholder groups or communities. 

The government is also actively promoting electronics manufacturing in Nigeria on the basis that Nigerian ICT markets are big enough to support local manufacture.  Nigeria thus offers a wide range of investment opportunities in a rapidly growing market.