By the time Olusegun Obasanjo became president in May 1999, Nigeria’s telecommunications infrastructure was, for most of its 120 million citizens, functionally non-existent. From independence in 1960 to 2000, the number of active telephone lines nationwide had grown to just 400,000, at an annual growth rate of about 10,000 lines over four decades.
What followed in January 2001 was a government auction designed to let the private sector build what the state had failed to do.
NITEL’s great failure
The Nigerian Telecommunications Limited (NITEL) was established in 1985 through a merger of the Posts and Telecommunications Department and the Nigerian External Telecommunications Company. Prior to the late 1990s, when other telecom operators were granted licences to operate in the space, NITEL operated a monopoly characterised by weak infrastructure, poor service, congested lines, and scarcity.
Ernest Ndukwe, who later led the Nigerian Communications Commission (NCC) through the GSM revolution, recalls that in 1999, there were over 10 million people on NITEL’s waiting list for telephone lines, and the wait time for a connection was as long as two years.
Often, subscribers received high bills after their phones were disconnected. This failure had far-reaching consequences on Nigeria’s productive economy. Businesses could not reliably reach customers, partners, or suppliers, and those who needed to make international calls had to travel to the NITEL international call centre at NECOM House in Marina, Lagos.
The birth of a new era
By the time the Obasanjo administration came to power, there was a broad consensus that NITEL’s monopoly had to end.
Five months after taking office, the Obasanjo administration published a new National Policy on Telecommunications in October 1999. The publication highlighted the need to reform Nigeria’s telecom sector and to attract private-sector investment. The policy specified that there would be only four digital national cellular operators in an initial five-year period and set a short-term goal of reaching 1.2 million mobile lines in two years.
The bigger question was how to make the process transparent and credible, especially in a country with a long history of opaque government contracting. An earlier attempt to issue GSM licenses in late 1999 and early 2000, at a proposed cost of $100 million each, led by the Communications Minister as head of a specially set up Inter-Ministerial Committee, failed and was cancelled in February 2000 after doubts were raised about the integrity of the process.
In 2000, the government decided that telecom licences would be assigned by auction, making the process transparent and less susceptible to corruption. The process, often referred to as the world’s first ascending clock spectrum auction, was founded on the Nigerian government’s resolve to host an auction that would foster competition in the sector, lend credibility to the country’s government among international observers and investors, and boost confidence in the country’s government processes.
The auction also demonstrated something that Nigeria’s economy has struggled to replicate in other sectors: that transparent, rules-based market entry, backed by a credible independent regulator, can unlock investment at scale. The NCC’s credibility, built through the transparency of the 2001 process, helped the telecom sector attract more than $75 billion in cumulative investment over two decades.
The growth of the telecoms sector can be ascribed to transparent markets, strong regulation, genuine competition, and private capital, principles that can accelerate the growth and stability of other public sectors in Nigeria, where government monopoly, much like NITEL, has led to poor services.
TNAM
Edited By Egwu Patience Nnennaya
