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How layoffs, funding challenges hurt tech sector in 2022 – Punch Newspapers

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TEMITAYO JAIYEOLA examines the Information and Communications Technology sector in 2022 and how funding challenges and other economic headwinds affected its fortune
The year 2022 is now locked up in the history books, but its impacts on the technology world will not be easily forgotten.
Elon Musk’s acquisition of Twitter in October after an initial pullback from the deal dominated the tech news globally. He was compelled by the court to honour the deal, and he eventually bought the microblogging and social networking platform for $44bn. Also, in the short time that he has been Twitter’s chief executive officer, he has served some memorable content to the watching world.
Two years prior to 2022, the global technology ecosystem was the toast of the global economy. While other industries shrank and or faced a recession, this industry boomed, and tech firms were valued at all-time highs. The COVID-19-induced lockdown meant that people had to rely heavily on digital services and tech firms.

By the turn of 2022, the tech ecosystem was on the ascendency, and many considered the industry to be immune to any economic downturn. However, the Russian-Ukraine war and high government spending during the pandemic leading to record-high inflation rates, with central banks across the world raising interest rates in response, which choked off access to easy capital, have caused the tech sector to take a hit.
Since peaking during the COVID-19 pandemic, the global tech industry has lost $7.4tn of its total value. In response, 1013 tech firms laid off 153,160 in 2022, 59.57 per cent more than the 95,991 that had been laid off since the onset of COVID-19, prior to 2022.
Tech firms such as Meta, Twitter, and Amazon headlined these layoffs. Nigerian firms were not isolated from the global reality of the tech sector.

In an interview with The PUNCH, the Founder of Lendsqr and a trustee of Open Banking Nigeria, Adedeji Olowe, said, “These are factors that are influencing the movement of money away. This cycle, that is, funding scarcity is not going to last forever.
“It is likely to get worse towards the end of the year, although by next year it will start shaping up again. Between now and when things start getting better, start-ups without solid bases are at risk. A lot of this is already happening in the US. Start-ups are struggling and laying off staff, and when this is happening, it mirrors what might happen here too.”
On the investment front, start-ups in Nigeria have not fared well even though they have raised almost $1.2bn and must raise at least $534m to better 2021 figures, ‘Africa: The Big Deal’ reports said.
The report which monitors deals over $100,000, disclosed that despite having a great first half of the year, which spilt into the second half, things were quiet on the investment front in November. It stated that start-ups must raise $534m in December to beat the amount raised in 2021.
The start-up subsector of the ecosystem was not the one affected by global realities as the telecommunication subsector had to grapple with high energy costs, rising inflation, and multiple taxations.
In 2022, telecommunication companies tried at least twice to raise the cost of their services in response to the prevailing operating environment. In May 2022, a leaked letter from the Association of Licensed Telecommunication Operators of Nigeria to the Nigerian Communications Commission revealed that telcos were proposing a 40 per cent increase in the cost of calls, SMS, and data to the regulator because of the rising cost of operating a business in the country.
Their proposal would have increased the price floor of calls from N6.4 to N8.95 and the price cap of SMS would have increased from N4 to N5.61. According to the telcos, they have been financially impacted by the country’s economic recession in 2020 and the effect of the ongoing Ukraine-Russia war.

While nothing was done in this regard, telcos were allowed to increase the price of some of their Internet bundles later in the year by the NCC. MTN Nigeria Communications Plc and Airtel Nigeria subsequently increased prices for their internet data services by about 10 per cent.
They had to reverse their prices after the NCC turned down final approval for the price review. Also, one of the major conversations that dominated the telecom sector was multiple taxations.
In the course of the year, the Federal Government tried to charge excise duty on telecom services. According to the telcos, this would have increased consumption cost on telecom services to 12.5 per cent. While kicking against this, the Minister of Communications and Digital Economy, Isa Pantami, revealed that the sector paid about 41 taxes to both federal and state governments.
He said, “The ICT sector is being overburdened with so many categories of tax. If care is not taken, this is going to jeopardise the achievements and gains we have recorded so far in the sector.”
The Federal Government later announced a suspension of this policy.

There was an increase in the number of cyber threat advisories issued by the NCC through its Computer Security Incident Response Team in 2022. The commission issued over 10 alerts in the year from banking detail stealing malware to carjacking malware.
A report by Check Point Research’s Threat Intelligence stated that Nigerian businesses experience about 2,308 attacks across all industry sectors weekly. It explained that over a six-month period, 62 per cent of businesses operating in the country fell victim to attacks that allowed cybercriminals to gain remote control of their devices and the private data stored on them.

According to the NCC, about $500m is lost to cybercrime yearly in Nigeria.
It was not all gloomy for the country’s tech sector last year. The ICT sector remained one of the bright spots of the country’s economy. In the third quarter of 2023, the information and communication sector contributed 20.32 per cent to the total nominal GDP of the nation.
The National Bureau of Statistics said, “In nominal terms, in the third quarter of 2022 the sector growth was recorded at 20.32 per cent (year-on-year), a 9.15 per cent points increase from the rate of 11.17 per cent recorded in the same quarter of 2021, and 6.20 per cent points higher than the rate recorded in the preceding quarter.”
MTN and Airtel made N1.92tn from calls and data between January and September 2022, an 18.27 per cent increase from the N1.62tn that was earned in the corresponding period of 2021.
Also, the country was one of the few African countries that successfully launched 5G with MTN and Mafab Communications winning the bids of the first auction of 5G spectrums. In August MTN did a pilot launch of 5G in Lagos and announced plans to roll out service in Abuja, Port Harcourt, Ibadan, Kano, Owerri, and Maiduguri.
While MTN has rolled out 5G, Mafab Communications Limited is yet to commence its services. The firm got an NCC five-month rollout extension after delays in its Unified Access Service Licence and Numbering plan.
Before the year ended, the commission announced plans to auction two more 5G spectrums. However, the auction failed to attract many firms with only Airtel Network Limited emerging as the sole bidder for its 3.5GHz spectrum band for 5G deployment in the country.

The NCC proceeded to an assignment stage, with Airtel set to pay $273.60m for the licence. The firm is expected to roll out 5G services in 2023.
Commenting on the launch of 5G in the region, GSMA, the global association for telco, said, “5G-related activities are beginning to pick up across the region.
“These include 5G spectrum auctions, 5G pilots and commercial trials, and efforts to develop locally relevant 5G use cases.”
Also, Nigeria finally signed its Start-up Bill, a bill meant to create an enabling environment for the growth, attraction, and protection of investment in tech startups, into law.
Commenting on this, the Senior Special Assistant to the President (Digital Transformation) and Lead, Nigeria Start-up Bill, Oswald Guobadia, said, “The Nigeria Start-up Bill serves as an enabler for tech hubs to attain sustained growth. State adoption, for instance, will encourage this.
“The NSB also has a seed fund which will be accessed by founders, hubs, and accelerators in Nigeria. This fund is to be managed by the NSIA. We are intentionally attempting to create that fabric of innovation across the country and the states must adopt it so that we can see the dividends.”
In an interview with The PUNCH, Co-founder of Flutterwave and Andela, and Founder/CEO of Future Africa, Iyinoluwa Aboyeji, said, “I think it is really the ‘end of the beginning’. The Nigerian start-up ecosystem has been around for a very long time, but only in the last 10 years have we started to attract significant attention from Silicon Valley and global investors.”

Meanwhile, 2022 ended on a mixed note for the country’s tech sector. A document titled ‘Invitation to a One Day Public Hearing and Submission of Memoranda on the 2022 Finance Bill,’ released by the House of Representatives Committee on Finance revealed that the Federal Government was reconsidering imposing excise duty on telecoms services.
Also, there was a controversial proposed amendment bill of the establishing act of the National Information Technology Development Agency before the House of Assembly. This bill, if allowed, would affect Internet freedom, media, social media companies, and technology firms operating in the country.
Industry experts believe that some of the challenges of the tech industry would spill over into 2023. They also stated that the industry would have to reposition itself with data becoming a more pronounced source of income for telcos for instance.
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