Nigeria’s telecom companies are battling a new crisis caused by skyrocketing diesel prices, forcing many to adopt renewable energy solutions in a bid to survive.
The country’s unreliable power supply has long forced the telecom industry to rely on diesel-powered generators. But with diesel prices soaring to N1,406 per litre in August 2024, telecom operators are finding it increasingly difficult to cope with the rising costs.
According to the Association of Licensed Telecommunications Operators of Nigeria (ALTON), the industry uses about 40 million litres of diesel monthly to power its numerous base stations and towers.
This reliance on diesel is costing the telecom sector a fortune, with monthly energy expenses surging to N56.24 billion as of August 2024. This represents a significant jump from the N34.17 billion spent in August 2023 when diesel was priced at N854.32 per litre.
ALTON President Gbenga Adebayo confirmed that diesel consumption remains a significant burden on telecom companies. He noted that diesel now accounts for 35 percent of operating costs, a figure that threatens the financial stability of the entire industry.
Harmanpreet Dhillon, Chief Technical Officer at Airtel Nigeria, revealed that the company spent a staggering N28 billion on diesel in May 2024 alone.
“Energy is the biggest constraint in the telecom industry,” Dhillon said during a media roundtable. He added that the company is now exploring hybrid energy solutions, including lithium batteries and solar power, to reduce its dependence on diesel.
With the rising costs of diesel threatening the sector’s sustainability, telecom companies are turning to alternative energy sources. Solar power, lithium batteries, compressed natural gas (CNG), and liquefied petroleum gas (LPG) are increasingly being used to power telecom sites across Nigeria.
According to a McKinsey report, companies can save up to 30 percent in energy costs by adopting renewable energy solutions. This potential savings has encouraged many operators to accelerate the shift toward green energy.
“The heavy logistics and capital we spend today on powering sites would not be necessary if the government had continued to provide 18 hours of electricity as promised in the early 2000s,” Adebayo said. He emphasized that without alternative energy sources, the sector’s future could be at risk.
MTN Nigeria Communications Plc, in its 2023 financial report, highlighted how energy costs, coupled with the devaluation of the naira and rising inflation, significantly impacted its operating expenses.
CEO of MTN Nigeria, Karl Toriola, previously warned that the industry was facing a “big crisis” due to these combined pressures.
Some telecom companies have taken concrete steps to reduce their reliance on diesel.
In 2023, WATT Renewable Corporation signed a $13 million deal with Empower New Energy to help reduce diesel usage. WATT’s CEO, Oluwole Eweje, revealed that the company plans to modernize over 200 telecom sites within ten months, which would reduce diesel consumption by three million litres annually.
Meanwhile, IHS Towers Vice President Kazeem Oladepo acknowledged that while diesel remains a major energy source, many tower companies are now integrating solar, LPG, CNG, and other renewable energy solutions.
MTN has also renegotiated its tower contracts with key infrastructure providers, ATC and IHS, with a focus on energy efficiency and the use of green energy.
“We will also focus on cost optimization, green energy utilization, and sustainability,” Toriola of MTN emphasized.
Despite the promising shift towards renewable energy, telecom companies face significant challenges in implementing these solutions, particularly theft.
Adebayo noted that one of the major obstacles to the adoption of renewable energy is the theft of equipment, including solar panels and lithium batteries.
“Even when you have alternative energy sources, they do not provide 24-hour backup, and you must seek other energy sources,” Adebayo said.
While renewable energy offers hope, many industry experts believe that telecom service prices must be adjusted to ensure the sector remains sustainable.
In May 2022, telecom operators requested a 40 percent increase in the prices of calls, SMS, and data to help offset rising operating costs, including energy expenses.
At the time, operators reported a 35 percent increase in their energy bills, a figure that has since ballooned due to the ongoing diesel crisis.
Chris Wood, CEO of West Indian Ocean Cable Company (WIOCC), also pointed out that diversifying the energy mix—beyond just solar power—will be essential for creating a more sustainable telecom sector.
“We must look at all levels of sustainable energy, including gas, tidal, and wind power,” Wood said. He emphasized that renewable energy, while promising, is not a one-size-fits-all solution.
However, this transition is not without its hurdles. Theft, high initial capital costs, and the need for continuous backup power remain significant obstacles.
Despite these challenges, the telecom industry is pushing forward with hybrid energy solutions, aiming to reduce costs and ensure a more sustainable future.
McKinsey’s projection that renewable energy could save telecom companies up to 30 percent in energy costs has given operators a reason to remain optimistic.
“We are committed to pursuing green energy solutions,” said Dhillon of Airtel Nigeria, adding that the long-term benefits of renewable energy outweigh the initial investment.
