The Need for Economic Policy Reform to Support Increasing Growth of Internet Penetration in Nigeria

Nigeria’s internet has been subject to vast digital divide effects since its inception in 1996. This paper aims to inspect the different elements that have influenced Nigeria’s internet usage through published case studies and other analyses of the area’s internet penetration. The paper will highlight many factors that influence the country’s internet usage such as education, socio-economic standings of users, accessibility to telecommunications infrastructure, and policy. I will explain, through comparison of countries’ fiscal policies as they relate to IT, that fiscal policy is the general umbrella for which the previously mentioned list of factors can be influences to promote higher rates of internet penetration and bridge the digital divide in Nigeria. Finally, I will discuss the implications of insufficient economic policy and how reform can allow for sustainable growth of internet penetration in developing nations.

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Digital Divide

According to a 2011 Reuters article, Funke Opeke of Main One Cable Company predicts that one-third of Nigeria’s population “could have direct internet access by 2013” (pg. 1). With such rapid expected growth, it makes you wonder why the developing country is so far behind more developed nations like the United States which has an internet penetration rate of 78.1%. Nigeria’s internet penetration is currently at a mere 28.4% (InternetWorldStats). The existence of digital divide in Nigeria has stifled the country’s ability to connect to the internet and allow Nigerians access to information.

The digital divide is a term used to describe the gap between those who have access to the internet and those who do not. Moreover, it typically reflects the gap in economic standing and support. For years, Nigerians have been subject to the impacts of the digital divide. While there are multiple influencing factors on the intensity of digital divide effects, this paper aims to create a strong platform reflecting the importance of policy, above all, and the need for reform.

Literature Review: Causes of Digital Divide in Developing Countries

There are many factors that can influence the effects of digital divide in developing nations. These include:

1. Accessibility & Development of Information & Communications Technology (ICT)

2. Education and Support of Internet Services

3. Socio-Economic Standings (Income, Age, Sex, Marital Status, etc.)

4. Economic Policy Reform

Government economic policy, I feel, is the most influential factor that can help bridge the digital divide in developing nations. The remaining four can be directly influenced and reformed by that fiscal policy, which acts as an umbrella solution.

ii. Accessibility & Development of ICT

Many researchers cite accessibility to telecommunications and development of internet infrastructure to be the easiest solution to the digital divide problem. But it is not the most important of factors. The argument is simple and lacks depth into the biggest factor of the problem. Essentially, as the argument goes, the more developed and abundant the ICT, the more opportunity for internet access. S. S. Rao (2005) lists connectivity as the first provision measure of his C-8 agenda (pg. 361). His research in India stresses the lack of electricity (at the most basic point of ICT), industry, and teledensity as the most fundamental problems preventing India from connecting.

Dasgupta, Wheeler and Lall (2001) point out the increasing accessibility to “low-cost Internet access devices” of the 1990s helped push more users online in developing areas such as Africa, Asia and Latin America (pg. 6). The emergence of mobile technology served as not only a less expensive means of communication, but also a new platform to connect to the internet. The launch of mobile technology in Nigeria in 2001 sparked a new, growing information revolution that caused a huge investment in telecommunications infrastructure by the Nigerian people ( Jagun et al., 2008). However much accessibility this provides, Nigeria still lacks a competitive e-commerce market and supportive economic environment necessary for the increased access to actually provide Nigerians with the desired internet penetration.

Aduwa-Ogiegbaen and Iyamu (2009) state “there is no doubt that lack of access to ICT” contributes to the effects of digital divide (pg. 75). Several other authors argue that by increasing access to higher technology, lower income countries, like Nigeria, will not only have higher penetration rates, but also be propelled into better economic standing (Rochon et al., 2008). Now this is certainly plausible, but how are they supposed to achieve better access? If Nigeria cannot afford to access and support the technology, what good will it do?

In an effort to bridge the digital divide, the World Bank (2002) includes improved access to IT infrastructure as one of their four main initiatives along with policy reform. Akinsola et al. (2005) also states that ICT infrastructure (electricity, hardware, software, telecom networks) is a key factor in getting rural communities, like those in Nigeria, online. By using empirical formulas, Adeya and Oyelaran-Oyeyinka (2004) show that ICT connectivity is vital to internet adoption. Furthermore, the access is constrained by high cost of hardware and connectivity as well as small markets. All of these mentioned have a direct link to economic and fiscal policy. If Nigeria adapts a better economic policy to allow for an IT industry to exist period, the country could be in a much better position to support access to telecom and ICT infrastructure.

It is clear that the physical means of ICT infrastructure are a key aspect necessary to allow access to the internet; but is it the most important? Does the instance of infrastructure reliant on outside factors? The answer is yes. These authors do have a fair (and obvious) point that access to IT is pertinent to internet use but how is infrastructure supposed to be implemented without fiscal policy affording it? Clearly in order to install ICT infrastructure and allow increased access, Nigeria needs to reform economic and fiscal policy to create an IT initiative.

ii. Education and Support of Internet

There are a number of claims arguing that education and support are the most important factors leading to digital divide. You could have all the infrastructure, hardware and software enabling connection to the internet; but if no one knows how to use it, is there any point? Many researchers say no — there is just as much a need for education as there is for access and physicality. The real question, however, is how do you address the lack of support and education? Because in order to fully harness the benefits of ICT and the internet, there needs to be related tools, education for how to use those tools, community support that encourages the use of these tools and adequate literacy (Akinsola et al., 2005). Furthermore, using the internet is much more complicated than the typical phone systems Nigerians are used to using. The internet requires a higher education and skill level due to the “dominant language” (English), which most Nigerians do not know, and the technical knowledge necessary to operate (World Bank, 2002, pg. 24): “weaknesses in the application of knowledge are a major factor behind stagnation” in Africa (pg. 16).

In addition, the majority of internet use comes from tertiary schooling (Adeya & Oyelaran-Oyeyinka, 2004; Aduwa-Ogiegbaen & Iyamu, 2009). That being said, Nigeria does has a group of users with demand, however large or small it may be. This means that Nigerian government not only needs to invest in purchasing updated technology but also offer a stimulating environment consisting of educated users and teachers and jobs to encourage growth and revenue of the sector.

The current state of Nigeria’s education system is in neglect, leaving little concern for educational support for computers. Only twenty-nine percent of the population goes on to secondary school — that is, only twenty-nine percent goes on past the fifth grade (Wikipedia, 2012a). Warschauer (2003) blames the poorly structured social systems of developing countries for the digital divide effects. It is this lack of social support (organizations, programs, relations, etc.) that prevents users from learning the new behaviors of modern technology (pg. 211). A study of a university town in Nigeria also shows that poor internet services and inadequate education or skills prevent users from utilizing the internet (Ani et al., 2010, pg. 362). Nineteen percent of surveyed users say poor internet services affects their access while eighteen answered skill.

Education and support are interdependent on each other. Since a large portion of Nigeria’s population is illiterate, they can only use computers through intermediary, skilled helpers. Unless there is a large number of skilled volunteers, programs must be set up to train those intermediaries and compensate them. This means that economic policy needs to create jobs within the IT sector to promote and expand the knowledge of computer. Nigerian policy makers must address the lack of jobs, growth and competition concerning computers and the internet. Even if the Nigerian government were to reform education policy, without a substantial job market and adequate equipment investment education and community programs will not be effective.

iii. Socio-Economic Standing

As stated earlier, the digital divide often times discriminates and exploits the inability to connect the internet. There are hundreds of social and economic traits that can influence internet penetration rates of an area. The most common, however, are gender, education and skill level and income level.

Age and marital status are becoming more important factors, as single, younger generations are more eager to subscribe to new technologies. The vast majority of Nigerian internet users ranges from 16 to 25 years of age, going up to 45 years old (Ani et al., 2010, pg. 361). In addition, seventy-five percent of users were single — which makes sense since most users are under 25 years old. This means the majority of internet users are perfect candidates for secondary and tertiary education. Perhaps Nigerian policy makers should include financial assistance programs and tax breaks to encourage computer education.

Aduwa-Ogiegbaen and Iyamu’s studies (2009) in Nigeria along with that of Ani, Uchendu and Atseye (2010) yielded varying results based on certain characteristics. Their research showed that men in Nigeria have higher internet penetration rates than women (based on their dominance in science and technology related areas. In addition, rural, poorer areas tend to have little to no access to simple infrastructure like electricity, let alone computers and internet. Those with less income also could not afford the fees and subscriptions of the oligopolized telecommunications marketplace.

Nigeria’s low GDP and economic standing also inhibits the ability to afford ICT infrastructure and support for internet policies and programs (World bank, 2002). An empirical study by Dasgupta, Lall and Wheeler (2001) also shows an elastic relationship between income and subscription to telecommunications (pg. 10). That is, the effects of a change in income will greatly and directly affect the behavior of subscriptions. The results also show that network economies in urban areas are those of scale. Urban areas have higher penetration rates as well as more advantages for the private sector (Dasgupta et al., 2001, pg. 11;Aduwa-Ogiegbaen & Iyamu, 2009). Surprisingly enough, however, if all other constants remain the same from country to country, “there is no gap in Internet intensity (subscriptions per telephone mainline)” (pg. 15). These authors all have substantial arguments and supporting evidence but isn’t poor socio-economic status a result of insufficient government fiscal policy and national growth? Without changes to Nigeria’s economic policy, commercial growth will not happen and, therefore income per capita will not increase to a level that can sustain reasonable internet penetration rates. Thus, socio-economic factors point to a larger problem: national fiscal policy.

iv. Economic Policy Reform

Government policy is arguably the most influential on a nation’s operations — including its IT investment. Dasgupta, Lall and Wheeler (2001) explain the mobile telephone growth (which they cite as a “promising new platform for internet access”) in the 1990s was due to “privatization and deregulation of telephone systems” that led to “accelerated access to telecom services in many developing countries” (pg. 7). They further state “countries with liberal economic policies enjoy a significant growth advantage” (pg. 8). Warschauer (2003) advocates the need for a “more informed policy and research agenda” in developing countries (pg. 210). He stresses the importance of creating policies which create synergetic support from the local and federal governments. An economic policy that stimulates competition and growth of the IT industry is crucial if Nigeria wants to expand its internet usage. Privatizing and decentralizing the sector while giving incentives to smaller companies that can offer competitive prices and equipment will ensure a stable and fair market for Nigerian consumers.

Ani et al. (2010) also spend a significant amount of time discussing the need for government reform. The main problem, they argue, is the lack of support to sustain growth of telecommunications and internet in Nigeria. Policy makers have neglected the growing need to facilitate access for institutions, libraries, schools, etc. Furthermore, the poor state of infrastructure and traffic congestion is due to an inadequate amount of internet exchange points, which government should be trying to reverse. Finally, “Decentralized internet access should be provided” for more abundant internet use (pg. 364). By reforming economic policy, Nigeria’s government can invest in new technologies and infrastructure which, in turn, will stimulate excitement and encourage Nigerians to learn about, adopt and use the internet more frequently.

Akinsola et al. (2005) also urge that the Nigerian problem lies in the hands of policy makers. They claim it is the responsibility of government to provide a supportive environment for internet growth, while encouraging the use of ICT infrastructure and to reform policies that facilitate improved use, support and access to internet services (pgs. 16-17). Thus, economic policy provides the answer. If the Nigerian government can reform its economic policy to digress from the monopolized culture of its information sector and towards a capitalized, competitive market, Nigerians could have a better chance to harness the benefits of internet penetration.

The World Bank (2002) also emphasizes policy reform as a factor that has the ability to facilitate the most growth in internet penetration in developing nations. This includes a competitive industry and regulatory framework (pg. 17). In addition, a study suggests that economic policy change in Africa “could double the number of [telephone] lines per capita” by privatizing the market, which increases competition, and employing good regulation practices (as cited pg. 24). Thus, providing an adequate economic policy will increase the accessibility of the internet throughout countries like Nigeria.

And although Adeya and Oyelaran-Oyeyinka (2004) emphasize the importance of socio-economic factors mentioned previously, they also acknowledge the significance of economic policy and its effects on those factors. From an empirical analysis of African countries and respective internet penetration, they note there is certainly a “correlation of wealth and Internet diffusion” (pg. 72). The authors also mention that the internet-rich countries like the US have been supported by federal and state policies (pg. 81). The correlation between wealth and internet penetration refers to the income level at the individual, organizational and national scales. Hence, there is an extreme need for economic policy to afford opportunities for increased income levels across the board.

At the individual level, low income means average Nigerians cannot afford to pay for the equipment and internet subscription fees. At the organization level, institutions, programs and companies that would like to offer internet services will not be able to due to such high ISP subscription fees and telephone costs without sufficient disposable income. And on a national scale, if a country cannot even provide reliable utilities to each citizen, it will most definitely not be able to afford the investment in the simplest internet infrastructure. (pgs. 79-80). Outlining these difficulties, it is easy to see that internet penetration is especially difficult a problem for poor countries. Countries in this predicament, like Nigeria, will need to create local and national growth via reformed economic policy in order to overcome low internet penetration rates.

Aduwa-Ogiegbaen and Iyamu (2009) concur. The inequalities caused by digital divide, they argue, “Needs to be addressed and redressed by government” (pg. 79). Without a positive relationship between government and education stakeholders, the gap between poor and wealthy communities and their respective internet use will widen. A good economic policy will increase Nigeria’s GDP and overall income per capita. Hence, there will be bigger investments in infrastructure, increased access and a smaller gap between rich and poor areas.

A study by Byrom (1998) showed a correlation between the amount of technology support and the development of technology diffusion (as cited Aduwa-Ogiegbaen & Iyamu, 2009, pg. 81). Although unspecific, this provides qualitative evidence that policy does in fact directly effect the rate at which internet diffuses through developing nations. Thus, in order to increase internet penetration and bridge the digital divide, Nigeria needs to create an economic policy that supports the existence and development of IT and internet usage by way of privatizing the sector, decentralizing the internet, eliminating monopolies in the telecom industry and making substantial investment in ICT infrastructure.