Internet Growth in Nigeria

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TELECOMMUNICATIONS INFRASTRUCTURE AND ECONOMIC GROWTH: EVIDENCE FROM NIGERIA

BY Sheriffdeen A. TELLA, Ph.D Department of Economics, Faculty of Management Science, Olabisi Onabanjo University, PMB 2002, Ago-Iwoye Ogun State, Nigeria satellang@yahoo.com and Lloyd Ahamefule AMAGHIONYEODIWE, Ph.D* Department of Economics Faculty of the Social sciences University of the West Indies, Mona Kingston 7, Jamaica. lamaghionyeodiwe@yahoo.co.uk

and Bolaji Adesola ADESOYE Department of Economics, Faculty of Management Science, Olabisi Onabanjo University, PMB 2002, Ago-Iwoye Ogun State, Nigeria boladesoye@yahoo.com

Being a paper submitted for the UN-IDEP and AFEA joint conference on “Sector-led Growth in Africa and Implications for Development” to be held in Dakar, Senegal from November 8-11, 2007. *All correspondence to be directed to this author while copies of e-mail messages can be sent to others.

TELECOMMUNICATIONS INFRASTRUCTURE AND ECONOMIC GROWTH: EVIDENCE FROM NIGERIA

Abstract Presently, telecommunication facilities in Nigeria, first established in 1886 by the colonial administration, is undergoing very rapid change and explosive growth and it has been argued that this has economic growth potentials for the economy. As such, this study tried to investigate the simultaneous relationship between telecommunications and the economic growth in Nigeria. A system of equations that endogenize economic growth and telecom penetration as well as telecom investment was estimated. The study found that main landline and cell phone penetration had significant effects on economic growth, when we control for the effects of capital and labour. Also traditional economic factors like income and price helped explain demand for main land phones, this was not the case with respect to demand for cell phones.

1.1:

Introduction

Recently, the role of telecommunication infrastructure in enhancing economic growth has been a subject for discourse in the economic literature. Arguments are that the development of a modern nation to its full potential in contemporary world can never be attained without adequate telecommunications infrastructure. This implies that the development of telecommunication infrastructure will significantly boost economic growth and development. In fact, information tools such as telephones, personal computers, and the internet are increasingly critical to economic success and personal advancement. All these help to encourage economic growth.

For instance, Ndukwe (2004) posited that in today’s world, modern digital telecommunications networks are as necessary to economic growth and to attracting foreign investment as are programs dedicated to promoting healthcare, electricity, transportation and agriculture. Furthermore, a reliable

telecommunications networks can improve the productivity and efficiency of other sectors of the economy and enhance the quality of life generally.

Studies have also shown that there is a positive relationship between telecommunication infrastructure development and economic growth. Among these studies are International Telecommunications Union (ITU) (2003), the World Bank (2003), Sridhar and Sridhar (2003 and 2004) and Noll (2000). These studies showed that there is a direct correlation between telephone penetration and economic growth.

2

All these notwithstanding, most of the values derivable from info-communications development have been concentrated in the developed countries of the world neglecting the developing and less developed countries. For instance, Africa has less than 3% of the world’s main lines although it accounts for more than 12% of the world’s population (Ndukwe, 2004) and in Nigeria the telephone density is estimated at around 5 telephones for about 100 people or five per cent. As telephones tend to be concentrated in the cities, access in rural areas is even much more limited and/or non-existent in many parts of the country. This, among others,...
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