Научная статья на тему 'Practical application of the theory of technological setup to the development of telecommunications (on example of Nigeria)'

Practical application of the theory of technological setup to the development of telecommunications (on example of Nigeria) Текст научной статьи по специальности «Экономика и бизнес»

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performance assessment / technological development / innovation / technology / means of communication / investment / technological phase

Аннотация научной статьи по экономике и бизнесу, автор научной работы — Nnaji A. Chidimma

This work is devoted to applying the theoretical knowledge of technological setup to the actual development of telecommunications, for instance, in Nigeria. This author is a master's student in Krok University of economics and law in Ukraine. She based this article on a meticulous overview of the technological setup of worldwide telecommunications and telecommunications in Nigeria respectively, in the view of analyzing the phase and relative level of the technological development of telecommunications in Nigeria. To do this, the author used two main approaches: firstly, the analysis of the technological development of telecoms in the world and in Nigeria, and secondly, a performance assessment of telecoms in Nigeria. For the analysis of the technological development of telecoms, the author presented a detailed overview of the pre-historical means of communication, the advent of telecoms and its sequential development till date. One of the main interesting part of this work is the fact that a clear distinction was made of the difference between technological development and technological setup. According to the author, technological setup may comprise of an accumulated series of technological development A performance assessment of telecoms in Nigeria was done by analyzing, with the help of some standard performance indicators, the level of investment in the sector and the outcome of the investment over the years. By dint of such analysis, the author phased the telecoms sector in Nigeria in relation to that of India and the world in general Moreover the author pinpointed some basic situations or challenges that characterize the telecommunications sector in Nigeria, and some possible solutions to them.

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Текст научной работы на тему «Practical application of the theory of technological setup to the development of telecommunications (on example of Nigeria)»

UDC 338.12:001.53

Nnaji A. Chidimma

PRACTICAL APPLICATION OF THE THEORY OF TECHNOLOGICAL SETUP TO THE DEVELOPMENT OF TELECOMMUNICATIONS (ON EXAMPLE OF NIGERIA)

This work is devoted to applying the theoretical knowledge of technological setup to the actual development of telecommunications, for instance, in Nigeria. This author is a master's student in Krok University of economics and law in Ukraine. She based this article on a meticulous overview of the technological setup of worldwide telecommunications and telecommunications in Nigeria respectively, in the view of analyzing the phase and relative level of the technological development of telecommunications in Nigeria. To do this, the author used two main approaches: firstly, the analysis of the technological development of telecoms in the world and in Nigeria, and secondly, a performance assessment of telecoms in Nigeria.

For the analysis of the technological development of telecoms, the author presented a detailed overview of the pre-historical means of communication, the advent of telecoms and its sequential development till date. One of the main interesting part of this work is the fact that a clear distinction was made of the difference between technological development and technological setup. According to the author, technological setup may comprise of an accumulated series of technological development

A performance assessment of telecoms in Nigeria was done by analyzing, with the help of some standard performance indicators, the level of investment in the sector and the outcome of the investment over the years. By dint of such analysis, the author phased the telecoms sector in Nigeria in relation to that of India and the world in general

Moreover the author pinpointed some basic situations or challenges that characterize the telecommunications sector in Nigeria, and some possible solutions to them. Fig. 6, tabl. 2, ref. 13.

Key words: performance assessment, technological development, innovation, technology, means of communication, investment, technological phase.

INTRODUCTION

Telecommunication is a system of technology used in the transmission of messages over a long distance by either cable, telegraph, telephone, or broadcasting. For many years before the advent of worldwide telecommunications, messages were transported by the use of messengers, light, fire and smoke signals, beacons, couriers, etc. However, with the advent of telecoms, most of the ancient means of communication were eliminated or in some cases modified to better meet the need of the people. The importance of telecommunications to a people, state, country and economy at large can never be overemphasized. For instance, telecommunications incredibly made life easier by reducing the ample time required to convey messages from one place to another, improving human and business relations, and so forth.

In Nigeria, telecommunications as one of the country's economic sub-sectors has contributed fairly to the country's output. In real terms, the telecoms sub-sect has in 2015, contributed N1 344 489.25 million or 8.38% to total economic output as at the first quarter of 2015. However, compared to the technological setup of telecommunications in the world, and the quality performance in other countries, it could be said that the Nigeria's telecoms still needs serious improvement.

Telecommunications industry in Nigeria has over the years experienced critical challenges, which have been the main stumbling blocks to both the technological

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development of telecoms in the country and the quality performance of the already developed technologies.

This work is methodized as follows: the first two sections analyze the technological setup of telecommunications in the world and in Nigeria respectively, the second section assesses the performance of telecoms in Nigeria, and the final section identifies the various challenges of the county's telecoms industry and some recommendations for its reform.

MAIN FINDINGS

The dawning of telecommunications in world and technological setup of the telecommunications in Nigeria. The history of telecommunications in the world dates back from the ancient times, when prehistoric man relied on light and sound (fires, drums and horns) for the production of signals. Then in Africa, America and some part of Asia, smoke signals were used, and in the 1790s, the first fixed semaphore systems were introduced in Europe. These means of communication however, had lots of restrictions, as information could only be transported over non-distant areas.

The first technological setup of telecoms in the history of the world occurred between the periods of 1672 through 1800. In 1672, Hooke, at his discovery that sound could be transmitted over strings into mouthpiece, produced the first experimental mechanical telephone. And in 1790, Claude Chappe invented an optical telegraphic. This system was the first telecoms system in Europe.

The second technological setup set in from 1800 through.

The advent of modern telecommunications set in with the innovation of the electric cell by Alessandro Volta in the 1800. This marked the beginning of the second technological setup. At this time, the means of communication experienced a remarkable improvement in the quality, thanks to electromagnetic energy, which had the capability of transmitting information at a strikingly fast pace.

Between 1809 and 1943, a more sophisticated (in terms of function) telegraphic system was invented, and in 1850, transducers which could transform acoustic signals into electric ones were introduced. Furthermore, in order to satisfy the need for a more reliable and distributed communication network, which was palpable at that time, a Switched Telephone Network (PSTN) was developed. Nonetheless such development did not yield the expected result, thus further investments were made toward its advancement to an automatic circuit commutation. In 1899 through 1923, an electromechanical device well known as selector, valve amplifier and television were invented.

Another technological breakthrough in the telecoms industry set in from 1938, at the invention of Pulse Code Modulation (PCM) technology. This technology led to a significant improvement in the communication systems, as it had the ability of using digitally encoding or decoding methods of transmitting voice signals in lieu of transducers. More so in 1946, an Electronic Numerical Integration and Computer (ENIAC) was invented. This technology made it possible for a processed data to be sent to a distant spot faster. In 1956 a 39-circuit transatlantic telephone cable, which allowed for a relatively less expensive phone calls was created, and in 1962, a communication satellite Act was inaugurated, allowing telecoms to go into space. The first computer network was innovated in 1969, while in 1983, an internet was invented.

Up to date, the significance and growth internet has been on the increase. The high flexibility given by the TCP/IP suite and the ISO/OSI protocols provide a strong foundation on which communication among devices of different kind -- be it a laptop or a cell phone, an iPod or a GPS navigator -- has finally been made simple and easy to achieve [5].

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Having carefully analyzed the technological generation or setup of the telecoms in the world, we can emphatically conclude that the entire setup occurred in two main epoch: the analogue epoch and the digital epoch. The analogue epoch started precisely around the 6th century BCE through early 1969, while 1970 to date is referred to as the digital information age. It is worth knowing that amongst the communication tools produced and used in the analogue era, only about few of them (pen, pencil, posting system, papers and newspapers) are still in use today.

The summary of the above analysis is displayed in table 1 below.

Table 1

History of the Telecommunications Industry

Period Key factor The core of the technological setup Basic economic effects & achievements Humanitarian advantage

CM 00 h- CO CD 00 Machinery - Acoustic (mechanical) telephone; - Optical telegraphic system - Predominance of monopolistic competition; - services limited to voice telephony, telegraphy Development of faster (than post riders) and cheaper (in long-term operating costs) means of communication

1838 -1938 - Electric cell; - Electromagnetic energy -Telegraphic system; -Transducers; telephone ('sound at distance') machine; -Public Switched Telephone Network (PSTN); -Automatic circuit commutation -Wireless telegraph (radio); -Valve amplifiers; -Television; -Transistors; -Integrated circuit; -Microprocessor - Construction of international telecoms infrastructure, which was a requirement for the development of worldwide telecoms; - Emergence of radiocommunication, telegraphy, satellite; - Transition from monopoly to limited liability companies; - Development of a more private means of communication - Acceleration of communication - Improvement of living standard;

1938 -present - Eclectic cell; - Microelectronic components -Pulse Code Modulation (PCM); -Electronic Numerical Integrator and Computer (ENIAC); -36-circuit transatlantic telephone cable; -Communications Satellite; -Computer network; -TCP/IP protocol suite; - Internet; International integration of small and medium-sized firms on the basis of information technologies - Acceleration of communication; - Globalization Improvement of quality and living standard of the people

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The characteristics of the latest technological development of the world's telecommunications show that telecommunications is currently at its third technological setup. This is made evident in the key factors (- electric cells and microelectronic components) and the core of the technology (electronics, computers, microelectronics, fiber-optic technology, and software, telecommunications and space exploration). The innovation of microelectronics has immensely remodeled the techniques in telecommunication networks and performance requirements for the networks.

However, it is worthwhile to know that the worldwide telecommunications has not yet reached its technological limit. It is true that what the next technological wave in telecommunications will be is yet to be discovered, nonetheless, I personally think that telecoms will not only advance in the use of electronic components as its key factor, but will also move to an era of Nano technology

Technological setup of telecommunications sector in Nigeria. In the prehistoric era, before the advent of telecoms in Nigeria, the means of communication especially when it concerns distance communication were drum, signals (fire, smoke, beacons) and horns. Most times however, people were sent to walk through a long distance (no matter how far) to deliver an important message. Later on, people adopted the system of writing, which was less stressful and more effective.

The technological setup of telecommunications in Nigeria began some hundred years ago after its advent worldwide. Precisely in 1886, a cable connection was established in Nigeria between Lagos and the colonial office in London. This marked the beginning of telecoms in the country. By 1893, telephone services were made available for the government offices in Lagos, and later extended to Ilorin and Jebba. This gradual but steady process of development continued in the subsequent years, until the establishment of nucleus of a national telecoms network.

In 1923, the first commercial trunk telephone services was established (between Itu and Calabar), and between 1946 and 1952, a three-channel line carrier system, which connected colonial office in London and the commercial centers in the country with Lagos and local authority offices respectively, was commissioned. From 1955 through 1962, Nigeria's telecoms moved from the use of a primitive coordinate pegboard switching system, to manual switchboards of different sizes, shapes, and capacities, and then to installation of Strowger exchanges. The installation marked the beginning of automatic telephone switching in the country. Moreover, the telegraph service witnessed a parallel development, from telegraph delivery by way of manual coordinate pegboard switching to the use of Morse code for telex switching [7]. However, while all the above efforts were aimed at improving internal telephone services within the country, external telephone services in the pre-independence period were wholly owned by Cable and Wireless of the United Kingdom, which was a colonial private company.

Within the space of 25 years (1960 - 1985), after the attainment of independence, several plans were made for the development of telecoms in Nigeria, however, most of the plans couldn't be executed due to some serious problems as underfunding, lack of sufficient skillful manpower, mismanagement and insufficiency of building for the installation of the already purchased equipment. The only achievements of this period were the installation of a microwave radio transmission system, national telex network, domestic satellite (DOMSAT), International Telephone Switching Centre (ITSC), and the provision of computerized telex, telegraph and data witching centers at NECOM House. All these period up till 1989, could be said to be an analogue era.

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The second technological setup in telecommunications in Nigeria set in after the realization by Nigeria as well as some other African countries like Kenya, Zambia, Malawi and Tanzania, that telecoms is an infrastructure that could speed up a country's economic development. It was then that Nigeria decided to adopt the system of digital telecommunications with the aim of improving services of the existing customers and also meeting new demands, thus the advent of the digital communication era.

In 1992, scarcely seven years after the establishment of NITEL (Plc), telecommunications in Nigeria introduced new technologies (- satellite fibre optic, INMARSAT, electromagnetic digital, and Integrated Services Digital Network (ISDN)) into the national network. In 2001, the mobile phone system services, which facilitated a wire-less telecommunications services were introduced in the country. Moreover in line with the 1992 development was an establishment of a joint venture agreement with SATCOM to provide data communications also known as DATANET into the network. Several collaborative arrangements were also made with research institutions as well as universities, in the view of developing and fabricating up-to-date technology system that would suite the Nigeria's environmental conditions. Thanks to these arrangements, there were development of modern technologies, one of which was a Cable Theft Alarm Device.

In the first quarter of 1993, NITEL introduced voice mail lines, paging system, phone card and trunked radio, later, an Integrated Service Digital Network (ISDN), which included video telephone (teleconferencing), electronic mail, and telefax and so on. Later on in 1996, seven years after the emergence of internet in U.S, the Nigerian Communication commission (NCC), the nation's telecommunications regulator, commissioned 38 internet service providers to sell internet services within the country, and in the subsequent year, Linkserve Limited started the commercialization of its operation, thus becoming the first internet service provider (ISP) in Nigeria.

Until now, there has being a tremendous restructuring of the telecommunications industry in the country and management rationalization for accelerated telecommunications [10].

The summary of the above analysis is displayed in table 2 below.

Table 2

History of the Telecommunications Industry

Period Key factor The core of the technological setup Basic economic effects & achievements Humanitarian advantage

1886 -1992 - Electric cell; - Electromagnetic energy - Provision of standard telephone and telegraph public services; - Introduction of the Nigerian Domestic Satellite (DOMSAT) to provide television and sound broadcasting; - Services limited to voice telephony, telegraphy, telex, facsimile, image and low speed data - Emergence of radiocommunication, telegraphy, satellite; - Transition from monopoly to limited liability companies Relative speed of communication and movement

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1992 - - Electric cell; present - Microelectronic components

- Establishment of new technologies -electromagnetic digital, satellite fibre optic, INMARSAT; (ISDN) and -Computer network;

- Internet

- Liberalization of national markets, divestiture,

competition and privatization;

- Emergence of multiple operators in national networks.

- Development of local and foreign standards

organizations (-(ETSI) that

coordinate telecommunication activities;

- Global Alliances for routing International Telecommunication Services;

- Entry of UIPs (such as NEPA, Cable Broadcasting Networks, NNPC, Railways etc. into the telecom market e.g. -full commercialization and autonomy of company_

- Acceleration of communication

- Improvement of quality and living standard of the people;

From the table above, we can say that the Nigeria's telecoms sector is not lagging behind in technological development. Just as we have in the most developed countries, telecoms sector in Nigeria has been experiencing a remarkable advancement in software engineering, computer technology, and telecommunications as well as the consequent developments in the mechanisms of processing data and information, and its dissemination. Also, there has being a lot of international integration of small and medium-sized firms on the basis of information technologies, globalization and speed of information and movement in the country, thanks to the technological advancement in the telecoms industry in Nigeria.

Performance assessment of telecommunications sector in Nigeria. In order to phase the technological development of the Nigeria's telecoms sector, in other words, to evaluate its performance, we will analyze the progressive level of investment in the sector and outcome of the investment. For this purpose, we will use such indicators as: expenditures ($), access to broadband and the internet, access to ICTS, total subscriptions and teledensity, level of employment by the sector, and market share.

Market investments. There are three major telecommunications and internet services providers operating in Nigeria: mobile (GSM), mobile (CDMA) and fixed (wired and wireless). These three operators occupy different share in Nigeria's telecom market. Based on the Nigerian Communication Commission, mobile (GSM) at the moment occupies more than 98% of the market share, whereas takes the lowest share - 0.1%. Mobile (CDMA) occupies only 1.4% of the total share. The distribution of the market share by the market operators in 2015 is shown in fig. 1.

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■ Mobile (GSM] ■ Mobile [CDMA] Fixed (wired & wireless]

Fig. 1. % Percentage share by technology (2015) [after 13]

The telecoms sector has experienced a steady set-up in investment from US$19 million in 1999 through US$970 million in 2001 to some US$2 312 billion in 2005 and to US$3,036 billion in 2010. Nonetheless, in 2013, the level of investment dropped to $1,886,200,000. Comparatively, the total Investment in telecoms with private participation in India, one of the fastest growing telecoms market in the world, was 7358300000 in 2013, and in 2014, it was expected that the gross investment at least doubles itself.

The level of investment in telecommunications in Nigeria and India is represented in fig. 2 below.

2,5E+10

1999 2001 2005 2010 2013

■ Nigeria 19000000 970000000 2312000000 ЗОЗбОООООО 1886200000

■ India 1045400000 3415100000 5665750000 20335300000 7358300000

Fig. 2. Investments in telecommunications in Nigeria and India [after 12].

From the above display, we can conclude that Nigeria, after all, still has a very long way to go in terms of technological investment and improvement.

Employment profile. Based on the statistical data obtained from the National Bureau of Statistics, the total number of employees in the Mobile Telecommunications sector stood at 8,319 in 2010. In 2012, the number declined by 39.39%, whilst in 2013 and 2014, the employee numbers rose by 79.12% and 55.83% respectively. A graphical representation of the total number of employment by the sector is represented in fig. 3 below.

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7000 6000 5000 4000

„„„„ H _ I P _ II ■ Male

3000 ■ f |

H I II Female

2000 1000 0

2011 2012 2013 2014

Period

Fig. 3. Number of Employees in the Mobile Telecommunications Sector [after 11].

Analogously with other economic sectors in Nigeria, telecoms sector has the largest number of the populace employees, and this speaks a lot well about the positive contribution of the sector to the economy.

Total subscribers/teledensity. According to NCC reports, there has been a tremendous increase in the total number of subscribers over the years. An annual average growth rate of 46.29% was recorded between 2002 and 2014, 8.97% of which represented a growth in 2014 alone.

Subscribers and teledensity data between 2002 and 2015 is shown in fig. 4 below.

In the same vein, as shown in the figure above, teledensity has grown in like manner as that of the subscription rate. Hence we can conclude that the subscription rate has grown in the same pace as the population growth.

Access to internet subscription. As at the fifth month of 2015, the report by the National Bureau of Statistics shows that a total number of internet subscription with GSM technology was 80 904 705 and CDMA - 150 799. Internet subscription respectively is shown in the fig. 5 on example of GSM.

From those figures we can see that between April of 2014 and May of 2015, there has been a steady rise of internet subscription (GSM), the monthly growth rate of which averaged 2.36%, while for CDMA, on the contrary, has experienced a decline in the ratio of .45% points.

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Fig. 4: Subscribers and teledensity between 2002 and 2015 [after 13]

Fig. 5. Subscribers (GSM) by internet subscription [after 11]

Thus having analyzed the performance of the Nigeria's telecoms sector using some standard performance matrix, we can say that the country's telecoms sector is on its growth phase (see fig. 6).

The analysis undertaken and described in figures above clearly reveals that the Nigeria's telecoms sector, has right from its advent experienced a significant improvement, including exponentially improving teledensity measures, increasing awareness and use of the Internet, and increasing levels of investment in the sector (though up till 2012). Nevertheless, compared to the world and other countries such as India, it is evidenced that telecommunications in Nigeria still lags behind in terms of performance, thus needs to improve the quality, efficiency and reliability of the ICTs. Put differently, Nigeria's telecoms sector needs to increase on its level of investment "Управлшня проектами та розвиток виробництва", 2015, №2(54), 54-65 Project Management and Development of Production, 2015, 2(54), 54-65

which is required to eliminate drop calls, enhance faster internet access or connectivity etc., increase investment on R & D, technology and innovation at large, and also implement changes on its regulatory patterns.

Fig. 6. Model of technological setup of telecommunications in Nigeria

The sector needs a lot of investment to improve on its quality performance. The current realities however is that the industry is struggling with high operating costs and low profitability and even skittishness (for both domestic and foreign investors) owing to the operating environment.

Challenges and recommendations. As afore mentioned in the previous section, telecommunications sub-sector in Nigeria is characterized by high level of poor quality services. Thus in this section we will examine the challenges and reasons behind this relatively high level of poor quality services.

The main problems/challenges faced by the telecoms industry in Nigerian market are that of insufficiency of power supply, poor service, high tariff, political unrest, exchange rate conversion problem in foreign direct investment and government restriction.

Insufficient power supply is of no doubt one of the main challenges facing the Nigeria's telecoms sector. It is no news that Nigeria is generally faced with paucity of infrastructure and poor maintenance of the little available ones. On a daily basis, operators continue to be plagued by challenges such as theft, site closures, work suspension edicts, vandalism of fibre and other equipment. These issues are very critical that if they are not resolved, the country's telecoms service delivery might never be able to meet the world standards.

By the reason of this situation, telecoms industry in Nigeria has over the years adopted an approach generally known as a "four in one" network approach. This has

"Управлшня проектами та розвиток виробництва", 2015, №2(54), 54-65 Project Management and Development of Production, 2015, 2(54), 54-65

enabled the operators to run parallel transmission, security, power/ diesel distribution and telecom networks. This approach has on one hand led to a better service to the consumers, and on the other hand had led to higher costs for consumers.

Another very big challenge that confronts the Nigeria's telecoms sector till date is that of transportation and communication. Poor road, rail and port infrastructure adds about 40% to the cost of goods. This has made shipping costs about 50% higher than other low-income developing regions.

Additionally, the problem of bad governance, multifold taxation and regulation, insufficient funding and on and on it goes cannot be overemphasized. Lack of maintenance, rampant corruption and waste that typify the country's telecoms sector has immensely contributed to a low service performance of the sector. In the same vein, the unfavorable taxation policy by the government also poses a major barrier to the roll out of infrastructure - cost of multiple taxation to industry which includes combination of increased operating costs and lost revenue costs is around N9bn each year to the telecoms industry, as more sites get targeted for taxation purposes, or about N20bn if most of the arbitrary fees in some key states are upheld [1]. Notwithstanding the high level of taxation by the government, the level of its funding to support the sector is relatively small compared to other countries. For instance, the World Bank, in its report, estimated a funding gap of US$31 billion, particularly for water and power infrastructure.

Recommendations. Though Nigeria has taken a lot of remarkable measures to deal with the various challenges that the telecoms sub-sector is faced with, yet I believe that there are more to it that they can do to at least almost completely meet the challenges.

Some recommended actions that can be taken to overcome the blockades on the advancement of the telecommunications sub-sector in Nigeria are as follows:

• establishment and implementation of statutory protection against closures, theft, and vandalism of telecoms infrastructure;

• improvement in the level of investment by both the public and private sector;

• improvement of electricity supply by other means such as by solar energy;

• conducting a periodic market research to understand the changes in the market, to get feedback on customer satisfaction, the size and nature of the growing market;

• avoidance of "punitive" taxes & charges.

REFERENCES

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2. L. N. Chete, J. O. Adeoti, F. M. Adeyinka, and O. Ogundele. (2014). Industrial development and growth in Nigeria: Lessons and challenges. Available at: http://www.brookings.edu/~/media/Research/Files/Papers/2014/11/learning-to-compe

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3. Anton A. Huurdeman (2003). The worldwide history of Telecommunications. Available at: file:///C:/Users/My%20PC/Downloads/[Anton A. Huurdeman] The Worldwide History of Tele (BookFi.org).pdf.

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5. Brian Brotarlo (2008). A brief history of telecommunications. Available at: http://www.cellphones.ca/features/brief-history-telecommunications/.

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7. O. Ajayi, R. I. Salawu, and T. I. Raji. (1994). A Century of Telecommunications Development in Nigeria--What Next? Available at: http://www.vii.org/papers/nigeria.htm.

8. Rose Mary Garcia, Richard Kohl, Ann Ruengsorn, and Julia Zislin. (2006). Nigerian Economic Performance Assessment Available at: http://pdf.usaid.gov/pdf docs/Pnadf350.pdf.

9. Harry Siu-lung Ku. (2010). Review of Past and Present Performance of Nigerian Manufacturing Sector Available at: http://core.ac.uk/ download /pdf/ 110 41 41 9 .pdf.

10. Dr. D.A. Alabi (1996). Telecommunications in Nigeria. Available at: http://www.africa.upenn.edu/ECA/aisi inftl.html.

11. National Bureau of Statistics (2015). NIGERIAN TELECOMMUNICATIONS SECTOR. Available at: file:///C:/Users/My %20PC/Downloads/NIGE RIAN%20TELECQMMUNICA TIQNS%20SECTQR%20r eport.pdf.

12. World Bank. Investment in telecoms with private participation. Available at: http://data.worldbank.org/indicator/IE.PPI.TELE.CD.

13. Prof. Umar Garba Danbatta (2014). 2014 year end subscriber/network data report for telecommunications operating companies in Nigeria. Available at: file:///C:/Users/My%20PC/ Downloads/Statistics-Annual Industry Statistics Report 2014.pdf.

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