Finance

Why Elon Musk’s Starlink is a big deal for Nigeria


Elon Musk announced via a tweet (how else) that the government of Nigeria has approved Starlink as an Internet Service Provider. Let’s understand the implications and what this means for you as an investor.

What is Starlink?

Starlink is high-speed internet access delivered via low earth orbital satellites (LEO).

Figure 1, A Starlink antenna image credit Starlink

Why is this a Big Deal?

Starlink solves the problems of access and speed of internet services in Nigeria, especially in rural areas. According to the “Digital 2022 Nigeria” report by Data Reportal internet penetration in Nigeria stands at 51% as of January 2022. Thus, 49% of Nigerians or 104.9 million Nigerians, did not use the internet.

The low uptake is due to the infrastructure deficit in Nigeria. Nigerians get internet access mainly via data sold by GSM companies like MTNN and Airtel Nigeria. There are not enough physical cell phone towers to beam data across Nigeria, especially in the rural areas. 53.4% of Nigerians live in urban centres, and 46.6% live in rural areas.

Speed is a crucial advantage of Starlink. Ookla indicates that the average mobile internet speed via cellular is 17.38Mbps, while fixed internet wireless connection is 10.06Mbps. In contrast, Starlinks’ speed is 104Mbps, ten times as fast. For context, the US FCC defines broadband as having speeds over 25Mbps or more.

With faster internet services, more internet applications can become operational in Nigeria. All commercial trucks, for instance, can be fitted with trackers to provide accurate and timely information on traffic flow to aid road safety and other emergency crews. What about banks? All branches could theoretically be connected online and in real-time to the head office, reducing the transaction time for clearing checks in the economy.

What specific sectors will get a boost?

The big win will be a fall in the data prices in Nigeria. Starlink can be looked at as more “supply”. Even though its target is the underserved internet locations, its speed will make it a viable option for all Nigerians. Many startups in “high speed” Lagos will gladly pay to access speeds over 100Kmps. This new competition introduced by Starlink will see prices falling, which is excellent.

Fast broadband internet access will significantly scale up all sectors in Nigeria but allow me to touch on sectors with significant Public and Private sector intersects.

  • Agriculture; This is the mainstay of Nigeria’s economic growth, contributing more than 22% of GDP growth. Nigeria’s vision 2020 agenda seeks the intensive use of satellite imagery to predict weather and or climatic changes that affect agricultural production. Nigeria’s challenge has been operationalizing these initiatives for impact. Nigerian firm, Cellulant for instance, developed the Growth Enhancement Scheme (GES) e-wallet used by about 14.5m farmers in Nigeria to acquire subsidized fertilizers via SMS.
  • Cellulant, via its blockchain-based mobile platform Agrikore, seeks to connect its farmers’ database in Nigeria to the agricultural markets. A Starlink power internet service in Nigeria’s food baskets will enable farmers to use smartphones, not just USSD, on solutions like Agrikole to get weather and agricultural pricing data. Commodity exchanges like comX by NGEX will be able to expand the “chain of custody” and verification of commodities from farm to the warehouse, derisking the commodity trades and allowing efficient collateralization.
  • Education & Health; According to the United Nations, more than half of the out of school children live in sub-Saharan Africa. 89% of students in sub-Saharan Africa do not have access to an internet connection. This is one problem Starlink can solve.
  • By deploying the internet to rural, underserved communities, the Ministry of education can perform remote learning. A maths class can be recorded in a classroom in Abuja and simultaneously beamed across Nigeria to all students on a free to watch educational portal. This is a way to reduce the science teacher deficit in schools artificially. Bridge International Academics, for instance, is a data-driven low-cost school where teachers use tablets and smartphones. Both teachers and pupils are monitored and scored on attendance and performance. This innovative use of data can only happen in fast internet environments; with the Starlink providing access, schools like Bridge can expand and scale-up.

Healthcare, like education can leverage the fast internet to add productivity improvements in Nigeria’s rural health delivery. Rural telemedicine becomes a reality when there is fast, reliable video-capable internet in rural communities. A doctor can sit in Atlanta or Lagos and see patients in rural communities with the assistance of a trained nurse.

Does this mean GSM share prices will fall?

No, instead, I see the entry of Starlink as boosting the fortunes of the services provided by MTNN and Airtel. Both GSM companies now have Mobile Money licenses. Starlink enabling the internet in rural locations across Nigeria will mean that more Nigerians will look at mobile money as a viable and reliable means of savings.

Summary

A Starlink device can be set up and receive fast internet in less than 30 mins. The internet connects and enriches communities and reduces the cost of doing business. One critical use of the Starlink enabled internet is that the Federal Government can deploy Starlink to transmit census data and election results from all wards and LGA to the headquarters in Abuja.

The internet is finally here.



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