The Nigerian federal government is poised to reintroduce telecom taxes and implement fiscal policies to secure a $750 million loan from the World Bank, marking a significant shift nearly ten months after suspending the 5% excise duty on telecommunications and the Import Tax Adjustment levy on certain vehicles.
This move comes amidst consistent complaints from telecom operators about the burden of multiple taxes and the necessity to raise tariffs in order to sustain their operations. Reports indicate that along with other taxes, including the potential reintroduction of excises on telecom services, the electronic money transfer levy (EMT levy) on electronic transfers through the Nigerian banking system is also under consideration.
The status of the loan remains in negotiation between the World Bank and the Federal Government, with approval pending. The Nigerian government’s push for increased taxation as a means of revenue generation is evident, having previously raised the Value Added Tax (VAT) rate from 5% to 7.5% in 2020.
The telecommunications sector in Nigeria has been grappling with a multitude of challenges, including multiple taxes, fibre cuts, power instability, foreign exchange shortages, equipment theft, and insecurity, as reported by operators in February 2022.
MTN, one of the major operators, faced over 6,000 fibre optic cable cuts and incurred expenses exceeding N11 billion to relocate 2,500 kilometres of fibre cable between 2022 and 2023. In response, telcos have sought tariff increases to offset these costs and ensure the sustainability of their services.
Despite economic challenges, regulatory constraints have prevented the telecommunications industry in Nigeria from adjusting its general service pricing framework for the past 11 years. In March 2024, MTN announced collaborative efforts with regulatory bodies, including those in Nigeria, to seek approval for tariff increases on voice and data services.
However, on May 9, 2024, the federal government of Nigeria declared that a tariff increase was not being considered as a solution to the challenges faced by telcos. Meanwhile, on May 7, 2024, the government introduced a cybersecurity levy, mandating telecommunications companies, financial institutions, and the Nigerian Stock Exchange to pay a 0.5% fee on all electronic transactions.