But the heavily taxed telecommunications sector appears seemingly overlooked.

The Nigeria Tax Bill, 2024, also seeks to exempt baby products, locally manufactured sanitary towels, pads or tampons, military hardware, arms, ammunitions and locally manufactured uniforms supplied to armed forces, para-military and other security agencies of a Nigerian government from payment of VAT.

Equally pencilled for exemption from VAT were shared passenger road-transport service; and purchase, hire, rental or lease of tractors, ploughs and other equipment used for agricultural purposes, provided that the person engaged in agricultural business shall first pay the VAT and request a refund from the tax authority.

Others were supplies consumed by an approved entity in the export processing or free trade zones, provided that the supplies were consumed on its approved activity; and goods or services supplied to a diplomatic mission, diplomat or person recognised under the Diplomatic Immunities and Privileges Act whose activity is in public interest, and not for profit.

In addition, plays and performances conducted by educational institutions as part of learning; land or building, including interest in land or building; and money or securities, including interest in money or securities were free from VAT obligations.

Furthermore, the proposed law specified taxable supplies charged to VAT at the rate of zero per cent.

These included basic food items; all medical and pharmaceutical products, including medicinal herbal products; educational books and materials; fertilisers; locally produced agricultural chemicals; locally produced veterinary medicine; locally produced animal feeds; and agricultural seeds and seedlings.

Others were electricity generated by generation companies (GENCOs) and supplied to National Grid or Nigeria Bulk Electricity Trading Company (NBET); Electricity transmitted by Transmission Company of Nigeria (TCN) to Electricity Distribution Companies (DISCOs); medical services; and tuition relating to nursery, primary, secondary or tertiary education.

Included also were exported goods excluding oil and gas; exported services; exported incorporeal property; and medical equipment.

In addition, under Exemption by Order of the President, the bill stated that where a government or an agency of a government in Nigeria had entered into an agreement with the government of another country or a donor agency for the provision of development financing for any project in Nigeria, and such agreement provided for the exemption of supplies made under the project from VAT, the president might, by an order published in the official gazette, give effect to the exemption.

The section covered basic food Items, cereals, including maize, rice, wheat, millet, barley, sorghum, oats, fonio and finer millet, in the form of grain, flour, crop, whether raw or semi-processed, whether in bulk or retail, among a host of other items.

To address the issue of double taxation, the bill expressly provided,

“Where the Government of the Federal Republic of Nigeria enters into an agreement with a treaty partner for the purpose of providing relief from double taxation in relation to tax imposed under this Act, the agreement shall have effect upon ratification or domestication by the National Assembly.”

It stated that relief from double taxation shall be in respect of income tax paid under the laws of a treaty partner against income taxes imposed under this Act.

The bill added,

“Where an agreement has taken effect, any obligation as to secrecy in the Nigeria Tax Administration Act or any other law in Nigeria shall not prevent the disclosure of any information required to be disclosed under the agreement to an authorised officer of a treaty partner.”

It also provided, “The Minister may make rules for implementing the provisions of any agreement under this section. For the purposes of providing relief in Nigeria from double taxation, all extant double taxation agreements are deemed to have been made under the provisions of this section and shall apply throughout Nigeria with effect from 1st January of the year immediately following the date the agreement entered into force.

“The agreement in subsection (1) of this section shall be for the purpose of elimination of double taxation, without creating opportunities for non-taxation or reduced taxation through tax evasion, avoidance or other forms of abuse, including treaty-shopping arrangements aimed at obtaining reliefs provided in the agreement for the indirect benefit of residents of any other country or territory that is not part of the agreement.

“For the purposes of the agreement referred to in subsection (1) of this section, a non-resident may benefit under the agreement where the person is a resident of the relevant treaty partner and the beneficial owner of the income for which the benefit is being claimed.”

The proposed law stated, “Nothing in this section shall be construed to allow a relief in respect of an additional tax paid for the relevant tax year under this Act or the domestic legislation of a treaty partner in conformity with the global minimum tax rules as it relates to a permanent establishment situated in the treaty partner.”

The Nigeria Tax Bill, 2024, further expatiated on the presumptive taxation regime, allowing the minister to determine taxes payable in certain circumstances.

It stated, “Notwithstanding any provisions of chapter two of this Act, where for all practical purposes, the income of a person chargeable to tax under this Act cannot be ascertained or records are not kept in such a manner as to enable proper assessment of income, then such person shall be assessed on such terms and conditions as may be prescribed by the Minister in a regulation under a presumptive tax regime.

“The chargeable income of an individual, is the total income of that individual ascertained under the provisions of section 28 of this Act, less eligible deductions. For the purposes of this section… ‘Eligible Deductions’  include payments made by the individual in a year of assessment in respect of— the individual’s contributions under the National Housing the individual’s contributions under the National Health Insurance Scheme, the individual’s contributions under the Pension Reform Act, interest on loans for developing an owner-occupied residential house.

“… annual amount of any annuity or premium paid by the individual during the year preceding the year of assessment in respect of insurance on his life or the life of his spouse, or contract for a deferred annuity on his own life or the life of his spouse, and rent relief of N200,000 or 20 per cent of annual rent paid, whichever is lower, provided that the individual accurately declares the actual amount of rent paid and other relevant information as may be prescribed by the relevant tax authority.”

Meanwhile, the 19 Northern Governors have rejected some provisions of the proposed tax reforms.

The rapid expansion of mobile telephony, internet connectivity, and digital services has spurred economic development, innovation, and job creation.

According to the National Bureau of Statistics (NBS), “Activities in ICT contributed 16.66 per cent to Nigeria’s real Gross Domestic Product (GDP) in Q4 2023.”

The industry is, however, fraught with perennial challenges threatening its sustainability and long-term viability.

Key among these challenges include issues of right of way (RoW), multiple taxation, rising electricity costs, and the inflation-eroded consumer spending power all of which threaten to impede the industry’s progress.

Addressing these obstacles is crucial for ensuring the continued growth of the ICT sector and its contribution to Nigeria’s economic future. 

Right of Way: The Infrastructure Bottleneck

The right of way (RoW) issue is one of the most significant impediments to the expansion of ICT infrastructure in Nigeria.

RoW refers to the legal right to pass through property another party owns. For telecom operators, obtaining RoW is essential for laying fibre optic cables and other critical infrastructure.

However, exorbitant fees and bureaucratic delays imposed by various state and local governments and private landowners have hampered progress.

Adding to the challenge are unofficial demands by local strongmen in some states, making it hard to predict the total cost. This delays network expansion and increases costs, hindering service accessibility and affordability.

To mitigate this, a unified national policy on RoW charges is imperative. The Federal Government’s recent efforts to harmonize RoW charges and reduce fees are steps in the right direction, but consistent implementation across all states is essential.

Collaboration between federal and state governments can facilitate smoother processes, lower costs, and accelerate the deployment of broadband infrastructure, ultimately enhancing connectivity across the country.

Clear and standardized guidelines can expedite approvals and incentivize infrastructure development in underserved areas.

Multiple Taxation: The Financial Burden

Multiple taxation is another significant challenge that stifles growth in Nigeria’s ICT sector. Telecom operators and ICT companies often face an array of taxes and levies from different levels of government, from federal to local.

This fragmented tax system creates an uneven playing field and increases the operational costs for businesses, discouraging investment and expansion.

Streamlining the tax regime is crucial for creating a conducive business environment. Implementing a standardized tax framework that minimizes redundancies and promotes transparency can alleviate the financial burden on ICT companies.

Additionally, tax incentives for investments in rural and underserved areas (universal access) can encourage broader infrastructure development, bridging the digital divide and fostering inclusive growth.

Rising Electricity Costs: The Power Challenge

Electricity costs in Nigeria remain prohibitively high, with service notoriously unavailable, posing a significant challenge to the ICT industry.

Reliable and affordable power is essential for operating data centres, telecom towers, and other critical infrastructure.

However, the inconsistent power supply and high costs have forced many ICT companies to rely on diesel generators, further inflating operational expenses.

Investing in renewable energy solutions, such as solar power, can offer a sustainable alternative. Government policies that support the adoption of renewable energy technologies, coupled with incentives for ICT companies to transition to green energy, can reduce reliance on costly and environmentally damaging diesel generators. Public-private partnerships in the energy sector can also drive investments in infrastructure, ensuring a more stable and cost-effective power supply for the ICT industry. 

Inflation and Consumer Income: The Demand Side

The impact of inflation on consumer income is another critical factor affecting the sustainability of Nigeria’s ICT sector.

As inflation erodes purchasing power, consumers have less disposable income to spend on digital services and products. This decline in consumer spending can limit the growth of ICT companies and stifle innovation.

To address this, ICT companies need to adopt innovative pricing strategies that cater to the economic realities of their customers.

Offering flexible payment plans, affordable data bundles and value-added services can attract and retain customers even in challenging economic times. Additionally, investing in digital literacy programs can empower more Nigerians to participate in the digital economy, expanding the customer base and driving demand for ICT services. 

The Path Forward

A sustainable ICT industry in Nigeria hinges on a collaborative effort between the government, private sector, and civil society.

Nigeria can unlock the full potential of its ICT sector by addressing the existing challenges and fostering an enabling environment. This will not only drive economic growth but also empower its citizens, bridge the digital divide, and position Nigeria as a leader in the global digital age.

It is clear, that by implementing unified policies, streamlining tax regimes, investing in renewable energy, and adopting customer-centric strategies, Nigeria can overcome these challenges and unlock the full potential of its ICT sector.

A sustainable ICT industry will not only drive economic development but also position Nigeria as a leading digital economy in Africa, promoting innovation, job creation, and inclusive growth for years to come.

 *Don Pedro Aganbi is the founder TechTV Network and  Convener of the popular annual Titans of Tech Conference, Exhibition and Awards. He can be reached via: getdonpedro@gmail.com

This is according to the Stakeholder Engagement Plan for Nigeria – Accelerating Resource Mobilisation Reforms programme between Nigeria and the World Bank with regards securing a new $750m loan from the Bank.

A Punch report indicated that the government might reintroduce the excises on telecom services, and EMT levy on electronic money transfers through the Nigerian Banking System among other taxes.

Recall that President Bola Tinubu in July 2023 ordered the suspension of the five per cent excise duty on telecommunications and the Import Tax Adjustment levy on certain vehicles.

However, it appears that this suspension may be lifted to meet the programme targets for a new, yet-to-be-approved World Bank loan with negotiations ongoing between the government and the World Bank.

Further investigations showed that the government had initially requested to obtain the loan in 2021 but was halted without clear reasons.

The programme’s development objective is to strengthen the government’s financial position by enhancing its capacity to manage and mobilise domestic resources effectively, which includes improving tax and customs compliance and protecting oil revenues.

The planned tax reforms under the ARMOR programme are expected to have significant implications across various economic sectors.

The PforR Programme is part of a larger governmental initiative running from 2024 to 2028, aimed at reforming tax and excise regimes, enhancing the administrative capabilities of tax and customs, and ensuring transparency in oil and gas revenue management.

The World Bank’s contribution of $750m constitutes a significant portion of the programme’s budget and the government is expected to contribute $1.17bn through annual budgetary.

According to the plan, affected stakeholders will include manufacturers of goods such as alcoholic beverages, tobacco products, sugar-sweetened beverages, telecom and banking service providers, as well as the general tax-paying public, importers and international traders.

Key industry groups such as the Association of Licensed Telecom Operators of Nigeria are engaged regarding the excise duties on telecom services.

The draft document stated,

“Domestic Revenue Mobilisation drive in the government ARMOR program seeks to increase revenue on some targeted industries and sectors of the economy. Specific groups and agencies within affected sectors include the Association of Licensed Telecom Operators of Nigeria: The introduction of excises on telecom services requires that all telcos are mobilised to fully participate in the collection of such revenue.

“Committee of Bankers: Introduction of EMT levy on electronic money transfers through the Nigerian Banking System would need the buy-in of all banking institutions

“Manufacturer’s Association of Nigeria: Manufacturers of tobacco products, sugar-sweetened beverages and alcoholic beverages who would be required to collect excises on their products are critical stakeholders for the introduction of the new excise regime. They are currently organised into various sectoral groups under the Manufacturer’s Association of Nigeria. Producers of alcoholic beverages organised under the Distillers and Blenders Association of Nigeria also need to key into the reforms.

“Also, strategic partners involved in the importation of different items into the country will be mobilised to participate in the ARMOR programme. A key stakeholder group is the Association of Nigeria Customs Agents.

“Vehicle Importers and Manufacturers: Stakeholders in the automobile trade industry must be engaged in reforms involving the introduction of green taxes on high GHG emission vehicles. Local manufacturing and assembly of vehicles is growing through a phase of growth in Nigeria. The demand for vehicles is mostly met through importation by vehicle importers under the aegis of the Association of Motor Dealers of Nigeria.”

The document also emphasised the importance of engaging vulnerable groups to ensure they are not disproportionately affected by these changes.

It also said,

“Services that will be subjected to the newly introduced excises are regulated by key public sector agencies. The introduction of the new revenue measures will require the application of existing regulatory mechanisms available within these institutions. The concerned institutions include the Nigerian Communication Commission, the Central Bank of Nigeria.

“There are also agencies with the mandate for making policies on some of the issues covered in the ARMOR program concerning policy framework on matters of public interest in Health and Environmental Protection. The government institutions relevant to ARMOR in this regard are the Federal Ministry of Environment, the National Environmental Standards Regulatory and Enforcement Agency, and the Federal Ministry of Health.”

Additionally, the programme outlines specific allocations for technical assistance, with $5m each going to the Federal Inland Revenue Service and the Nigeria Customs Service to support their capacity to implement these new measures effectively.

The fact that it’s still here means that it has somehow managed to survive, remained sustainable and even dared to thrive. It is a phenomenon that ought to be studied. 

Every indicator shows that the telecom sector remains the bright spot in the nation’s weak economy. It drives socio-economic development, boosts productivity and contributes to improving the lives of citizens like no other sector. 

The COVID-19 pandemic impacted negatively on the global economy by precipitating lockdown and economic disruptions with transport, tourism and aviation sectors tumbling. The telecom sector however continued to “buga”.

It saw an increase in voice service and massive growth of digital channels for daily routine activities ranging from telecommuting to entertainment and social engagements. The sector witnessed the growth and saw huge profits as financial reports from major operators show. 

The Nigeria Telecom sector is a gift that keeps on giving. It has witnessed strong growth in recent years and is expected to have continued growth over the foreseeable future.

The growth in the sector, according to industry watchers, has been driven by the increasing population, growing demand for communication services, and rising adoption of smartphone services.

Some experts have pointed to strong support by the regulatory authorities which in recent times has led to the licensing of the 5G network in the country – a feat some have called the first in Africa. 

Investors in telecom operations are smiling at the bank. It is not surprising therefore that everyone wants a piece of the action, even the government. 

It must be stated that the government collects the value-added tax, annual operating levies, licensing fees and duties among others. This is in addition to all the other statutory taxes including PAYE and withholding tax. 

Now, there are reports that the Finance Minister, Zainab Shamsuna Ahmed, is actively pushing for another tax, a five per cent excise duty on telecoms services.

Most right-thinking Nigerians, including, interestingly, the Minister of Communications and Digital Economy, Prof Isa Ali Ibrahim Pantami, have kicked against it. If a recent news report is to be believed, the finance minister is not backing down. 

If the government is keen on milking the telecom sector, it should at least step up on its behalf and help tackle some of the long-standing issues that have held the sector back. 

The challenges are not new. Many of them have plagued the sector since the liberalization of the industry. Industry experts are quick to point out the fact that these challenges are also opportunities when viewed through the right lenses. 

Here are seven of the most pressing challenges, with what I hope are feasible solutions. The government should give it a look-in if doesn’t want to kill the goose that lays the golden egg. 

1. Difficulty in accessing long-term funds for the industry –

The government must hasten to establish an ICT Bank. While it should be in the mould of the Agricultural Bank, it should operate like a venture capital entity. So, after due diligence, the ICT Bank will invest in tech starting with a clearly stated exit /pull-out date. I propose an initial take-off grant of N200 billion naira only. 

2. Right of way –

The goal of the right of way policies should not be revenue generation but to facilitate the speedy deployment of telecom infrastructure. In the short term, states can take a leaf from Ekiti State which reduced telecom’s right of way charges by 97 per cent. For the long term, states should install road ducts on a build-and-lease basis.

The federal government can set an example here by installing ducts on all new federal roads and leasing to operators based on an agreed realistic billing scheduled for usage. 

3. Multiple taxations –

Again, governments at all levels, need to stop seeing telcos as only cash cows. Efforts must be towards proper harmonization of taxes and levies and so make it uniform across every state and locality. This will undoubtedly aid the planning and deployment of services by operators. 

4. Energy challenge –

Yes, the telcos knew that Nigeria had a power problem when they paid for licenses in 2001. But who could have imagined that the issue will persist unresolved, for this long? Currently, the logistics of ensuring round-the-clock availability of power is a nightmare that keeps whole teams awake many a night. A straightforward solution is the establishment of energy parks to serve critical infrastructure. QED! 

5. Local content –

Some progress has been made here, especially through the National Office for Technology Acquisition and Promotion (NOTAP).

To move forward the government and other corporations need to host local content locally. As a corollary, Nigeria must urgently adopt the doctrine of data sovereignty.

6. Multiple regulations –

This is another problem that is almost as old as the industry itself. The NCC has done a lot of work here. Nigeria must explore a converged regulatory regime as the way out. 

7. Capacity building –

Human resources have always been an issue but the recent increase if the rate of migration has made it a mini-crisis. The Nigerian Universities Commission (NUC) and the NCC have their work cut out for them – bridge the gap between academia and industry via curriculum reform involving the industry and internships.

I’ll be the first to admit that these problems and solutions are not exhaustive. The NCC may want to consider calling a stakeholder forum to deliberate on the problems and proffer solutions. The white paper produced can now be the basis of engagement with the government and its relevant agencies. 

For the government, the focus should not be only on sharing the existing telecom cake, but also on helping the industry bake a bigger cake.