Conflicts Over Tariff Hike In Telecoms Sector

The Nigerian telecommunications sector is facing unending conflicts over the tariff hikes amid other challenges rocking the sector in recent times.

The telecoms operators and the federal government triggered the conflicts in their quest to hike tariff and other taxes. While the telecom operators said that tariff hikes have become necessary to cushion debilitating costs of delivering telecom services,   the government said it intends to raise revenues in the face of dwindling economic fortunes of the country.

The signs of these conflicts showed up in April this year, when the telecom operators demanded a 40 per cent hike in voice call, Short Message Services (SMS) and data services after they claimed to have reviewed the high costs of diesel to power their base stations.

Under the umbrella body of   the Association of Licensed Telecom Operators of Nigeria (ALTON) they wrote a letter to the Nigerian Communications Commission (NCC) in April, asking for an upward review of the cost of delivering most telecom services to subscribers.

In the letter dated April 25, 2022, which was received and acknowledged by NCC on April 27, 2022, ALTON said, “The cost of diesel required to power operators’ Towers, Base Stations and offices rose by a staggering 233 per cent from N225 per litre in January 2022 to over N750 per litre in March 2022. Additionally, the introduction of new lines of fiscal obligations via the recent Excise Duty of 5 per cent on telecommunications services further exacerbates the burden of multiple taxes and levies in the sector. The power sector under the supervision of the Nigerian Electricity Regulatory Commission (“NERC”), in November 2020 undertook a review of electricity tariffs to cater for the economic headwinds.”

However, the NCC turned down the request with a view to maintaining cost-effective regulation across the telecom sector in much the same way the president of the National Association of Telecoms Subscribers (NATCOMS), Adeolu Ogunbanjo, rejected the move.  He noted that the telecoms sector was already contributing more to Nigeria’s GDP and cannot be subjected to harsh conditions in the name of tariffs.

Then in August, 2022, the ministry of finance budget and national planning and the Nigerian Customs Service (NCS), announced a 5 per cent Excise Duty on telecom services, which they claimed was in line with the Finance Act 2020. At a stakeholder summit organised by the NCC in Abuja, the ministry said it has become necessary to raise revenue for the government as it is done in other countries of the world in the face of the dwindling revenue base of the country.

But no sooner was this policy announcement made than it met with a fierce opposition from industry players. Perhaps the most virulent opposition to the tax came from the minister of communications and digital economy, Prof. Isa Ibrahim Pantami, who noted that it will overburden the subscribers and impact negatively on the digital sector that has contributed 18.44  per cent to the GDP in 2022.

The minister eventually used a Presidential Directive to suspend the 5 per cent Excise Duty in September, stressing that the digital economy sector, and particularly, telecommunications, is already overburdened with multiple taxes totalling about 41 categories.

He said some of these are multiple taxations because other tiers or levels of government were imposing the same levies that   Mobile Network Operators MNOs had already paid to the federal government.

He said, “Excise duties are usually imposed on luxury goods and not telecommunications services that are increasingly becoming essential services for the survival of the people.

“Excessive taxation has been a central challenge of the information and communications technology sector,” he said, arguing that it is unfair to overburden such a sector that is so central to the nation’s growth and development and especially because the sector rarely receives subsidies which other sectors have enjoyed.

“Despite the spiralling inflation, and cost of production, particularly the energy factor, the network service providers have not increased prices of services. I challenge the gentlemen of the press here to name one sector that has not witnessed price increases in services in the last three years. It is only in telecoms that prices have been stable,” he said.

The proposed 5 per cent tax was coming after a 7.5 per cent VAT on telecom services, which further infuriated the operators.

During the stakeholders summit in Abuja, executive secretary of the Association of Telecommunications Companies of Nigeria (ATCON), Ajibola  Olude,  flayed the proposed tax, saying that it was “ badly intended” by the ministry of finance budget and national planning. He added that implementation of the excise duty will cause job losses as Nigeria is faced with inflationary pressures, which will “lessen investment.”

Now that the proposed 40 per cent tariff on telecom services by telecom operators has been rejected, and the 5 per cent excise duty by the ministry of finance budget and national planning has also been suspended, how will the operators and government cushion the adverse business environment and raise revenue respectively?

An expert within the industry, who does not want his name on print, told NATIONAL ECONOMY yesterday that the government “should find other means of raising revenue instead of unnecessary tariff. You have a government that has lost humongous revenue due to oil theft because of their own failures coming to overburden the telecom sector. This must be resisted.”

He also tasked the regulatory agency, the NCC not to allow the operators to in his words “exploit the people.”

However, the excise duty is a matter of law and will surely be implemented any time the government deems it necessary.  Although the government has suspended its implementation, it can still revisit it perhaps when the economic situation improves. So, the nightmare of tariff might not yet be over.