Nigeria mulls 5% excise duty on telecom services

The telecom sector in Nigeria is facing uncertainty as the Federal Government considers imposing a five per cent excise duty on telecommunications services, gaming, and betting activities as part of a new tax bill. This move has sparked concerns among industry players, with Gbenga Adebayo, the Chairman of the Association of Licensed Telecommunications Operators of Nigeria, expressing worry about the implications of such a tax on consumers and the industry's sustainability. The proposed excise duty would also apply to discrepancies between the Central Bank of Nigeria exchange rate and the actual transaction rate, further complicating the tax landscape for telecom operators. Adebayo highlighted the industry's objections to the reintroduction of the excise tax, especially since telecom services are now being grouped alongside gaming and betting activities. He emphasized that telecommunications play a vital role in driving the economy, providing essential services to the public, unlike gaming and betting, which are considered businesses of hope. Adebayo reiterated the sector's need for tariff adjustments to reflect the actual cost of providing services in the face of economic challenges. The telecom sector has been operating under an outdated pricing model for nearly a decade, with Adebayo noting the disconnect between current tariffs and operational costs. He pointed out the need for the government to consider the industry's sustainability before imposing additional taxes. Adebayo expressed concerns about the potential impact of the excise duty on consumers, as it would increase the cumulative tax on telecom services to 12.5%, including the existing 7.5% VAT. The conversation around tariff hikes has also brought attention to the broader issues affecting the telecom industry, such as import taxes, levies, and investment climate. Adebayo stressed the importance of addressing the industry's overall sustainability, beyond just tariff adjustments. He called for regulatory intervention to facilitate a fair pricing mechanism that considers inflation, income tax, and operational costs. The looming excise duty and debt challenges in the sector, particularly the 250 billion Naira in outstanding fees from banks, have raised alarm bells among telecom operators. Adebayo highlighted the need for regulators, including the Nigerian Communications Commission and the Central Bank of Nigeria, to intervene in resolving the USSD debt issue before it escalates further. He warned that failure to address the growing debt could lead to disruptions in telecom services provided to banks. Despite the uncertainties and challenges facing the telecom sector, Adebayo remains optimistic about the industry's future. He emphasized the importance of infrastructure development, such as fiber optic networks, in expanding access to affordable telecom services across the country. Adebayo expressed confidence in the sector's resilience and its ability to adapt to changing market dynamics and technological advancements. As the industry awaits the third quarter GDP numbers and company income tax contributions, Adebayo anticipates some improvement driven by evolving services like data centers, artificial intelligence, and e-commerce. While acknowledging the core infrastructure shortcomings, he believes that the telecom sector's diversified revenue streams will continue to support growth despite the prevailing challenges. In conclusion, the telecom sector in Nigeria is at a crossroads, grappling with regulatory uncertainties, tax burdens, and debt challenges. Industry players like Gbenga Adebayo are advocating for a balanced approach that prioritizes sustainability, regulatory support, and infrastructure development to ensure the long-term viability of the sector.