The Nigerian telecommunications sector is vocally opposing the Federal Government’s recent proposal to reintroduce a 5% excise duty on telecommunications services. Stakeholders within the industry have labeled this initiative as insensitive, particularly given the prevailing economic challenges that consumers are currently facing. The proposed duty appears in a broader tax reform effort articulated in a bill designed to consolidate taxation laws, which emphasizes that telecom services—including both postpaid and prepaid—will now be subject to this additional tax. The reintroduction of the excise duty follows a suspension in July 2023 after considerable backlash from both industry players and the public over its imposition, as it was deemed detrimental to an economy already under strain.
The telecommunications sector, represented by the Association of Licensed Telecom Operators of Nigeria (ALTON), argues that imposing such a levy only serves to increase the financial burden on already struggling consumers. ALTON Chairman Gbenga Adebayo voiced strong opposition, underscoring how this tax would compound the difficulties faced by subscribers who are already contending with rising prices across several essential goods and services. He emphasized the need for the government to reconsider the timing of such a tax, as the current economic landscape severely diminishes the purchasing power of Nigerians. The sentiment resonates strongly with telecommunications operators who assert that the government’s insistence on introducing this duty is misaligned with the broader economic reality.
Adding to the complexity, the government had previously suspended the excise tax following its introduction in 2022 — a suspension prompted by concerns regarding consumer welfare. The government had refrained from imposing the excise duty amid rising costs of living and inflationary pressures affecting all sectors of the economy. Now, with the reemergence of the excise duty alongside discussions about the execution of a $750 million World Bank loan, stakeholders are once again rallying against perceived inconsistencies in government policies. Critics point out that traditionally, excise duties are applied to goods rather than services, threatening to complicate the taxation landscape and further complicate the operational abilities of telecom companies.
In their advocacy for a reconsideration of the excise duty, telecom companies are simultaneously pursuing a long-overdue increase in tariffs. Despite the considerable operational challenges arising from inflation and currency devaluation, government officials have been hesitant to endorse fee increases, creating a paradox in the dialogue on economic policies. While prices for other sectors can be adjusted to reflect the economic conditions, telecom companies are essentially being squeezed between governmental stipulation against tariff increases and the demand to operate under an additional tax burden—further complicating an already challenging situation.
The Association of Telecommunications Companies of Nigeria (ATCON) has also expressed profound concern regarding the implications of this reintroduced tax. ATCON President Tony Emoekpere remarked that the excise tax would likely strain both telecom companies and consumers further, particularly given the already precarious stance of the telecom sector’s profit margins. Meanwhile, the government’s reasoning for imposing such a levy on a critical sector aligns poorly with the typical objectives of excise taxes, which are generally levied on goods that have detrimental societal impacts. In this instance, taxing a sector viewed as foundational for economic growth raises substantial questions about policy coherence and intentions.
As the matter escalates, the National Association of Telecommunications Subscribers of Nigeria is taking steps to revive previously shelved legal challenges against the excise tax, aiming to contest what they perceive as an unjust governmental move. Their president, Prince Adeolu, warned that the tax could provoke severe disruptions in the telecom sector, potentially leading to drastic operational decisions such as load shedding by telecom operators. The impending legal battle underscores the heightened tension surrounding the proposal, as stakeholders prepare to assert their rights and advocate for the interests of consumers amidst a backdrop of regulatory uncertainty and economic hardship. The telecommunications community anticipates this will be a defining moment, challenging not just the excise tax proposal but the government’s broader approach to economic taxation and industry sustainability.
