• Says Nigeria needs regulation that supports sustainable investment

To avoid the collapse of Nigeria’s telecommunications sector, the Groupe Spécial Mobile Association (GSMA) has urged the Federal Government to adopt a single-digit tax system for the industry.

This demand was contained in a digital economy report launched in Abuja.
Nigeria’s $76 billion telecoms sector is currently grappling with over 45 charges and levies, which have stalled the growth of the sector.

GSMA while acknowledging the important work being conducted by the Presidential Committee on Fiscal Policy and Tax Reform, recommended that a comprehensive review of the level and impact of taxation on the sector and the government’s digital economy objectives is undertaken.

The advocacy body noted that this review should consider reducing to a single-digit tax system, as directed by the President, and other recommendations made by the Association of Licensed Telecommunications Operators of Nigeria (ALTON) submission to the Committee in September 2023.

Indeed, ALTON, the umbrella body for telecoms operators in the country recommended the need to harmonise RoW charge agreements across all states; and remove changes in the Value Added Tax Act, which now subjects radio and television masts, transmission lines, and cell towers (base stations) to VAT; reconsider and lower the Finance Act 2023’s increase of the Tertiary Education Tax Trust Fund from 2.5 per cent to three per cent; remove Withholding Tax at 10 per cent on the income of tower infrastructure providers.

GSMA said the suspension of excise duty on telecoms services is welcomed and should be completely removed from the Finance Act. It added that there was a need to lower the import levy on goods from outside Africa for the sector.

It noted that the recent amendment to Section 32 of the Companies Income Tax Act removes capital allowance on telecommunication goods and services, and should be re-instated; lowering 7.5 per cent VAT on diesel importation for the sector and insert a comprehensive constitutional amendment to clarify the powers of federal, state, and local governments regarding taxation, alleviating the ambiguity surrounding tax obligations.

According to GSMA, taking these actions reduces the operating costs of the industry and frees up additional revenue for investment into network infrastructure and services. The telecoms body that this would feed also through into lower retail prices (subject to NCC tariff regulations).

Further, the international body said Nigeria needs to create a regulatory environment that supports sustainable investment, saying adapting the regulatory environment to one that is more supportive of sustainable investment would benefit customers, the government and the wider economy.

Getting the above done, GSMA recommended that the following measures should also be adopted, including changing the basis for charging for spectrum fees from USD to Naira; removing retail tariff price control regulations and focusing tariff regulation on wholesale services such as interconnection.

According to the body, in the interim, if retail price controls are retained, there should be periodic tariff reviews, ensuring assessment of the costs of service provision by applicable legislation, to allow for adjustments to reflect the changing cost of inputs into the businesses and facilitate investment into improved network coverage and quality of
service and the introduction of a more pro-competition tariff regulation where upper and lower price bands are set by NCC, and allows service providers to launch services without prior NCC tariff approval, provided tariffs are within such bands and introduce regulatory sandbox approach to enable sector innovation in digital applications and services.

On the RoW crises, GSMA said the process should be simplified, saying a consistent and fair system of RoW charging and administration is needed across the entire country.

To achieve this, the body recommended among others that all government authorities (at national and sub-national levels) should apply the national maximum RoW fee of N145 per/LSQM adopted by the National Economic Council (NEC) for the deployment of fibre across all states in Nigeria; there should be a single point of contact in each state for the RoW application process.

GSMA said this process should be digitalised in all states to accelerate the process for managing RoW applications, saying the duration for the approval process should be limited to a maximum of one month.