- Nigeria’s telecom sector, despite its potential, struggles with a complex tax regime and inconsistent right-of-way (RoW) charges
- A report showed that in 2023, Nigerian telecom companies paid around N2.4 trillion in taxes, a significant contribution to the economy, but challenges like high operational costs and tax inconsistencies persist
- Global System for Mobile Communications Association (GSMA) urged the Nigerian government to reduce telecom taxes to enhance investment and the digital economy in the country
To promote investment and strengthen the digital economy, the Global System for Mobile Communications Association (GSMA) has called on the Federal Government to cut telecom taxes.
This was disclosed on Wednesday, September 4, in a statement released by the GSMA official, which reported that telecom operators are facing significant pressure due to rising operational costs, which are being driven up by increasing energy prices.
“These challenges are not unique to Nigeria; many African markets face similar issues. However, Nigeria’s complex and burdensome tax regime presents additional, country-specific obstacles that severely limit the sector’s potential,” GSMA detailed.
Nigeria’s heavy tax, inconsistent RoW hindering growth
According to Angela Wamola, the Head of Sub-Saharan Africa at GSMA, Nigeria’s excessive and heavy tax regime is limiting the telecom industry's efforts to invest in infrastructure, expand its services, and drive economic progress.
The GSMA official expressed frustration that, despite a 2020 agreement among state governors to set the RoW charge at 145 naira per meter, many states have not adhered to this rate.
She explained that this non-compliance has resulted in higher infrastructure deployment costs, with RoW charges now fluctuating between 1 per cent and 70 per cent of the additional expenses for fibre optic installations, varying by state.
The GSMA leader observed that this inconsistency not only obstructs the deployment of crucial infrastructure such as fibre optics but also jeopardises the sector’s capacity to fund essential expansions.
Access to foreign currency hinders telecom’s development - GSMA
The GSMA official indicated that adhering to the 145 naira per meter rate consistently could lower fibre deployment costs by 15 per cent nationwide, thereby enhancing the feasibility for operators to invest in network expansion.
According to Wamola, the problem was compounded by the struggle to access foreign currency, essential for importing the equipment required to develop and sustain network infrastructure.
The growth of Nigeria’s telecommunications sector and its impact on the country’s Gross Domestic Product (GDP) have slowed in recent years, largely because of significant financial losses and the declining performance of telecom operators.
Telecom’s N33 trillion contribution represents 13.5% of Nigeria’s GDP
The digital economy report from the Groupe Special Mobile Association showed that telecommunications companies in Nigeria paid around N2.4 trillion in taxes in 2023.
This figure reflects a significant economic contribution, with the telecom sector producing roughly N33 trillion and constituting 13.5 per cent of Nigeria’s GDP for the year.
Telecom operators pay right-of-way (RoW) charges to landowners or authorities for permission to use their land or property to install infrastructure.
Wamola advocates for tax cut to boost growth
According to Wamola, although the sector holds great promise, it faces challenges due to the expensive and variable right-of-way (RoW) charges imposed by different states.
Wamola added that changing telecom tax policies would not only support the sector but also stimulate economic growth, improve connectivity, and broaden access to digital services for millions of Nigerians.
The Head of Sub-Saharan Africa at GSMA, Angela Wamola, suggested that the government should simplify taxes, standardise right-of-way charges, and cut down on multiple levies to promote investment and improve digital inclusion.
7 tax reforms by Tinubu administration that affect every Nigerian
Upon assuming office, President Bola Tinubu inherited a complex and often criticised tax system. Nigeria had over 62 different taxes.
TheRadar compiled key tax reforms that had been implemented through a series of executive orders and legislative changes.