Nigeria’s telecommunications sector is exploring the possibility of implementing regional pricing for calls, data, SMS, and other telecom services across the country.
This proposal arises from the need to tackle the complexities posed by multiple taxation and diverse business conditions in different states.
Mr. Gbenga Adebayo, Chairman of the Association of Licensed Telecoms Operators of Nigeria, unveiled this initiative during the ‘Nigeria eGovernment Summit 2023’ in Lagos. He stressed that the current nationwide tariff structure is no longer tenable, given the substantial variations in the cost of delivering services in different states.
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Addressing Multiple Taxation Challenges
The issue of multiple taxation has been a long-standing concern for the telecommunications sector in Nigeria. Mr. Adebayo pointed out that it might no longer be viable to maintain a single national tariff when faced with the intricacies of different tax regimes and business environments across states.
He elaborated, stating, “If you have a state that has introduced 50 different taxes for the operator, the telcos need to pass it on to the subscribers there. Otherwise, we would remain on this issue for many years to come.” This proposal aims to address this challenge effectively.
The plan for regional tariffs is currently awaiting approval from the Nigerian Communications Commission (NCC). Telcos believe that this approach will help mitigate the burden of multiple taxes and establish a more equitable pricing system that aligns with the local business environment in each state.
Mr. Adebayo noted that tariff variations based on geographical regions are common practices globally due to varying regulations and rules. By adopting regional tariffs, Nigeria’s telecommunications industry aims to create a fairer pricing model that accounts for the diverse regulatory landscapes and business conditions across the nation.
Equitable Pricing for a Diverse Nation
The implementation of regional tariffs would mark a significant shift in the telecommunications sector in Nigeria. It is expected to enable telecom service providers to tailor their pricing structures to better align with the operational costs associated with specific states. This, in turn, would promote fairness and address the challenges stemming from multiple taxation.
The proposal for regional tariffs for calls, data, and other telecom services represents a step towards resolving taxation issues and ensuring that telecom services are priced equitably across Nigeria’s diverse landscape. Pending regulatory approval, this initiative holds the potential to bring relief to both telecommunication companies and subscribers while fostering a more business-friendly environment.
Tariff to Incentivise States
According to the NCC, Nigeria has 36 states and the Federal Capital Territory, each with its own tax laws and regulations. This creates a complex and challenging environment for telecom operators who have to comply with multiple levies and fees imposed by different authorities.
Some of the taxes and levies that telecom operators face include Right of Way (RoW) charges, annual operating levies, spectrum fees, numbering fees, environmental impact assessment fees, building plan approval fees, and many others3. These taxes and levies vary significantly across states and often result in high operational costs for telecom operators.
The NCC has been working with the Federal Ministry of Communications and Digital Economy, the Nigerian Governors’ Forum, and other stakeholders to harmonize and streamline the tax regime for the telecom sector. However, progress has been slow and inconsistent, as some states have not complied with the agreed terms.
The regional tariff proposal is seen as a way to incentivize states to adopt a more favorable tax regime for the telecom sector. Mr. Adebayo explained that states that offer lower taxes and levies would attract more investments and subscribers, while states that impose higher taxes and levies would lose out on revenue and customers.
The regional tariff proposal is also expected to enhance transparency and accountability in the telecom sector. Mr. Adebayo stated that telcos would be required to disclose the breakdown of their tariffs to show how much they pay in taxes and levies in each state. This would enable subscribers to know how much of their bills go to the government and how much go to the service providers.
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What is the current tariff structure in Nigeria?
The current tariff structure in Nigeria is based on the Economic Community of West African States (ECOWAS) Common External Tariffs (CET), which Nigeria began to implement in 2015. The CET seeks to harmonize tariff charges within ECOWAS countries and liberalize trade in line with World Trade Organization (WTO) guidelines. The CET has five tariff bands, ranging from 0% to 35%, depending on the product category.
However, Nigeria also maintains several supplemental levies and duties on selected imports that significantly raise the effective tariff rates. For example, Nigeria has an effective duty (tariff, levy, excise, and value added tax (VAT) where applicable) of 50% or more on over 80 tariff lines. These include luxury goods, alcohol, tobacco, and some agricultural products. Nigeria also imposes a high duty of 70% on automobile imports to support its domestic vehicle manufacturing industry.
The average weighted mean applied tariff for all products in Nigeria was 12.37% in 2020, which was a 3.85% increase from 2016. This was higher than the average of 9.32% for sub-Saharan Africa and 6.19% for lower-middle-income countries.
The tariff structure in Nigeria is influenced by the complexities and challenges posed by multiple taxation and diverse business environments across the country’s 36 states and the Federal Capital Territory. Each state has its own tax laws and regulations, which often result in high operational costs for telecom operators and other businesses. The Nigerian Communications Commission (NCC) and other stakeholders have been working to harmonize and streamline the tax regime for the telecom sector, but progress has been slow and inconsistent.
To address this issue, the telecommunications sector has proposed a regional tariff plan that would allow telecom service providers to vary their pricing structures based on the cost of delivering services in different states. This proposal is currently awaiting approval from the NCC. The regional tariff plan aims to create a fairer pricing model that accounts for the diverse regulatory landscapes and business conditions across Nigeria’s diverse landscape.
