Nigeria’s 5% Telecom Tax: A Step Backward for Digital Inclusion

Thedailycourierng

The recent reintroduction of the 5% excise duty on telecommunications services in Nigeria represents a concerning shift in policy that threatens to undermine digital inclusion and economic growth at a crucial time for the nation’s development.

The Wrong Tax at the Wrong Time

The timing of this tax couldn’t be more problematic. With Nigerians already struggling under the weight of significant economic challenges, including high inflation and reduced purchasing power, adding another financial burden to essential communications services seems particularly tone-deaf to the realities on the ground.

The Ripple Effect

What makes this tax especially concerning is its cascading impact. While it may appear as a simple 5% levy, its effects will ripple through the economy in several ways:

Increased Consumer Costs: As industry expert Ejike Onyeaso correctly points out, telecommunications companies will inevitably pass this cost burden to subscribers. In an economy where many are already struggling to maintain basic services, this additional cost could force some to reduce their telecommunications usage.

Digital Divide Expansion: Higher costs for telecommunications services risk widening the digital divide, potentially pushing connectivity out of reach for lower-income Nigerians at a time when digital access is increasingly crucial for education, business, and daily life.

Business Impact: Small businesses, particularly those in the digital economy, will face increased operational costs, potentially stifling innovation and growth in one of Nigeria’s most promising sectors.

Policy Inconsistency Concerns

The government’s flip-flopping on this policy – introducing it in 2022, suspending it in 2023, and now reintroducing it in 2024 – raises serious concerns about policy consistency. Such regulatory uncertainty can deter long-term investment in the telecommunications sector and hamper infrastructure development.

A Better Path Forward

Instead of implementing measures that could hamper digital growth, the government should consider:

Incentivizing Infrastructure Development: Focus on policies that encourage telecommunications companies to expand and improve their networks

Digital Literacy Programs: Invest in programs that increase digital literacy and adoption

Alternative Revenue Sources: Explore less regressive taxation methods that don’t directly impact essential services

The Bottom Line

While the government’s need to generate revenue is understood, this particular approach appears counterproductive. The potential short-term gains in tax revenue may be significantly outweighed by the long-term costs to digital inclusion, economic growth, and social development.

As Association of Telecommunications Companies of Nigeria President Tony Emoekpere notes, the industry is already facing operational challenges. Adding this excise duty could prove to be the proverbial straw that breaks the camel’s back for some operators, potentially leading to reduced competition and poorer service quality.

The government would do well to reconsider this decision and engage in meaningful dialogue with industry stakeholders to find more sustainable ways to achieve its revenue goals without compromising Nigeria’s digital future.

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Reference

Subscribers to bear five per cent telecom excise duty’ published in Punch

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