Again, Telecoms Operators Fret over High Cost of Diesel, Multiple Taxes

Telcoms

Although the federal government, last week, announced the suspension of the implementation of the five per cent excise duty on all voice calls, SMS, and data services in response to the protest of telecoms operators, Emma Okonji writes that other factors including the hike in the cost of diesel, other forms of taxes and the right of way are still robbing operators of opportunities for expansion in the sector 

Mobile Network Operators (MNOs), under the aegis of the Association of Licensed Telecoms Operators of Nigeria (ALTON), are worried that the hike in diesel, coupled with the multiple taxes imposed on telecoms operations by state governments and federal government agencies, may retard the growth and development of telecoms sector, despite its huge investment profile and contributions to Gross Domestic Product (GDP) growth.

They are equally worried that the refusal to grant a Right of Way (RoW) permit to telecoms operators by state governments, may retard telecoms’ expansion, and erode its many gains.  

Chairman of ALTON, Gbenga Adebayo, is worried that the pump price of diesel has continued to be on the rise and is expected to rise further when the federal government begins the implementation of the 7.5 per cent Value Added Tax (VAT) on fuel.

According to him, the MNOs also depend on the public transportation system for the haulage of diesel to the various sites, adding that the removal of fuel subsidy, without an alternative means to cushion the effect, has increased the cost of haulage of diesel to BTS sites.

 Fuel Hike

 The increase in the cost of petroleum products like petrol and diesel, is affecting the cost of foodstuffs. The cost of living has been affected and all sectors of the economy have been affected by the increase in the cost of petroleum products.

Adebayo, who explained that the hike in the cost of petroleum products was adversely affecting the telecoms sector, just the same way it is affecting other sectors of the Nigerian economy, said the development would adversely affect telecoms operations, if not addressed.

Adebayo who spoke to THISDAY about the implication of diesel hike on telecoms operations said: “As a telecoms service provider, we consider the interest of the country first and that is the reason why we have continued to maintain the same cost in telecoms services without making any move to increase the cost of service since inception. But the truth is that we cannot continue to provide quality service when we do not have the right pricing in the telecoms industry.

“Telecom operators have their own challenges that are affecting service delivery. The reality is that our charges must reflect the cost of providing telecoms services and we cannot shy away from that. We cannot continue to provide services below cost, because if we continue to do so, then we will go out of business and the sector will suffer for it. Telecom operators are private entities that are doing business without any form of government concession or waiver.

He further said if the cost of diesel remained high and the cost of telecom services delivery remained the same, then the industry would suffer because variation in pricing would negatively affect the telecoms industry.

“For telecoms operations to be sustainable, we must price right and we must have access to foreign exchange, and government must ensure full protection of telecoms infrastructure,” Adebayo further said.    

Multiple Taxes

 Addressing the issue of multiple taxes, Adebayo said: “The issue of multiple taxes must be addressed because it is gradually killing the telecoms sector and eroding its many gains. The current situation where the telecom sector is struggling with 39 different taxes is not sustainable and government has to address it.

“So it is ridiculous to operate with 39 different taxes, from different government agencies and state governments, because they are killing the industry. We have just one government in the country, yet we have different levies and taxes imposed on telecom operators from different government agencies, and we are not comfortable with them.”

Adebayo said the MNOs were already engaging with the relevant stakeholders in the industry to chart a way out of the challenges.

“We are engaging with all the relevant stakeholders, in particular, we are in contact with our regulator, the Nigerian Communications Commission (NCC). We are not unmindful of the challenges that people are going through, in particular, we are not unmindful of the high cost of living, but the reality is that we operate within the same ecosystem,” he said.

 Suspension of 5% Telecoms Tax

One of the 39 taxes imposed on telecoms operations across networks, is the five per cent excise duty tax on telecoms services, which the federal government introduced last year, and revisited in April this year, after agitations from telecoms industry stakeholders, who said its implementation would negatively impact on telecoms subscribers.

President Bola Tinubu last week announced the suspension of the proposed tax, thus bringing the controversy over its implementation to an end. 

In his reaction, Adebayo commended President Tinubu, saying that the suspension is a good development for telecoms subscribers and the telecoms industry. 

“The Nigerian public should be grateful to the current government for being brave enough to suspend the five per cent excise duty on telecoms. As operators, we had been instructed to collect the tax from telecoms’ subscribers and remit same to the federal government, but with the suspension, operators will no longer collect such tax and the subscribers will be free from the tax burden,” Adebayo said. 

Telecoms Investments

 Despite the challenges faced by the telecoms industry and the possible threat that the challenges are currently posing on telecoms operations, the Executive Vice Chairman of NCC, Prof. Umar Garba Danbatta, is insisting that telecoms’ investments and its contributions to Gross Domestic Product (GDP) have been on the increase.

Danbatta disclosed this last week in Lagos during an interactive session with the media, where he provided his scorecards and landmark developments that have shaped the growth in the telecoms sector since he assumed office in August 2015.

According to Danbatta, in 2018, the investment profile in the sector stood at $68 billion. This increased to $70.5 billion in 2019 and $72 billion in 2020. At the end of 2021, the figure rose to $75,560,563,417.79 ($75.6 billion). The latest figure is the current official investment profile computed in the industry up from the initial $70 billion investment in the last few years.

Danbatta said through an effective regulatory environment put in place by the commission, the telecoms sector has recorded tremendous growth from an initial investment profile of $500 million as of 2001 when the sector was fully liberalised.

He also explained that the telecoms sector would continue to be a major contributor to Nigeria’s economy through its quarterly sectoral contribution to the nation’s Gross Domestic Product (GDP) which is now up from about 8.5 per cent in the third quarter of 2015, to reach N10.126 trillion in 2022 alone.

Citing data from the National Bureau of Statistics (NBS), Danbatta said the telecoms sector contributed N10.126 trillion as an aggregate quarterly contribution to GDP in 2022.

“The growth trajectory continued this year as the telecommunications and Information Services sector in Nigeria delivered N2. 508 trillion in terms of financial value contribution to the nation’s gross domestic product (GDP), representing 14.13 per cent in the first quarter of 2023,” Danbatta said.

Adebayo who agreed with Danbatta that telecoms investments and its contributions to GDP have been on the rise, however, said the government must address the challenges of fuel hikes, multiple taxes, and right of way among others that could erode the many gains of the telecoms sector.