- Saturday, May 4, 2024
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The Chairman, Technology Committee of
the Nigerian Bar Association Section on Business Law, Ikemesit Effiong, has
raised concerns about the sustainability of Nigeria's telecoms sector amid
ongoing economic challenges.
In an insightful piece entitled:
“The Imperative of Upholding Nigeria’s Telecoms Lifeline,” Ikemesit delved into
the sector, emphasizing its pivotal role as both an economic engine and
societal enabler. With approximately 15,000 direct employees and a significant
16per cent contribution to Nigeria’s gross domestic product (GDP), the sector's
health is crucial for the nation's well-being.
Ikemesit highlighted various
obstacles facing the industry, including frequent fibre optic cable cuts due to
road construction and vandalism, multiple taxations, and challenges in
acquiring rights-of-way (RoW). These issues, compounded by exploitative
rent-seeking practices, have persisted despite efforts to resolve them.
"Central to the sustenance
of any industry is a conducive economic environment that allows for sustainable
growth and innovation," he noted. However, regulatory constraints that
limit tariff adjustments hinder the sector's ability to adapt to market
dynamics unlike other industries.
Recent data from the National
Bureau of Statistics (NBS) indicated a rise in inflation to 33.20per cent in
March 2024, up from 31.7per cent in February 2024. This poses significant
challenges for businesses striving to manage staff welfare and make necessary
investments amid economic strains.
The inflationary pressures have
led to price increases across various sectors, including agriculture,
beverages, and services. Companies such as Nigerian Breweries Plc and Netflix
have adjusted prices multiple times this year to cope with rising costs.
Recently, the quality of service
has become a significant concern for subscribers across the country. Available
data indicates that this issue may persist for the foreseeable future. The 70per
cent broadband penetration target set by
the Federal Government was severely impacted in 2023, experiencing a decline of
14.2per cent from a peak of 48.28per cent in March to 41.87per cent in
November.
With operators reporting
financial losses in 2023 and a challenging outlook for 2024, it is evident that
funding will pose a significant challenge for the necessary investments needed
to transform the sector.
Describing the challenges of the
sector in 2023, Engr. Gbenga Adebayo, Chairman of the Association of Licensed
Telecommunications Operators of Nigeria (ALTON), said: “ALTON’s members
currently pay at least 49 different taxes and levies. Additionally, our members
continue to bear the brunt of multiple taxation and coerced compliance with tax
and levy demands that have no legal basis by sub-nationals. This threatens
investment, sustainability, and industry growth.
“Instances include – exorbitant Right of Way
fees, increases under the Finance Act 2023 (such as an upward review of
Tertiary Education Trust Fund Tax from 2.5per cent to three per cent,
imposition of Value Added Tax on cell towers (Base Stations), imposition of
import levy on goods, removal of capital allowance on telecommunications goods
and services under Section 32 of the amended Companies Income Tax Act), amongst
others.”
In the past 10 years, telcos have
maintained the same charges for calls and data, despite inflation rising from
8.05per cent in 2014 to 33.20per cent in 2024, and the dollar increasing from
185 naira in 2014 to about 1,000 naira in 2024.
Considering that this sector
supports Nigeria’s 221.7 million active voice subscriptions and 160.2 million
data subscriptions, with immense consequential economic and social value,
leaving it to resolve its challenges independently or risk collapse poses
significant threats to Nigeria’s socio-economic stability. Stakeholders in the
sector are urging the government to either invest in the sector as needed or
adopt a cost-reflective tariff to facilitate necessary investments.
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