TEMITAYO JAIYEOLA examines the challenges facing the Information and Communications Technology sector
The sun is just rising in 2023, but the one in the previous year did not really set as some of the issues that plagued the telecommunications sector last year are still much around. The implementation of the proposed five per cent excise duty tax and the debt owed to telecom operators would play significant roles in determining the growth of the sector this year.
In 2022, the Federal Government tried to introduce a five per cent excise duty tax on telecoms duty in a bid to boost revenue generation.
According to the Minister of Finance Budget and National Planning, Zainab Ahmed, the excise duty rate on telecom services was not captured in the Finance Act of 2020, but it was proposed by the President, Major General Muhammadu Buhari (retd).
Speaking through the Assistant Chief Officer of the Ministry, Mr Frank Oshanipin, she said, “Payments are to be made on monthly basis, on or before the 21st of every month.
“The duty rate was not captured in the Act because it is the responsibility of the president to fix rates on excise duties and he has fixed five per cent for telecommunication services which include GSM. It is public knowledge that our revenue cannot run our financial obligations, so we are to shift our attention to non-oil revenue.”
After much outcry from the telecoms industry, the government eventually suspended the planned excise duty.
The Minister of Communications and Digital Economy, Isa Pantami, took sides with the telecom operators, arguing that the telecoms industry was overburdened with excessive and multiple taxations, and any extra tax would probably negatively affect the sector.
While announcing the suspension, he said, “However, in spite of the contributions and achievements of the sector, we have been recording some challenges coming up from time to time that if care is not taken these challenges could be a barrier to the development of this sector in the next few years to come. One of them is the issue of excessive taxation and sometimes, multiple taxations in the sector.”
He added, “The ICT sector is being overburdened with so many categories of tax. If care is not taken, this is going to jeopardise the achievements and gains we have recorded so far in the sector.”
The suspension was temporary. Before the year ended, a document released by the National Assembly revealed that the government was planning to reintroduce the five per cent excise duty in 2023.
The document titled ‘Invitation to a One Day Public Hearing and Submission of Memoranda on the 2022 Finance Bill,’ released by the House of Representatives Committee on Finance indicated that the suspended excise duty on telecoms services was likely to form a part of the 2022 Finance Bill.
A draft of the Finance Bill 2022 reveals that the government is trying to amend the excise duty tax. It reads, “(2) All services, including but not limited to telecommunication services, provided in Nigeria shall be charged with duties of excise at the rates specified under the duty column in the Schedule as the president may by order prescribe pursuant to section 13 of this Act.”
While the Finance Act of 2022 has yet to be signed into law, industry stakeholders have begun to move against it, in a bid to stop the imposition of excise duty on the telecoms industry.
According to the President of the National Association of Telecoms Subscribers, Adeolu Ogunbanjo, the association is set to challenge the Federal Government’s move to introduce a five per cent excise duty on the telecoms sector.
In an interview with our correspondent, he said, “Last year, they tried introducing the five per cent excise duty tax, but we were totally against it. We are grateful it was suspended, but the Senate is reintroducing it. This may make telecoms service become unaffordable to the needy. They are planning to introduce it again. But we are going to court. We are filing next Wednesday.
“Everything is ready. We are going to court to challenge the five per cent excise duty tax that was suspended last year but found its way back this year. The minister of finance has stated that they would reintroduce the suspended excise duty tax. With this, we are going to court.
“While the implementation may soon be here, we would challenge this in court and if we win, it could be reversed. We are heading to court.”
According to a The PUNCH report, the Federal Government would earn about N160.46bn from telecom services if it successfully implements the five per cent excise duty on the sector.
While a cloud over the implementation of excise duty on the telecom sector has gathered since 2020, telecom experts expect 2023 to clear the skies.
Another issue that has been brewing in the sector for a while has also found new life. Before 2022 ended, telcos threatened to disconnect bank customers from Unstructured Supplementary Service Data services.
The telcos stated that they were deciding to proceed with the decision that would cut off a lot of Nigerians from financial services because the banks were owing them about N80bn as of November 2022.
The Chairman of the Association of Licenced Telecom Operators of Nigeria, Mr Gbenga Adebayo, said, “The debt is rising and has not been paid by the banks. As of November 2022, the accumulated debt rose to over N80bn.
“Time will soon come when we will be constrained to withdraw the service and many bank customers that depend on the USSD service will suffer for it and it will affect the economy.”
When contacted by The PUNCH, he stated that the association had sought regulatory approval from the Nigerian Communications Commission and would soon reach a resolution.
He said, “We would start disconnecting those who owe us in batches, the highest debtor scenario.”
This is not the first time banks and telcos would be having a face-off as regards USSD services. In March 2021, ALTON announced that they would disconnect USSD services until banks pay their N42bn debt. Telcos and banks have been at each other’s throats since 2019 over this issue.
While the association has not stated when it would implement its threat, the Head of Operations, ALTON, Gbolahan Awonuga, suggested to our correspondent that it could happen in the first quarter of 2023.
However, the Federal Government prevailed on the telcos to suspend their actions. Since then, telcos have resorted to threats, which included the threat of suing the banks to force their hands. But none has been successful.
According to Awonuga, the telcos were set to implement their new threat as early as the first quarter of 2023.
Speaking to The PUNCH, the Chief Operating Officer, Association of Telecommunications Companies of Nigeria, Ajibola Olude, explained that the money being withheld by the banks was needed for network expansions across the country.
He said, “The Federal Government through the Central Bank of Nigeria has to facilitate the N80bn USSD debt payment. This money is needed for further expansion of the industry.”
Suspension of USSD services by telcos would hamper the country’s cashless policy drive, especially with a new CBN policy that seeks to curtail the volume of cash in circulation.
USSD remains one of the most important channels of delivering financial services, particularly for the underserved and the financially excluded, and with feature phones and 3G phones dominating the Nigerian phone space.
Bank customers use USSD to transfer money through the use of mobile devices, without internet data connectivity, ensuring that anyone with a phone can have access to financial services.
According to the Nigeria Interbank Settlement System, USSD contributed to 35 per cent of electronic payments in 2020.
The telecoms sector has made major strides in recent years, becoming a major component of the country’s Gross Domestic Product. But all of this gain is being threatened with a bill before the National Assembly, according to industry stakeholders.
The bill, the National Information Technology Development Agency (Repeal & Re-Enactment) Bill 2021, seeks to make NITDA the major regulator of the ICT sector.
One provision of the draft bill reads, “Section 1 (Objectives of the Bill) – The purpose of this Act is to create an effective, impartial, and independent regulatory framework for the development of the Nigerian information technology sector and digital economy.”
According to experts, this section creates a pathway for NITDA to move from being an IT development agency to a regulatory outfit and might encroach on the regulatory powers of the NCC.
Section nine of the draft bill which states the functions of the agency explained that the agency shall “develop a framework for regulating the use, development, standardisation, research, and application of information technology, emerging technology and digital services, activities, and systems in Nigeria”.
Experts have countered this move, saying this section reflects the provisions of section 4 (1) (h) of the Nigerian Communications Act 2003, which mandates the commission to develop and monitor performance standards and indices relating to the quality of telephone and other communications services and facilities supplied to consumers in Nigeria having regard to the best international performance indicators.
Nigeria is not a stranger to the duplicity of functions when it comes to government agencies. In 2014, the Steve Oronsaye Committee Report on Restructuring and Rationalisation of Federal Government Parastatals, Agencies and Commission, recommended the scrapping or merging of some ministries, departments and agencies because of the duplicity of functions in order to reduce the cost of governance.
In 2023, the telecoms industry would also usher in more 5G penetration and move closer to the National Broadband plan of 70 per cent penetration.
Commenting on this expectation, Olude echoed, “The 5G rollout is in phases and MTN has done part of what they were meant to do.
“If more 5G services are deployed, they will help us to achieve the 70 per cent broadband target. And though, it wasn’t part of the Nigerian broadband target plan, if we give attention to 5G, it will help us to deepen the penetration of broadband services in the nation.”
While the year has only just begun, the telecoms sector seems to be picking up right where it left off in 2022.
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