MTN Nigeria’s CEO, Carl Toriola, has raised serious concerns about the National Assembly’s proposal to reintroduce a 5% excise duty on telecommunications and related services, including gaming and betting. Toriola warned that this tax could significantly harm Nigeria’s telecom sector, which is already facing severe financial challenges. Drawing a parallel to the collapse of NITEL, he emphasized that the telecom industry is at risk of reaching a critical breaking point.
Background on the Proposed Tax
The 5% excise duty, as earlier reported, is part of a larger legislative effort to reform Nigeria’s tax system through the new “Nigeria Tax Act.” The National Assembly aims to streamline and consolidate tax frameworks with this law. However, the proposal has met strong opposition from telecom industry players who argue that adding financial pressure to the sector could have devastating consequences.
This tax was initially exempted during former President Muhammadu Buhari’s administration, who recognized the economic hardship it could cause. Similarly, President Bola Tinubu suspended the tax via an Executive Order, acknowledging the potential burden it could impose on both consumers and the telecom industry
During a recent session with MTN Media Innovation Programme Fellows in Lagos, Toriola expressed his alarm over the potential reintroduction of the excise duty. He warned that lawmakers pushing for the tax are “playing with fire.” He explained that the telecom sector, which contributes over 15% to Nigeria’s GDP, is already struggling due to the naira’s severe devaluation and mounting economic pressures.
Toriola had also noted that telecom operators have been unable to adjust tariffs despite their financial difficulties, as the Nigerian Communications Commission (NCC) has resisted any changes due to the country’s economic struggles. He also revealed that telecom companies are now relying on financial reserves to stay afloat, but this is unsustainable. Without tariff increases, Toriola believes the industry could collapse, following the path of NITEL.
Potential Impact of the Excise Duty
Analysts and industry experts have warned that introducing the 5% excise duty could force telecom operators to increase tariffs, pushing the cost burden onto consumers. This would exacerbate the financial strain on Nigerians already grappling with rising living costs. Despite the NCC’s resistance to a tariff hike, the excise duty could leave operators no choice but to increase prices.
Telecom companies, including MTN, Airtel, Glo, and 9mobile, have continued to invest in network expansion and infrastructure despite high operational costs caused by factors like diesel price hikes, multiple taxation, and regulatory fees. The financial health of the telecom industry is vital to Nigeria’s economy, supporting millions of jobs and driving digital transformation. As the sector served as a crucial economic driver during the COVID-19 pandemic, its collapse could have wide-reaching consequences.
Industry experts and stakeholders are urging the government to reconsider the excise tax proposal to prevent further destabilization of the telecom sector.
