• Monday, June 24, 2024
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The modern Nigerian workforce and the promise of a robust broadband penetration

The modern Nigerian workforce and the promise of a robust broadband penetration

The world of work witnessed drastic changes in the wake of the COVID-19 pandemic. Virtual workstations went from a luxury available to only a select few to a necessity for businesses in locations around the world. Meetings and other types of business are now being routinely conducted without the need for being physically present. The scale of remote work is unprecedented and beckons at a whole new paradigm for the future workplace. For jurisdictions with strong and reliable broadband connectivity, the transition to remote work has been relatively seamless. With the added benefits of remote work for the environment (carbon emissions have been falling sharply since global lockdown measures came into effect) and potential reductions to business operating costs, the remote model has maintained popularity even after the grip of the pandemic has eased. It has been quite a different situation in developing countries like Nigeria.

The promise of a Nigerian workforce that can respond in real-time to unpredictable global challenges, has been held back by a lack of access to strong and stable broadband internet. In the United Kingdom (UK) the number of households with internet access grew from 93 per cent in 2019 to 99.7% of households as of January 2022. By comparison, only about 47.1% of Nigerians had access to the internet in 2018 and 51% at the start of 2022 – and this, at a very high cost. This was despite the stated intention of the Nigerian National Broadband Plan 2013-2018 to ensure that at least 80% of Nigerians would enjoy world-class wireless broadband as a basic access medium for society by 2015.

With the rest of the world going in the direction of cheaper and faster internet, if Nigeria is to be poised as a welcoming investment market and provider of services, it would seem there is no better time than now for an upgrade. But how?

Nations like the UK have been able to achieve mainstream internet access through the use of broadband connections. Broadband is a wide bandwidth data transmission technology which transports multiple signal and traffic types. The medium can be a coaxial cable, optic fibre, radio or twisted pair or even satellite. Optic fibre broadband is the primary and preferred medium for the delivery of broadband capacity due to its ability to withstand electromagnetic disruptions and harsh weather conditions. It also carries greater volumes of communications traffic at a faster speed; making this data transmission mechanism most advantageous for a country like Nigeria with a vast population.

Lessons from the United Kingdom
The UK’s Department for Digital, Culture, Media and Sports is the body responsible for building its digital economy, and some aspects of the media such as broadcasting and the internet. This department has over the years encouraged investment in internet development programmes by providing incentives to Internet Service Providers (ISPs) such as:
i. Investment to provide superfast broadband coverage to as many premises as possible beyond the 95% level achieved in December 2017;

ii. Supporting the installation costs of gigabit-capable broadband for small to medium-sized businesses through the Gigabit Broadband Voucher Scheme which was funded through to March 2021;

iii. Stimulating private investment in gigabit-capable connections through its Fibre programme, which was funded through March 2021.

iv. In November 2022, it introduced low-cost broadband and mobile phone tariffs.
With the vibrant environment for internet service providers in the UK, competition is steep. This has ultimately benefitted internet users. For example, ISPs like ‘Talk-Talk’ have at one point or another other offered customers ‘free’ internet broadband with a telephone package. Orange has responded by offering ‘free’ broadband for some mobile customers. Other smaller ISPs have in turn offered similar packages. Sky sometime in July 2006 had announced 2 Mbit/s broadband to be available free to Sky TV customers and a higher speed connection at a lower price than most rivals at the time.

The promise of a Nigerian workforce that can respond in real-time to global challenges, has been held back by a lack of access to strong and stable broadband internet….47.1% of Nigerians had access to the internet in 2018 and 51% at the start of 2022  – and this, at a very high cost.

Providing affordable internet service is capital-intensive. The Nigerian government through the Nigeria Communications Commission (the “NCC”) can take some lessons from the UK by engendering a business environment that can drive investment in the sector. With the government leading the way in investment, the private sector possesses the technical know-how and complementary financial capacity to also drive such a commercially viable venture. The government could also encourage private investment by introducing tax incentives in the form of waivers and reliefs for companies intending to invest in the sector and existing ISPs. The tax issue is partly responsible for the present conundrum of insufficient investment in the provision of broadband internet services. ISPs are saddled with tax and fiscal burdens some of which include:
i. Companies Income Tax on profits accrued in Nigeria received or brought into Nigeria for any trade or business for whatever period of time so long as such profits are not taxed under any other statute. There is also a novel provision under the Finance Act which seeks to tax non-resident companies that transact businesses in Nigeria based on the significant economic presence basis;

ii. Education tax at the rate of 2.5% imposed on all companies in Nigeria pursuant to section 2 of the TET Fund Act 2011;

iii. National Information Technology Development Fund (NITDF) Levy or Information Technology Tax which is 1% of profit before tax and payable by companies with over 100 million turnover in the following sectors: Telcos; cyber and internet service providers; pension companies; financial institutions; and insurance companies.

iv. Value Added Tax of 7.5% imposed on goods and services produced or imported into Nigeria;

v. Import duties levied on all telecommunications equipment imported into Nigeria which was reviewed downward in 2015 to 5% as an incentive to accelerate broadband development across Nigeria;

vi. National Agency for Science and Engineering Infrastructure Levy which is 0.25% of profit before tax and payable by companies with turnover of over N100 million in banking, ICT, aviation, maritime, or oil and gas sector
Nigeria’s fiscal policy on the whole has been largely characterized by over-taxation. Virtually all tiers of governments have been imbued with constitutional powers which they deploy liberally. The multiplicity of taxes on ISPs contributes significantly to the lack of investment and lack of interest in doing business in Nigeria. It is also responsible for the hike, rather than reduction, as is the case in most of the world, in the pricing of internet services. Introducing tax incentives to ISPs would not only be beneficial to them, but also to Nigerians as it would allow for a reduction in the prices charged for internet services. The government could even engage stakeholders to ensure that such a reduction in the cost of providing internet service does not all return to the companies as profits but translates in part to reduced rates across the country.
The lack of basic infrastructure such as electricity must also be urgently addressed as this will go a long way in reducing business costs for intending and existing ISPs. The Lagos state government in an attempt to ensure the availability and quality of internet service around the Lagos metropolitan city has partnered with ISPs on initiatives to make this a reality. The Federal government having witnessed these efforts, has commissioned similar projects in all 774 local governments in Nigeria. These efforts will be insufficient in the face of a lack of proper underlying infrastructure to support them and inadequate incentives to drive investments in the sector.

It must be noted that beyond engendering remote work in Nigeria, Broadband can also be used as a transformative platform that can impact the economy. For instance, it has the ability to provide easier access to information that increases productivity in the economy and also enhances the efficiency and productivity of enterprises. The multiplier effect of broadband can improve a country’s Gross Domestic Product (GDP), productivity, as well as employment growth. A World Bank study found that between 2000 and 2006, developing countries experienced about 1% point increase in GDP for each 10 per cent increase in broadband penetration.
An exponential rise in demand for stable and fast broadband internet service in Nigeria may be just around the corner, however, Nigeria needs to focus on embracing the global trend and putting its house in order. Whilst many countries have commenced utilisation of 5G networks at full capacity, the majority of Nigerians are still stuck with unreliable 3G networks. The implications of this disconnect could potentially play out with horrific consequences on the economy and also in a global environment where work is now increasingly being conducted both nationally and internationally using online platforms that require broadband connectivity.

Tare Olorogun is a Senior Associate at Perchstone & Graeys