The number of taxes and levies telecom operators in Nigeria are forced to pay to federal, state and local government agencies has increased to 52 from 41, according to Gbenga Adebayo, president of the Association of Licensed Telecommunication Operators of Nigeria (ALTON).
Adebayo, who was speaking at a closed-door stakeholders’ meeting on Thursday, also disclosed that banks were yet to pay the USSD debt owed to telecom operators, which has now risen to N200 billion from N120 billion in June.
Multiple taxation is seen as one of the primary bottlenecks affecting the profitability of telecommunications business in Nigeria, and efforts by operators to draw the government’s attention to it have yielded little or no results.
In a recent communique to the Senate Committee on Telecommunications, Tony Izuagbe, president of the Association of Telecommunication Operators of Nigeria, also made similar submissions, urging the committee to quickly address these issues to avoid revenue losses in the industry. According to him, the multiple taxation is often a result of multiple regulations.
“The Nigerian telecom industry is often faced with multiple regulations that usually lead to multiple taxation. As of today, our members pay taxes to federal government agencies, state government agencies, and local government agencies. All these taxes impact our members negatively because money earmarked for network expansion must be redirected to pay illegal taxes,” Izuagbe said.
Operators in the industry have come under immense pressure recently as a result of the harsh economic situation of the country, which exacerbated existing challenges. MTN and Airtel, the two largest operators in the industry, reported losses in their half-year results.
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Airtel reported a $13 million loss after tax for the half year ended September 30, 2023, compared to the $330 million profit after tax reported in the same period of 2022. The company said the loss was largely driven by a foreign exchange loss of $471 million recorded in finance costs before tax and because of the devaluation of the Nigerian naira in June. The telco posted $12 million profit before tax in H1 2023, a decline of 97.7 percent from the $516 million reported in H1 2022, as total finance cost rose to $873 million from $358 million.
MTN Nigeria’s nine-month net profit also showed a decline as a result of the steady decline of the naira. The telco’s foreign exchange loss rose to N232.8 billion within the period from N27.9 billion a year earlier.
Since the current administration announced it was floating the naira with the goal of unifying the exchange rate, the naira has gone on a downward spiral, falling to as low as 1,300 per dollar in the parallel market and about 1,000/$ in the official market. The removal of petrol subsidy has also led to a surge in headline inflation. On Wednesday, the National Bureau of Statistics said inflation rose to 27.5 percent in September.
Telcos have also not been able to get commercial banks to agree they will pay the accumulated debt from USSD charges they were yet to remit. In September, Umar Garba Danbatta, former executive vice chairman of Nigerian Communications Commission (NCC), had said the deposit money banks agreed to pay the debt. He didn’t however say when it will be paid.
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Adebayo, ALTON president, later clarified that the banks merely acknowledged there was a debt but never agreed they were going to pay or when they planned to pay. While they delayed to pay, the debt had now ballooned to N200 billion. Stakeholders say the continued delay in settling the debt affects the attainment of the federal government’s 80 percent financial inclusion target.
Telcos have in June threatened to disconnect the USSD service of banks – a development that would disrupt transactions activities across the financial system and impact millions of users.
“It is pertinent to note that the contract between MNOs and DMBs on the use of USSDs for banking transactions is strictly commercial and MNOs are at liberty to withdraw the services if it is established that the transaction is unprofitable to them,” the telcos said.
The telecom industry in general has also seen voice and internet subscription growth decline. MTN lost 6.9 million voice subscribers between January and August. Airtel lost 394,684 in the same period.
In terms of internet subscription, between January and August, the industry added less than 3 million (2.8 million) subscriptions, representing a decline from 8 million growth recorded in the same period last year. Internet penetration within the same period dropped by about 3 percentage points to settle at 45.5 percent in August from 48.20 percent in January.
Izuagbe said addressing the many problems in the industry is critical to its continued contribution to the GDP. The smaller players especially require urgent attention, he added.
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“Smaller operators are going out of business because major corporate firms, especially banks dictate monthly charges for leased lines to smaller telecom operators on a take-it-or-leave-it basis. The same banks provide loans to these smaller operators and the interest rates have been going up consistently. Thus, their cost of capital is going up consistently while their revenues from these banks are going down. This has forced downward pressure on prices and led to price competition between desperate players,” he said.
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