October 22, 2024/CSL Research
According to a report by Punch newspaper, telecommunications stakeholders in Nigeria have strongly opposed the Federal Government’s move to reintroduce a 5% excise duty on telecom services. This proposed tax reform is outlined in a new bill titled “A Bill for an Act to Repeal Certain Acts on Taxation and Consolidate the Legal Frameworks Relating to Taxation and Enact
the Nigeria Tax Act to Provide for Taxation of Income, Transactions, and Instruments, and Related Matters.” The bill proposes an excise duty structure under which telecom services—both postpaid and prepaid—regulated by the Nigerian Communications Commission (NCC) would be subject to a 5% duty.
Telecom stakeholders, including the Association of Licensed Telecom Operators of Nigeria (ALTON), have strongly opposed the proposed 5% excise duty, warning that it will further burden subscribers already facing economic hardship. Industry leaders argue that the reintroduction of the levy is poorly timed, considering Nigeria’s current economic challenges.
This latest attempt to impose the tax comes after a similar effort in 2022, which faced widespread opposition from consumers and telecom operators. The backlash led to the suspension of the tax in July 2023, under the administration of President Bola Tinubu.
The telecommunications sector in Nigeria is currently grappling with mounting operational costs, driven by adverse economic factors such as foreign exchange devaluation and inflation.
These economic pressures have severely impacted the profitability of telecom operators, with MTN Nigeria suffering the worst losses. In H1 2024, MTN Nigeria reported a net loss of N519.06 billion, a steep rise compared to the N85.5 billion loss it posted in H1 2023. This sharp rise is attributed to the combined effects of currency depreciation and escalating operational expenses. In contrast, Airtel Africa showed signs of recovery in early 2025. The company posted a US$31 million profit in the first quarter of 2025, rebounding from a US$151 million net loss in the same period in 2024.
Telecom operators have emphasized the need for cost-reflective tariffs to sustain their financial health, citing economic challenges like inflation, currency volatility, and rising operational costs. These factors make it increasingly difficult to maintain current tariffs. Despite these pressures, regulatory restrictions have prevented operators from adjusting their pricing for over a decade. In light of the sector’s challenges, operators view a tariff increase—rather than the introduction of an excise duty—as crucial for their long-term growth and sustainability. Without such adjustments, profit margins will continue to shrink, endangering the financial stability of the industry. Operators warn that keeping non-cost-reflective tariffs in place will limit investments in infrastructure and service improvements, ultimately jeopardizing the future of the sector.
