Telecoms Sector’s Hidden Struggle: Despite N2.4tn Tax Contribution, Investments Plummet....KINDLY READ THE FULL STORY HERE▶

Telecommunication companies in Nigeria contributed a staggering N2.4tn in taxes to the government in 2023, according to a recent digital economy report from the Groupe Special Mobile Association (GSMA) obtained by Sunday PUNCH. This hefty tax contribution comes despite the sector’s struggle to attract new investments……..CONTINUE READING

The GSMA report highlighted the telecommunications sector’s vital role in the Nigerian economy, accounting for about N33tn, or 13.5 percent of the country’s GDP. The report emphasized the sector’s potential for significant growth in the next 3–5 years.

“The mobile telecoms sector accounted for 13.5 percent of total GDP in 2023, including the direct value added by wider ICT industries and the impact of the sector in enhancing the productivity of other sectors,” the report noted. It further detailed the mobile sector’s overall contribution to GDP, estimated at N33tn in 2023, with tax revenue contributions of N2.4tn.

Data from the National Bureau of Statistics (NBS) revealed that in the first quarter of 2023 alone, telcos paid N119.87bn in taxes, a 35.91 percent increase from the N88.19bn paid in the same period in 2022. This tax revenue included both Company Income Tax (CIT) and value-added tax (VAT), with operators paying N35.75bn as CIT and consumers contributing N84.12bn as VAT.

The NBS also highlighted that the information and communications sector was a top contributor to CIT during this period, with the total tax revenue for Q1 2023 standing at N1.18tn, and the sector contributing 10.17 percent to this total.

However, the industry faces significant challenges. Rising inflation, energy costs, and exchange rate volatility have severely impacted telcos. Last year saw a dramatic 70.5 percent decline in sector investments, dropping to $134m from $456.8m in 2022, as reported by the NBS.

Major players like Airtel and MTN Nigeria have reported substantial losses. Airtel declared a $151m loss in the first quarter of 2024, while MTN Nigeria reported a loss of N137bn for the year ended 2023.

Tony Emoekpere, President of the Association of Telecommunications Companies of Nigeria (ATCON), warned that operators might not survive the year-end if economic hardships continue. “Telcos have been running at a loss, even though they may be reluctant to disclose,” he stated in April.

Recently, telcos have petitioned the Federal Government to allow tariff increases, a move not seen in the past 11 years. Gbenga Adebayo, Chairman of the Association of Licensed Telecom Operators of Nigeria (ALTON), pointed out that the sector is no longer attracting investments due to economic challenges.

Bismarck Rewane, CEO of Financial Derivatives Company Limited, supported the telcos’ call for a tariff review, noting that inflation has surged multiple times since the last review in 2013.

As the industry navigates these turbulent times, the hefty tax contributions underscore the sector’s significant economic impact and the urgent need for strategic interventions to sustain growth and attract investments.