Telecom
Indigenous Telcos Seek 5 Years Tax Holiday, Special Intervention Funds
Indigenous telecommunications companies in Nigeria have appealed to the Federal Government to give them tax holidays of up to five years and a special intervention funds.
This, they said, would allow them to compete favourably with bigger players who had enjoyed the same benefits in the past.
The operators, who appealed at a virtual forum on the National Policy for Promotion of Indigenous Content in the Nigerian Telecommunications Sector, said local players in the telecom sectors deserved pioneer status incentives, which should include tax and duty waivers on their importations.
According to them, these incentives were enjoyed by the GSM operators when they newly got their licenses in 2001 and led to their rapid growth.
Speaking at the forum, Mr. Chidi Ibisi, executive director, Business Development at Broadbased Communications Ltd., said aside from tax waivers for the small players, the telecom sector was seriously in need of intervention from the government.
According to him, the sector needs special funds like the Nigerian Content Intervention Fund (NCIF) supervised by the Bank of Industry. “We need a similar Fund as NCIF with a seven per cent interest rate, 10 to 15 years’ loans and equity participation,” he said.
Ibisi said indigenous players need seed funds, increased subsidies, incentives for local device manufacturers (including duty waivers for equipment and components), pioneer status for indigenous players in manufacturing, services, research and development, and innovation fund.
The Broad-based Communications chief said in other climes, they make some special intervention funds available to indigenous players.
For instance, Ibisi said in the USA, there is a $65 billion Broadband Fund, which comprises $42.45 billion for a new Broadband Equity, Access and Deployment program focused on connecting un-and underserved areas; a $1 billion grant programme targeting middle-mile infrastructure; and $14.2 billion for an affordable connectivity subsidy programme.
According to him, in the UK, there is a £30 billion broadband expansion program, while Germany has a $14.5 billion Digital Infrastructure Fund and $10 billion for broadband expansion.
Referring to the New National Broadband Plan (2020-2025), which requires $5 billion for implementation, Ibisi said national backbone and metro fibre of 80,000km would cost $1.5 billion; 4G roll out targeting 2,500 base stations is expected to gulp between $1-2 billion; 5G roll out with 6,000 base stations is pegged at $500 million; local manufacture of devices to cost $100 million.
He recalled that there have been power and aviation funds via the Bank of Industry of about N300 billion, with a seven per cent interest rate, and between 10 and15 years tenure.
According to him, there has been a $37 billion Infrastructure Fund of the Infrastructure Corp of Nigeria (InfraCorp), managed by four asset managers with $2.4 billion seed capital from the Federal Government. He added that there was also the Nigerian Content Intervention Fund (NCIF) supervised by the Bank of Industry.
“We need similar fund as NCIF with seven per cent interest rate, 10 to 15 years loan and equity participation; equity participation by InfraCorp; subsidies and grants, and pioneer status for five years (Tax Waivers and Duty Waivers),” Ibisi stressed.
Corroborating Ibisi at the forum, Mr. Oluwole Adetuyi, chief executive officer of Swift Telephone Network, said for the indigenous operators to grow, the sector would require access to funding for telecoms from financial institutions at low interest rates.
“We need easy access to FOREX at Central Bank of Nigeria (CBN) approved rate, and provision of special intervention funds for the telecoms sector by CBN – as has applied to other sectors,” he noted.
He said tax waivers, as well as the provision of grants and subsidies to telecoms operators, would help the small players grow. Adetuyi also called for the reduction and harmonisation of Right-of-Way charges across states and local government areas.
While calling on the Nigerian Communications Commission (NCC) to put in place a strong local content policy because of the need to create employment, increase FDIs, improved technology adoption, enhanced security and revenue and forex earnings, Adetuyi, represented by Dare Folorunsho, chief technical officer of the firm, said most PNLs and local telecommunication companies in Nigeria fall into the SME category, accounting for 60 to 70 per cent of jobs in most countries.
Adetuyi claimed that the lack of regulation for healthy competition had created outright dominance of four players in the telecoms industry with a heavy legacy load that makes new technology adoption very slow.
“If Nigeria must play in the unfolding IoT market that is in excess of $20 trillion, it must use its local companies with smaller legacy loads to drive faster technology adoption,” he stated.
According to him, there must be urgent reforms, which must promote a regulatory environment conducive to the development of smaller firms as part of the consideration for growth; lesser regulatory burdens on small operators, and NCC should allow the use of Nigerian numbers on a global scale as it is with the USA, the UK Canada, and numbers.
In a keynote at the forum, Prof. Umar Danbatta, executive vice chairman of the Nigerian Communications Commission (NCC), said the Commission had established the Nigeria Office for Developing the Indigenous Telecoms Sector (NODITS) as part of the implementation of the government’s local content policy in the telecoms sector.
According to him, the office is saddled with the responsibility of implementation of the local content policy as well as the Executive Orders 003 and 005.
“With the constitution of the NODITS, the industry should expect new guidelines and regulations bothering on indigenous content, local manufacturing of telecom equipment, outsourcing of services, construction and lease of telecoms ducts, succession planning in the telecoms sector, corporate governance, corporate social responsibility, etc. as the need arises,” said Prof Danbatta, who was represented by Babagana Digima, team lead, NODITS.
The EVC added that the Commission has already constituted a standing licensing review committee that is currently examining all its licenses in an effort not only to modernising them to reflect the current realities of technology and development, but also to consolidate, bundle or unbundle individual licenses or even create new licences.
He said other departments within the Commission were equally saddled with responsibilities that help to inculcate indigenous participation in the telecom sector.
“Efforts being made by the Research & Development and Licensing Departments are worthy of mention in that regard. Under the auspices of the Research & Development Department, the Commission has sponsored research efforts in several universities across the country.
A recent Groupe Spécial Mobile Association (GSMA) digital economy report has cast a spotlight on the significant contributions of Nigeria’s telecom sector to the nation’s GDP, highlighting its crucial role in driving economic growth and development.
Released amidst growing interest in the Nigerian telecom landscape, the report provides a comprehensive analysis of the sector’s impact on the country’s economic metrics. Key findings reveal that in 2023 alone, the telecom sector directly contributed 8% to Nigeria’s total GDP. However, when factoring in the wider ICT industries’ value-added contributions, this figure surged to an impressive 13.5%.
Beyond mere numbers, the report delves into the intricacies of the telecom sector’s influence on various economic sectors. It elucidates how the mobile industry’s cumulative contribution to Nigeria’s GDP reached an estimated 20 trillion NGN in 2023, accompanied by substantial tax revenue contributions totalling 2.8 trillion NGN. Such figures further highlight the sector’s role in driving fiscal revenues and national economic stability.
Moreover, the report sheds light on the transformative potential of the telecom sector in enabling digitalisation across key industries. Projections indicate that by 2028, sectors such as agriculture, manufacturing, transport, trade, and government are poised to witness a remarkable GDP increase of approximately 2 percentage points.
This surge is expected to generate an additional NGN 1.6 trillion in tax revenue, marking a significant milestone in Nigeria’s quest for economic diversification and resilience.
“The telecommunications sector is the backbone of the digital economy. We have a strong appreciation of the fact that if we are able to improve the business environment and invest in the sector, we can continue to improve the level of productivity.
A country like Nigeria has significant opportunities to contribute to the world, but this is impossible without diversifying the economy”. Dr. Bosun Tijani, Minister of Communications, Innovation and Digital Economy added.
The report also highlights the vital role of 5G networks in enhancing operational efficiency across sectors through real-time data transmission and remote monitoring.
It spotlights the immense potential of digitalisation in sectors like manufacturing and trade, with the capacity to add trillions in industry value and generate substantial employment opportunities and tax revenues.
Despite these promising revelations, the report also acknowledges the challenges faced by the telecom sector, particularly its capital-intensive nature.
The report’s findings beckon a clarion call for concerted efforts to leverage the telecom sector’s potential as a catalyst for economic advancement. With the right policies and investments, Nigeria stands poised to harness the full spectrum of opportunities offered by its vibrant telecom landscape, driving inclusive growth and prosperity for all.
While the advocacy for tariff increase remains under deliberations, revelations in the latest Groupe Spécial Mobile Association (GSMA) digital economy report have watered the ground for an increased tariff increase advocacy. The report, offering a deep dive into the sector’s dynamics, provides compelling arguments for adjusting tariffs to ensure sustainability and growth.
L-R: Juergen Peschel, Chief Executive Officer, 9Mobile; Dr. Bosun Tijani, Honourable Minister of Communications, Innovation, & Digital Economy; Dr. Aminu Maida, Executive Vice Chairman, Nigerian Communications Commission; Gbenga Adebayo, Association of Licensed Telecommunications Operators of Nigeria (ALTON); Bella Disu, Executive Vice Chairperson, Globacom; Karl Toriola, Chief Executive Officer, MTN; Angela Wamola, Head of Sub-Saharan Africa, GSM Association (GSMA); Ibrahim Dikko, Chief Executive Officer, Backbone Connectivity Networks Nig. Ltd.; at the GSMA Nigeria Digital Economy Report launch in Abuja on May 9 2024.
Highlighted in the report is the telecom sector’s significant contribution to Nigeria’s GDP. In 2023 alone, it accounted for 8% of the nation’s total GDP, a figure that swelled to 13.5% when considering the broader ICT ecosystem. The mobile industry’s overall contribution to GDP was estimated at a staggering 20 trillion NGN, with substantial tax revenues of 2.8 trillion NGN.
The sector’s potential to drive digitalisation across various domains is of paramount importance. The report projects a significant boost in GDP across sectors like agriculture, manufacturing, transport, trade, and government, translating into nearly 2 million jobs and an additional NGN 1.6 trillion in tax revenues by 2028.
The promise of 5G networks is poised to revolutionise operations, particularly in critical sectors like oil and mining, with real-time data transmission and remote monitoring enhancing efficiency. Digitalisation, especially in manufacturing and trade, holds immense potential for value addition and job creation, promising billions in additional tax revenues.
Despite Nigeria’s noteworthy internet usage figures, with 29% of the population regularly online, the sector faces challenges. The country boasts the lowest-cost data baskets in Africa, yet maintaining competitive mobile data network speeds remains essential. With an average speed of 21Mbps, Nigeria’s performance is comparable to neighbouring countries, underscoring the need for sustained investments.
However, sustaining this growth requires recognizing the capital-intensive nature of the telecom sector. Operators must continually invest in network maintenance and expansion, necessitating a conducive regulatory environment that ensures fair returns on investments.
Chairman, Association of Licensed Telecom Operators of Nigeria (ALTON), Gbenga Adebayo, commenting during the report launch, said, “We raised several issues on the state of affairs of the telecom industry, and among the challenges articulated is the return on investment, stability of the infrastructure and the need for pricing rights. As an ecosystem, tariff hike is one of the sensitive issues affecting the telecom sector and has to be addressed by all stakeholders. We need to look at the state of affairs of the industry and examine holistically. There are ongoing obligations to our end users including infrastructure security. Tariff increase is a solution to solve multiple challenges of the telecom industry.“
The GSMA report positions the ongoing tariff adjustment deliberations as a strategic move to secure the sector’s long-term viability. With Nigeria’s digital future at stake, finding a balance between affordability for consumers and sustainability for operators is paramount to ensure continued growth and innovation in the telecom landscape.
Gbenga Adebayo, chairman, Association of Licensed Telecom Operators of Nigeria (ALTON) has said the telecoms sector should not be a palliative to solve economic woes.
Gbenga Adebayo, chairman of ALTON,
He made this call during his address at the Groupe Spécial Mobile Association (GSMA) digital economy report launch which took place in Abuja.
According to Adebayo, the telecom industry faces numerous challenges that hinder its growth and development.
He emphasized the need for sustainable investment, effective regulation, and a conducive business environment to drive progress.
The GSMA digital report, launched May 9th 2024, 2024, highlights the telecom’s 8 percent contribution to Nigeria’s GDP and 13.5% when considering the broader ICT ecosystem.
The report also highlights the significant challenges plaguing the industry including investment challenges, right of way, multiple taxation, and regulation.
Adebayo highlighted the existence of over 45 associated charges and levies on operators, despite the supposed removal of right of way costs.
He said that it creates an unfavorable business environment, discouraging investment and hindering the industry’s ability to deliver quality services.
He also stressed that regulatory interference and the lack of independence for the regulator exacerbate the problem.
The price review should be a simple regulatory process.
The public debate this has gained makes it appear the industry is insensitive to people’s concern.
“While the government tries to provide incentives for the public on account of ongoing macroeconomic headwinds, the telecoms sector should not be used as a palliative to solve the people’s problem. We must price right to sustain the industry; we must price right to have the right investment,” , Adebayo said.
He concluded that the industry must be allowed to operate sustainably, with the right investment and regulation, to deliver quality services and drive economic progress; encouraging stakeholders, including policymakers, regulators, and operators, to work together to address the challenges facing the industry, in order to drive economic growth, and fulfill its potential as a critical sector in Nigeria’s economy.
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