That 9 Percent Tax On Telecom Services In Nigeria Will Soon Be A Reality As This Is Projected To Worsen Tech Sector Outlook

If you believe in the no smoke without fire saying, then your belief is in line with something we reported back in May that’s gradually unfolding before our eyes. You see back then we said that the Federal government was planning to place a 9 percent tax on consumers of communication services which is another way of saying the cost of calls and text will eventually rise in Nigeria so if you think you don’t like the cost of these services, wait till this takes effect. According to a report In This Day paper, the Minster of Communications, Barr. Abdur-Raheem Shittu says he has “been reliably informed that the projected earnings from this effort is over N20 billion every month, which is an attraction to the government in funding our budget deficits. I must be quick to say that this government has got a human face twined around its decisions,”

The move was opposed by a group led by former NCC (Nigerian Communications Commission) called The Alliance for Affordable Internet (A4AI)-Nigeria. The group had opposed the move in April by saying “Balanced fiscal policy must consider affordability of broadband and ICT, and should not put into place additional barriers that would make Internet access unaffordable for hundreds of millions of Nigerians. It now looks like they are not alone as the Lagos Chamber of Commerce and Industry (LCCI) said the “economic implications of this bill would affect consumer purchasing power which they say negates the principle of neutrality, maintaining that it would also discourage investment and impede development of the telecommunications sector.”

Nigeria’s Communications Minister; Barr. Abdru-Raheem Shittu, Source: Guardian Nigeria

So here’s the issue, a 9 percent tax is necessary in light of government inability to fund the 2016 budget which has been hard hit by low crude oil prices and renewed blowing up of pipelines by militants which has further worsened Nigeria’s revenue from the once priced commodity. As a result, Nigeria is now no longer the biggest economy in Africa. “Based on the data released by the International Monetary Fund (IMF), Nigeria has been displaced by South Africa as the biggest economy in Africa. By the latest development, South Africa has reclaimed the topmost position it lost to Nigeria in 2014, when the later rebased its gross domestic product (GDP), to increase the size of its economy to $510 billion, using 2010 as the base year to replace 1990 previously used. The GDP is the total value of a country’s goods and services over a period of time.”

So you get why the government is now looking for money desperately to fund projects and pay salaries but what they might not get is that, this could eventually turn to be robbing Peter to pay Paul as they say. This is because we now live in a new world where tech companies dominate by market value and this is largely because of the enabling environment that’s provided for citizens to be innovative in those climes. To understand this better, at the end of the trading day on the 29^th of July, the top 5 companies in the world were actually tech companies and this is largely due to the fact that western world citizens have better access to technology than their counterparts in Africa. Africa is still not bridging this gap fast enough as the ICT penetration pace has been largely hampered by cost of acquiring tech services like broadband. Nigeria and by extension many African nations don’t have indigenous technology as many providers still buy these services from Europe and America and as the Nigerian Naira continues to weaken against major currencies where these services are gotten from, it means the average user will eventually bear the brunt of this. Broadband service providers like Spectranet have jerked up prices across the board and with this 9 percent proposal, it’s likely to go up further.

If broadband and call services go up, it also means the average Nigerian who hasn’t seen a rise in income in many years won’t be able to afford broadband and if you can’t afford it, how is expected of you to build the next Facebook or Google? It will only remain a pipe dream. The effect may not be felt in a small setting but spread it across 180 million people and then you’ll understand better.

The effect of currency fluctuations has started taking its toll on Nigerians and PC shipments to Africa continued to decline in the second quarter of this year. People now use computers longer with more users buying refurbished laptops more. An average laptop now goes for as high as 200,000 Naira/$550 and if you live in Nigeria, you’ll know that no one who lives on the minimum wage of 18,000 would be able to come close to even affording these devices. Taxing services that run on smartphones and PCs may be counterproductive to the government’s plan to increase the penetration of technology services in Nigeria.