The Federal Government has announced the removal of excise duty for the telecom sub-sector of Nigeria’s Digital Economy Industry, in accordance with the recommendations of the Committee it formed to review the duty’s applicability to the telecom sector, which is already overburdened with taxation and various levies.
Isa Ali Ibrahim Pantami, Minister of Communications and Digital Economy, disclosed this on Tuesday at a press briefing to provide updates on the status of the 5% excise duty, whose application to the telecom sector was objected to by the Minister in August 2022, after which President Muhammadu Buhari suspended its application to the telecom sector and established a Presidential Review Committee on Excise Duty in the Digital Economy Sector.
Pantami, the Chairman of the Committee, which was formed specifically to review the proposed excise duty in the telecom sector, stated that the Committee had completed its national assignment and had accordingly submitted its report to the President, justifying why the sector should be exempted.
The Committee’s submissions, according to the Minister, can be summed up in three arguments put forward to justify why additional burdens in the form of taxes or any level should not be imposed on the telecom sector to prevent a reversal of the sector’s important contribution to the growth of the Nigerian economy.
Our justifications are based on three premises: First, is the fact that operators in the telecoms sub-sector of the digital economy industry currently pay no fewer than 41 different categories of taxes, levies and charges; secondly, that telecoms has continued to be a major contributor to Nigerian economy in terms of Gross Domestic Product Contribution (GDP).
The third ground for contesting the Excise Duty in telecom sector is the fact that, despite increase in the cost of all factors of production across sector, and naturally leading to increase in costs of products and services, telecom sector is the only sector where cost of service has been stable and in many cases continued to go down over the past years and therefore, adding more burden will destroy the sector, the Minister said.
The Minister also informed the gathering that, after considering the Committee’s arguments and relying on the provision of Section 5 of the Nigerian 1999 Constitution, as amended, the President has exempted the telecom sector from the list of sectors required to pay the excise duty as stated in the Finance Act of 2021 and other subsidiary legislations, none of which are as superior as the Constitution, which allows the President to grant such waiver.
Pantami said:
I am happy to report to you that President Muhammadu Buhari, GCFR, has approved the exemption of the digital economy sector from the five percent excise duty to be paid and this is because of the strength of the argument presented to him by the Committee that additional burden on telecom sector will increase the sufferings of Nigerians and that other sectors that are not making as much contribution to the economy should be challenged to do more and pay the 5 per cent excise duty.
The Minister assured Nigerians who use telecommunications that the presidential exemption granted to the sector would be maintained by the incoming administration because “the President’s decision is not about any political party or any administration, but about Nigeria and the welfare of Nigerian citizens.”
The Minister also stated that the Digital Economy Sector has continued to make significant contributions to the growth of the Nigerian economy, accounting for 14.07 percent of GDP in the first quarter of 2020, 17.79 percent in the second quarter of 2021, and 18.44 percent in the second quarter of 2022.
He also stated that the sector has increased its quarterly revenue generation for the government from N51 billion to over N480 billion, representing a 594 percent increase; and that the cost of purchasing data has decreased from N1,200 in 2019 to N350 currently, despite the increase in the cost of operations, including the energy challenge, which has caused mobile network operators to power base stations with over 32,000 power generating to provide seamless services to their teeming customers.