Muhammadu Buhari, Nigeria’s president, has reputedly approved the collection of five per cent excise duty on telephone recharge cards and vouchers.
The increase comes even as Telecom providers have written to the Nigerian Communications Commission (NCC) seeking to increase call and SMS tariffs by 40 percent.
Recall that Telecom operators under the aegis of Association of Licensed Telecom Operators of Nigeria (ALTON), on Wednesday asked for upward reviews in voice calls, short message services (SMS) and data costs.
ALTON had made the request in a letter addressed to the Nigerian Communications Commission (NCC), citing the rising cost of running business as reason.
According to ALTON, the proposed upward review of the price of calls will increase from N6.4 to N8.95, while the price cap of SMS will increase from N4 to N5.61.
Meanwhile, the customs 5% duty is part of new items on the list of goods liable for excise duty on the Finance Act in the country.
Excise duty is a levy charged at the time of manufacturing. It is also a form of indirect tax on the sale or consumption of certain goods, products, services or activities such as tobacco, alcohol, narcotics, gambling etc., mainly to discourage their use and consumption. Nigeria’s Finance Act has extended the list to include beverages, non-alcoholic drinks etc.
According to a circular signed by Zainab Ahmed, minister of finance, budget and national planning, directed the Nigerian Customs to create a tariff line for the collection of the excise on mobile telephones, electricity meters (components) and set up boxes at five per cent.
It is understood that the federal government is expected to raise at least N150 billion from the duty while customs will pocket about 10 billion, a 7 per cent collection fee.
The circular conforms with another list of excisable items by customs to include telephone recharge cards and vouchers at five per cent.
The collection was part of new items on the 2020 Finance Act signed by President Buhari. Although no rate was not stated, it is clear that the president might have okayed the collection of the duty at five per cent as empowered to do by the Act.
Section 21 (1) of the Act describes goods liable to excise duty as “Goods imported and those manufactured in Nigeria and specified in the first schedule of this Act shall be charged with duties of excise at the rate specified under the duty column in the Schedule.
Subsection 2 further added that “telecommunication services provided in Nigeria shall be charged with duties of excise at the rate specified under the duty column in the Schedule as the President may by Order prescribe pursuant to section 13 of this Act”.
In the current (2021) finance act, a new section was inserted to include “excise duty on non-alcoholic, carbonated and sweetened beverages shall be charged at a specific rate of N10 per litre”.
The new 5 per cent levy on recharge cards will increase call costs and add to other taxes levied on telcos operating in the country. Some of these levies include the right of way charges, National Information Technology Development Fund Levy, National Cybersecurity Fund, and Annual Operating Levy in addition to existing statutory taxes like tertiary education tax, companies income tax, and value-added tax.
Meanwhile, Telecom subscribers have opposed the move by Telecom companies to hike tariffs.
The President, National Association of Telecoms Subscribers (NATCOMS), Chief Deolu Ogunbanjo, said the operators should not in any way try to increase the yoke on the neck of suffering Nigerians by increasing tariff at this time.
According to him, what the operators should be appealing to the Federal Government to do is to unconditionally lift the ban imposed on over 70 million subscribers who have not linked their Subscriber Identity Module (SIM) with their National Identity Number (NIN) from originating calls from their mobile phones.
He regretted that both the operators and the affected subscribers were losing revenue already because a lot of the subscribers depended on the affected lines for their livelihoods since most of them operate in the small medium enterprises (SMEs) segment of the economy.
According to him, the Communication and Digital Economy Minister, Prof Isa Pantami should immediately lift the suspension placed on the affected subscribers and extend the deadline by another three months so that the financial haemorrhage besetting the industry could be halted.
Also speaking, the President, Association of Telephone, Cable and Internet Subscribers of Nigeria (ACTIS), Sina Bilesanmi, said any increase in tariff now will be bad for the consumers who are already impoverished by government policies.
The ACTIS chief said the quality of service (QoS) does not even support any hike in end user tariff, adding that the operators must first improve service quality before contemplating tariff hike.
“Yes we know the operators are also affected by the pains the ordinary man on the streets feels but it will not be the best for them to increase tariff now. If they do it, it will be an increase in the suffering of the people,” he said.
Efforts by The Nation to speak with Director, Public Affairs t NCC, Dr. Ikechukwu Adindewas futile as calls placed on his mobile phone rang out without being picked.
ALTON said since its members were not connected to the national grid, they rely on diesel to power the base transceiver stations (BTS) the price of which had hit the rooftop increasing opex by 35 per cent.
It added that the introduction of the recent excise duty of five per cent on telecom services had further increased the burden of multiple taxes and levies on the industry.
“As the commission may be aware, the power sector under the supervision of its Nigerian Electricity Regulatory Commission of the power sector in November 2020 undertook a review of electricity tariffs to cater for the economic headwinds reported above,” the letter reads.
“In view of the foregoing, ALTON considers it expedient for the telecommunications sector to undergo periodic cost adjustments through the commission’s intervention to minimise the impact of the challenging economic issues faced by our members. Details are hereunder:
“Upward review of the price determination for voice and data and SMS. Given the state of the economy and the circa 40 per cent increase in the cost of doing business, we wish to request an interim administrative review of the mobile (voice) termination rate for voice; administrative data floor price, and cost of SMS as reflected in extant instruments.
“With respect to voice and SMS cost, ALTON respectfully requests the commission to consider a mark-up approach to address the upward price adjustment desirable for the industry. We have enclosed herein and marked ‘Annexure 1’our proposal in that regard.
“For data services, we wish to request that the commission implements the recommendations in the August 2020 KPMG report on the determination of cost-based pricing for wholesale and retail broadband service in Nigeria. Excerpts from the report are attached and marked ‘Annexure 2’ to provide a further illustration.
“In implementing the said recommendations, however, we recommend that the 40 per cent increase in the cost of doing business be factored in to arrive at a cost price per GB in view of the current economic situation.”