During the first half of 2024, the largest mobile network operator in Nigeria paid ₦232 billion in taxes, marking a significant 586% increase from the previous year. The company faced 54 different taxes in 2024 from federal, state, and local government bodies.
Telcos like the one mentioned are expected to face a further increase in tax burden by the end of 2024 as the number of taxes they pay continues to rise. The Association of Licensed Telecommunication Operators of Nigeria (ALTON) reported that most of these taxes are collected by state governments.
These taxes include various fees like building permits, sewage fees, convulsion levies, and storage licenses. ALTON’s President stated that these taxes resulted in a 50% increase in operational costs for telcos in 2024.
While some taxes are legally required, others are imposed arbitrarily. For example, a new association in Bayelsa imposed levies that are not recognized by state law. Federal taxes are generally grounded in law and amount to less than 20, while state and local taxes range from legally-backed to arbitrary levies.
The telecom industry faces multiple taxes primarily due to the perception of its high profitability, leading to it being seen as a lucrative revenue source. This taxing environment threatens the expansion of broadband infrastructure, which is essential for integrating more Nigerians into the digital economy.
There are concerns about inconsistent right-of-way fees for laying fiber optic cables on state-owned land, with charges varying between different government agencies and states. This disparity in charges poses a challenge for operators like MTN, Airtel, and Globacom.
Efforts to review and harmonize these taxes have been initiated by the Presidential Fiscal Policy and Tax Reforms Committee since 2023, but there has been no update on their progress in addressing telecom taxes. The need for engagement between telecom operators and states to resolve these issues is evident.
Some operators have resorted to negotiating directly with states, with examples like Lagos State granting a right-of-way waiver to MTN Nigeria in exchange for free high-speed internet services in public institutions. Edo State also offered waivers and tax incentives to operators that engaged with it.
Despite these individual engagements, there are concerns that larger operators may benefit more from negotiating deals, leaving smaller operators at a disadvantage. It is essential for telecom operators to engage actively with state authorities to find sustainable solutions to these tax-related challenges.
