How Tax Enforcement Results in Poor Telecom Network Services

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CEM REPORT | Most phones in Nigeria has the facility to bear at least two SIM cards, making it possible for Nigerians to have access to at least two network providers on one device.

The answer to why Nigerians need more than one network provider has always been the issue of service quality but the question on why service quality differs from one provider to the other is a question that has been left unanswered.

Nigerians continue to suffer from bad telecommunication service delivery in form of distorted audio or noisy background which often results to shouting and moving during phone calls while airtime get wasted

This has been attributed to the multiple and aggressive enforcement of taxation on telecommunication companies by the Nigerian government.

According to a report released by SB Morgen titled “Inside Nigeria’s Subnational Fiscal Crisis”, there are over 40 different taxes and levies meted out upon the Mobile Network Operators (MNOs) carrying out telecom services in Nigeria.

These multiple taxes slammed on the sector and the aggressive enforcement has led to the degradation of network quality which Nigerians in turn suffer.

A clear impact of multiple taxations of telecommunications companies is the degradation of network quality. This mostly occurs when state authorities, in a bid to enforce compliance in payment of taxes, lock up the facilities of telecom operators and deny them access to their sites for refuelling, maintenance or fault resolution.”

The report further states that the regulator’s; federal and state alike, at several times forcefully lockout of telcos from their operational centers which consequentially would result in severe network disruptions, affecting a large number of cities and towns in the country.

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State governments often lock telcos out of their facilities in a bid to collect various taxes. Oftentimes this leads to a degradation of network quality”

“The lockouts are quite often targeted at large sites, which effectively paralyses a good section of the network, causing complete network outage for the affected communities over an area that could stretch across as many as two or more adjoining states.”

MNOs in Nigeria share resources and shut down of a facility can affect more than just the location of the facility.

“telecommunications operators in Kogi State warned that the shutting down of their sites by the Kogi State government in a bid to force operators to pay more taxes and levies could lead to a communications blackout in as many as 11 states.”

In the face of these the Nigerian National Broadband Plan 2020-2025 estimates that 4G coverage is at 37% and has a target of achieving coverage of at least 90% of the population and a penetration rate of 70% by the end of the plan’s lifetime and delivering data download speeds of about 25Mbps in urban areas and 10Mbps in rural areas.

This according to the plan should increase the country’s Gross Domestic Product (GDP) by 2.6-3.8%, for every 10% increase in broadband penetration, in the country’s.

GDP data for the telecommunications sector as at the close of 2021 stood at N14.1 trillion compared to N5.3 trillion for the entire financial services sector.

A decade ago the overly taxes telecommunication sector had a nominal GDP of N5.3 trillion while banks had a GDP nominal size of N1.49 trillion.

This reveals and as confirmed by the recent report on increasing teledensity despite NIN-SIM linkage barring, that telcos have a customer base and demand that will drive increased revenues and profitability in the coming years.

To further sustain operations MNOs, have diversified into other areas of the economy, beginning with banking; thanks to Federal Government Central Bank of Nigeria Financial Inclusion Strategy.

One operator who has stood tall amidst the several pitfalls in the sector is MTN. With the operators receiving final approval to operate as a full Payment Bank Service (PSB) which provides the company with a new source of revenue.

MTN Nigeria currently worths N5 trillion, making it more valuable than all banks, insurance companies, and financial services firms listed on the Nigerian Stock Exchange combined according to Nairametrics.

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