Nigeria: NITDA bill- Multiple regulations, taxation fears grip telcos

The telecommunications industry is one of the fastest-growing sectors in the Nigerian economy.  It has brought about massive digitalisation that has helped equip several sectors in the country.

In 2022, the ICT sector contributed N12.32tn, approximately 16.22 per cent to Nigeria’s Gross Domestic Product through the continual growth of telecommunication subscribers, according to data from the National Bureau of Statistics.

The Federal Government, in the ‘Nigeria Medium-Term National Development Plan 2021-2025: Volume II’, stated its plans to increase the contribution of the ICT sector to GDP to 30 per cent by 2025.

However, this projected growth may be hindered by multiple regulations contained in the proposed National Information Technology Development Agency Bill, which has been before the Joint Committee of the Senate and House of Representatives on ICT and Cyber Security.

According to a recent report by the International Data Corporation, the telecommunications market is currently experiencing a decline in value in real terms due to inflation, with a forecast that the global spending in telecoms will hit $1.54tn next year. With multiple regulations, taxation, and levies, a steady decline in investment is projected to rise in the sector invariably leading to a decline in value/revenue.

Since 2021, when the bill generated by NITDA was first presented to the National Assembly, telecommunications operators sought exclusion from the bill, claiming it will take up regulatory roles already performed by the Nigerian Communications Commission.

The bill is set to repeal the 2007 Act initially generated by the agency and enacted by the National Assembly.

Findings by The PUNCH showed that the bill would empower the agency to regulate and implement all government policies on the information technology and digital economy sector.

Telecom companies have been expressing concerns about the numerous and repetitive regulations imposed on the industry, claiming that they have been hindering both domestic and foreign investments in this sector.

The Association of Licensed Telecommunications Operators of Nigeria said that there was a risk that the agency, acting properly under the bill, may issue regulations, guidelines, and standards concerning the use of information technology and digital services, which would conflict with the functions of the NCC if the bill is passed as currently constituted.

The operators said, “The bill will also result in double and possibly conflicting regulations for telecommunications companies in Nigeria.

“In this circumstance, we humbly request that since telecommunications are already being regulated by the NCC with regard to information technology and digital services, the distinguished members of the committee have telecommunication companies excluded from the group of persons (“operators”) who will come under the control and regulation of the agency with regard to information technology and digital services.”

The primary objective of the Nigerian Communications Act 2003 is to create and provide a regulatory framework for the Nigerian communications industry and all matters related thereto.

Under section 32(1), the act stated that the commission is empowered to issue communications licences for the operation and provision of communications services or facilities by way of class or individual licences on such terms and conditions as the commission may from time to time determine.

It is anticipated that the commission will create and uphold a financial reserve that will cover all expenses accumulated by the commission, encompassing the yearly payments made to the commission by licensees.

A critical look at the NITDA bill shows a duplication of activities between NITDA and NCC.

For instance, the bill states that the agency would be authorised to by regulation issue licences and authorisations for operators in the information technology and digital economy sector, and provide for licensing and authorisation criteria, including renewal, suspension, and revocation conditions to promote free market operation and competition, among others.

The bill in sections 20(2) and 6(5) indicated that NITDA will determine and register operators in the information technology and digital economy sector and fix licencing and authorisation charges, and collect fees and penalties as may be necessary for the exercise of its functions under the act.

The agency is also tasked with coordinating and supervising the activities of any entity incorporated, owned, or partly owned by the government to provide information technology infrastructure and digital services as well as the development of regulations, guidelines, and directives on the use of information technology and digital services in every sector of the economy to attain the purpose of the agency.

Furthermore, the NITDA bill requires certain companies designated in the act with an annual turnover of N100m to pay a levy of one per cent of their profit before tax into the National Information Technology Development Fund it established.

The Fund which is to be collected by the Federal Inland Revenue Service is to be used for the advancement of the country’s digital economy objectives and related purposes.

According to experts, the NITDA bill seeks to expand the pool of companies that are required to contribute to the fund such that it will now include, information technology, e-commerce companies, digital platform operators and providers; foreign digital platforms targeting the Nigerian market; banks, financial institutions, and companies providing financial services using information technology tools; and such other companies and enterprises as determined by regulations from time to time by the agency.

Some of the discrepancies in the bill are that it failed to expressly define some important terms, which could lead to misinterpretation and the board controlling the regulations excludes private sector involvement, among others.

Consequently, it would introduce multiple regulations for licensing and levies through the NITDFund.

The NITDA bill lacks additional information and explanation about the meaning, scope, or criteria for obtaining the different categories of licences. The duplicity of the licensing regime and the introduction of the NITD Fund would make it difficult for businesses to thrive especially startups as they would be subject to multiple regulations and levies.

Multiple regulations, levies, and taxes have been a major impediment to businesses in Nigeria. In a research titled “Multiple Taxes, Levies, and Regulations in the Nigerian Telecommunications Industry” by Rotimi Akapo, telecom operators alleged that there are over 38 different taxes and levies on their operations by the various tiers of government and different government agencies in Nigeria and this they considered a threat not only to their businesses but a threat to further investments in the industry.

The study uncovered a crucial correlation between increased taxes and fees and enhanced investments in infrastructure and equipment by service providers, improved service quality, and better accessibility of services to consumers.

“The telecommunications industry is a major source of tax revenue for governments and operators are frequently subjected to audits by tax authorities to confirm compliance with their tax obligations. However, taxes and levies on operators in the telecommunications sector impact the services provided by operators in terms of service adoption, pricing, investment decisions, quality, and affordability of services.

“The tax burden of a typical telecommunications service provider includes not just the general taxes and levies imposed on all companies in the country, but also a myriad of sector-specific and other “bespoke” taxes and levies that further reduce their profitability. The concerns are not just on sector-specific taxes and levies but the imposition of duplicated taxes by different tiers of government,” it noted.

NITDA which is the agency set up by the Federal Government to regulate information technology in Nigeria, had earlier told The PUNCH that telecom operators will be excluded from the bill since the agency was not set up to regulate telecom business.

The spokesperson, NITDA, Mrs Hadiza Umar said, “NITDA does not seek to regulate telecoms business, rather, we regulate Information Technology for development. The only place in the bill that involves telcos is the payment of the National Information Technology Development Fund.”

The Association of Licenced Telecoms Operators of Nigeria and the Association of Telecommunications Companies of Nigeria had made several calls to the Senate to look into the matter.

The National President of ATCN, Tony Emoekpere, told The PUNCH that the NITDA Bill replicates several aspects of what the Nigeria Communication Act, handled by the NCC regulates.

One of the notably clumsy aspects of the bill he said was the section that talked about infrastructure which is purely the prerogative of the NCC.

Emoekpere noted, “There are several licences NCC has given in that regard which it has been regulating over the years. This new bill is a very clear duplication of roles. Another duplicated regulation is the section of the bill that talks about operators paying a levy on their services. We are already paying levies to NCC as well.

“The minister had asked the senate to set up a joint committee between NITDA and the NCC to critically check and eliminate areas of infraction, so it would not come up in the bill. That is what we expect to be done. The Senate should ensure the bill is critically looked into.”

According to the ACTON president, if there are multiple regulations or too many regulatory bodies overseeing similar activities in a sector, it discourages investors because they are at risk of multiple taxation, regulation, and levies.

Despite the response by NITDA not regulating telecoms operators, Emoekpere said it was not clearly stated in the bill, adding that any clauses or phrases in the bill can lean towards false interpretation.

According to him, the bill is structured in a way that it can be misinterpreted, stating, “If infrastructure for digital services will be regulated by NITDA, there is no infrastructure service that does not ride on the digital telecommunication network. The infrastructure must be specified. Is it data centres or something else? All these are communication infrastructures and are already being regulated by the NCACT and the NCC.”

He recommended that the bill should not be passed as it is, rather, the language utilised in writing the bill should be reviewed and it should be a joint committee between the several bodies in the ICT sector.

The President of the Nigeria Computer Society, Prof. Adesina Sodiya, also condemned the bill stating that it was poorly put together and attempts to arrogate powers of other government agencies to NITDA.

He said that stakeholders in the digital space were exempted from the decision-making process, adding that despite several meetings with NITDA to correct the situation, stakeholders’ inputs were not considered. Sodiya said that the new bill would do Nigeria no good.