Nigerian Telcos Urge Financial Reporting Council to Reconsider Annual Dues Structure

Telecom operators in Nigeria, under the umbrella of the Association of Licensed Telecom Companies of Nigeria (ALTON), have raised concerns over the revised annual dues structure introduced under the Financial Reporting Council Amendment Act 2023 (FRC Act). The operators warn that its implementation could place a heavy financial strain on the industry, particularly given the country’s current economic challenges.

ALTON Raises Concerns Over New Payment Model

In a letter dated September 13, 2024, and addressed to the Executive Secretary/CEO of the Financial Reporting Council of Nigeria (FRC), Dr. Rabiu Olowo, ALTON expressed its deep reservations about the revised payment framework. The letter, signed by ALTON Chairman Gbenga Adebayo and Executive Secretary Gbolahan Awonuga, highlighted the disproportionate financial burden the new structure would impose on telecom operators.

Previously, the annual dues were capped at a maximum of N1 million. However, under the new system, non-quoted public interest companies must pay fees based on a percentage of their annual turnover. The rates range from 0.02% for companies with a turnover of N25 million or less to 0.05% for those with an annual turnover exceeding N10 billion.

ALTON noted a stark discrepancy in the way publicly quoted and non-quoted companies are treated under the Act. For instance, a publicly quoted company with a market capitalization of N1 trillion would pay N25 million in annual dues, whereas a non-quoted company with the same revenue would be required to pay 0.05% of N1 trillion—amounting to N500 million. ALTON described this disparity as excessive and unfair, particularly given the financial strain faced by telecom operators in Nigeria.

The Telecom Industry’s Economic Realities

The telecom sector, ALTON emphasized, is already grappling with rising operational costs, foreign exchange fluctuations, and infrastructure investment demands. The association warned that imposing dues based on revenue, rather than profit, could stifle growth and discourage much-needed foreign direct investment (FDI) in the industry.

ALTON argued that telecommunications companies invest heavily in infrastructure and operations, leading to significant differences between their revenue and actual profit. Using an example, ALTON noted that a company with a turnover of N200 billion might only declare N15 billion in profit, yet would still be required to pay dues based on the much higher revenue figure.

Proposed Alternatives for a Fairer Computation Model

To address these concerns, ALTON proposed two alternative methods for calculating annual dues:

1. Dues Based on Profit, Not Revenue – ALTON urged the FRC to shift from revenue-based calculations to a model based on net profit, which would more accurately reflect a company’s financial standing and prevent undue financial strain.
2. Reintroduction of a Cap on Annual Dues – The association called for a predetermined ceiling on the dues payable by non-quoted public interest companies, similar to the cap applied to publicly quoted firms. For example, a publicly quoted company with a market capitalization of N500 billion would pay the lower of either 0.0025% of that amount or N20 million. In contrast, a private company with the same revenue would be required to pay N250 million—an imbalance ALTON described as unfair.

Call for Dialogue and Regulatory Collaboration

In its letter, ALTON urged the FRC to reconsider its approach and explore alternative payment structures that would ease the financial burden on telecom operators. The group also expressed its willingness to engage in discussions with the FRC to find a mutually beneficial resolution.

“We firmly believe that a collaborative approach would serve the best interests of the industry, the regulatory environment, and the overall economic stability of the country,” ALTON stated.

As the telecom sector remains a critical driver of Nigeria’s digital economy, stakeholders are watching closely to see how the FRC responds to these concerns and whether adjustments will be made to the annual dues structure.