In the first half of 2024, MTN Nigeria, the largest mobile network operator in the country, paid an astounding ₦232 billion in taxes, marking a 586% increase from the same period in 2023. This sharp rise is part of a broader trend of increasing tax pressures on telecommunications companies, particularly in Nigeria, where MTN and its counterparts are grappling with an ever-growing list of levies imposed by various federal, state, and local government agencies.
MTN Nigeria’s tax obligations included 54 different types of taxes within just six months of 2024. According to the Association of Licensed Telecommunication Operators of Nigeria (ALTON), the majority of these taxes are collected by state governments. These levies range from statutory taxes like building permits and storage licenses to more arbitrary charges such as sewage fees and convulsion levies.
ALTON President Gbenga Adebayo highlighted that these increasing taxes have escalated operational costs for telecom operators by 50% this year. Adebayo also pointed out that the telecom industry is often viewed as highly profitable, leading to a perception that it can be exploited as a cash cow by different levels of government.
One significant example of the arbitrary nature of these taxes comes from the National Association of Telecom Landlords in Bayelsa, which recently imposed new levies not recognized by state law. While federal taxes are generally more structured and legally grounded, the number and nature of state and local taxes can be unpredictable and burdensome.
MTN Nigeria has yet to comment on these issues publicly. However, the ongoing tax environment poses a substantial threat to the expansion of broadband infrastructure, which is vital for integrating millions of Nigerians into the digital economy. According to the Nigerian Communications Commission (NCC), as of December 2023, 27.91 million people in 97 communities still lack reliable high-speed internet access. Some states, such as Niger, have no high-speed internet at all.
A significant hurdle for telecom operators is the inconsistency in right-of-way (RoW) fees, which allow them to lay fiber optic cables on state-owned land. While federal agencies typically charge ₦145 per meter for fiber laying along highways, other agencies like the Nigerian Inland Waterways Agency (NIWA) impose significantly higher fees, up to ₦2,500 per meter for laying fiber along waterways and bridges. State charges also vary widely, from as low as ₦1 per kilometer in Kwara to as high as ₦9,000 per kilometer in Oyo State.
Several states, including Osun, Lagos, Cross River, and Abuja, have made investments in fiber ducts to protect cables, leasing these ducts to telecom operators. However, the additional requirement of charging separate fees for both the lease and RoW has made this arrangement more costly for operators like MTN, Airtel, and Globacom. Additionally, states often fail to protect these cables from damage caused by construction projects, leading to degraded service quality.
In response to these challenges, the Presidential Fiscal Policy and Tax Reforms Committee, established in 2023, has promised to review and harmonize telecom taxes. However, there has been little progress in this area, and the committee has yet to provide updates on its work.
Some telecom operators are attempting to negotiate directly with state governments to reduce their tax burdens. For instance, in 2023, Lagos State granted MTN Nigeria a right-of-way waiver in exchange for providing free high-speed internet to public institutions. Similarly, Edo State offered waivers and tax incentives to operators willing to engage in negotiations.
During a recent telecom stakeholder meeting organized by the Association of Telecommunication Operators of Nigeria (ATCON), ICT commissioners from states like Niger, Kogi, and Cross River emphasized the need for more active engagement between telecom operators and state governments. However, there is concern that individual negotiations could lead to unequal opportunities, with larger operators securing more favorable deals than smaller ones.
As the telecom industry continues to navigate this complex tax landscape, the burden of multiple levies and inconsistent fees threatens not only their profitability but also the broader goal of expanding digital connectivity across Nigeria.