Amid sector’s $75.6bn growth report, Tinubu suspends 5% tax on telcos’ services

President Bola Tinubu has approved suspension of the controversial five percent Excise Tax on telecommunication services in the country.

The announcement comes amid claims by the Executive Vice Chairman/CEO of the Nigerian Communications Commission (NCC), Prof. Umar Garba Danbatta, that total investment into the telecoms sector in the country has now officially exceeded $75.6bn.

Meanwhile, President Tinubu has also endorsed the suspension of excise duty escalation on locally-manufactured products in the country.

Special Adviser to the President, Dele Alake told State House Correspondents, during a press conference, Thursday, that these were parts of four Executive Orders signed by Tinubu, adding that the decision was taken to reduce the suffering of Nigerians especially in the area of multiple taxation, as well as, creating a more friendly environment for both local and foreign business operators.

Amid, what the Executive Vice Chairman/CEO of the NCC, Prof. Danbatta, described as underscoring ‘a pulsating industry despite a mix of challenges including galloping inflation and a shrinking national income in the last few years,’ the ICT sector attracted over $75.6bn in foreign investments, representing both local and foreign direct investment (FDI).

Danbatta who disclosed this during an interactive session with stakeholders in the communications media ecosystem, in Lagos, further provided his scorecards and landmark developments that have shaped the trajectory of growth in the telecoms sector since he became the chief telecom regulator in August 2015.

According to Danbatta, in 2018, the investment profile in the sector stood at $68 billion, which increased to $70.5 billion in 2019 and $72 billion in 2020.

“At the end of 2021, the figure rose to $75,560,563,417.79 ($75.6 billion). The latest figure is the current official investment profile computed in the industry up from the initial $70 billion investment in the last few years.

“Investment in the telecommunications sector in Nigeria is computed from two sources: the Central Bank of Nigeria (CBN), and the financial data obtained from service providers by the commission.

“While the CBN collects and calculates an element of the telecoms sector to include FDI, portfolio and others, the Commission collects investment figures from telecom licensees described as domestic investment arising from capital expenditure (CAPEX) which forms part of the total investment in the industry,” the EVS said.

Danbatta said through an effective regulatory environment put in place by the commission, the telecom sector has recorded tremendous growth from an initial investment profile of $500 million as of 2001 when the sector was fully liberalised.

Similarly, he said the telecom sector has continued to be a major contributor to Nigeria’s economy through an impressive sectoral contribution to its Gross Domestic Product (GDP) quarterly, up from about 8.5 percent in the third quarter of 2015, contributing N10.126 trillion to the nation’s GDP in 2022 alone.

Citing data from the National Bureau of Statistics (NBS), Danbatta said the telecoms sector contributed N10.126 trillion as an aggregate quarterly contribution to GDP in 2022.

 “In the first quarter, the sector contributed 12.94 percent equivalent to N2.246 trillion while the second quarter witnessed an all-time high GDP contribution by the telecom sector to the nation’s economy, standing at 15 percent and valued at N2.593 trillion. The sector’s contribution to GDP in the third was 12.85 percent and in the fourth quarter, it grew to 13.55 percent, which is valued at N2.436 trillion and N2.851 trillion respectively.

“The growth trajectory continued this year as the telecommunications and Information Services sector in Nigeria delivered a handsome N2. 508 trillion in terms of financial value contribution to the nation’s gross domestic product, GDP, representing 14.13% in the first quarter of 2023.

“Telecom’s contribution to national GDP has grown significantly since the assumption of Prof. Danbatta as the EVC of NCC in August 2015, according to available data from NBS.

“From 8.50 percent in 2015, it grew to 9.13 percent in 2016 and to 8.66 percent in 2017. In the last quarter of 2018, telecoms contributed 9.85 percent to the national GDP while it added 10.60 percent in the fourth quarter of 2019.

“Also in the second quarter of 2010, it added 14.30 percent to GDP; 14.42 percent in the second quarter of 2021. The highest quarterly contribution to GDP by the sector to the economy was 15 percent in the second quarter of 2022,” Dambatta disclosed.

In addition to the growth in investment and GDP contribution, Danbatta said: “As of May 2023, active voice subscriptions reached 221.3 million, equivalent of 115.91 percent teledensity, while Internet subscriptions rose to 159.6 million.

“Broadband subscriptions on Third Generation (3G) and Fourth Generation (4G) networks increased to 92.2 million, representing a 48.28 percent broadband penetration in the country.

“Also, following the issuance of 3.5GHz spectrum licenses for the deployment of Fifth Generation (5G) networks in Nigeria, marked by ultra-high-speed internet, low latency and high capacity, and the subsequent commercial launch by two of the three license holders, 5G subscriptions have grown to over 60,000 in many cities in at least 12 states of the Federation,” he reported.