According to Tajudeen Ibrahim, director of research at Chapel Hill Denham Securities, the proposed five per cent tax on the telecommunications sector as the Nigerian government seeks to increase non-oil revenues will negatively impact the industry.
Ibrahim, a guest on Newscentral’s Business Edge, said telcos are currently being challenged by the volatility in the foreign exchange market and inflationary pressure. Without passing any of these costs on to consumers through tariff increases, their viability remains to be seen.
“Bringing a five per cent tax to that sector will further put downward pressure on the performance of the telecommunications sector and also paints a negative outlook for the sector in terms of their ability to remain profitable on a sustainable basis, in terms of their ability to invest for business expansion, and also in terms of their ability to attract investors into that sector for it to grow further. So, in summary, it is negative for the telecommunications industry.”
Ibrahim stressed that the imposition of another tax on the industry, especially as the government has prevented the telcos from increasing their tariffs, will be stifling and advised that the government considers a gradual implementation.
“If it is five per cent, why doesn’t the government consider one per cent this year or next? I think the tax should be implemented over a large period, maybe the next three to five years, instead of imposing a five per cent outright.”
Ibrahim acknowledged that the industry significantly contributed to the country’s gross domestic product and that the government must achieve sector stability.
