Impact of Proposed Five Percent Tax on Telecommunications Sector in Nigeria
The Nigerian government’s proposal to impose a five per cent tax on the telecommunications sector has raised concerns about its potential negative impact on the industry. Tajudeen Ibrahim, the director of research at Chapel Hill Denham Securities, believes that this tax could hinder the growth and profitability of telcos in the country.
In a recent interview on Newscentral’s Business Edge, Ibrahim highlighted the existing challenges faced by telcos, including volatility in the foreign exchange market and inflationary pressures. He expressed concerns that without the ability to pass these costs on to consumers through tariff increases, the viability of telecommunications companies may be at risk.
According to Ibrahim, the imposition of an additional tax on the industry, coupled with restrictions on tariff adjustments, could have detrimental effects on the telecommunications sector. He suggested that the government should consider a more gradual implementation of the tax to mitigate its impact.
“Instead of implementing a five per cent tax outright, why not consider a phased approach over the next three to five years? This would allow telcos to adjust to the new tax burden gradually,” Ibrahim explained.
Despite these challenges, Ibrahim acknowledged the significant contribution of the telecommunications industry to Nigeria’s gross domestic product. He emphasized the importance of ensuring sector stability and urged the government to carefully consider the implications of the proposed tax on industry growth and investment.
