Nigeria Considers Reintroducing Telecom Tax for World Bank Loan

by Ohepo Ohepo

The Federal Government of Nigeria is contemplating the reintroduction of previously suspended fiscal measures including a telecom tax and an Electronic Money Transfer (EMT) levy, in pursuit of a new $750 million loan from the World Bank. This development is part of the discussions under the Nigeria – Accelerating Resource Mobilisation Reforms program (ARMOR), aimed at enhancing the government’s capacity to manage and mobilize domestic resources effectively.

The potential reinstatement of the excise duty on telecommunications services and the import tax adjustment levy on certain vehicles comes after President Bola Tinubu’s directive in July 2023 to suspend these levies. This was detailed in a document available on the World Bank website which outlined the engagement plan for the proposed reforms.

The ARMOR program, scheduled to run from 2024 to 2028, focuses on reforming tax and excise regimes, enhancing the administrative capabilities of tax and customs authorities, and ensuring transparency in the management of oil and gas revenues. The World Bank is set to contribute $750 million to this program, with the Nigerian government adding an additional $1.17 billion through annual budgets.

Key stakeholders impacted by these changes include manufacturers of alcoholic beverages, tobacco products, sugar-sweetened beverages, telecom, and banking service providers, as well as the general tax-paying public, importers, and international traders. Industry groups such as the Association of Licensed Telecom Operators of Nigeria have been engaged regarding the excise duties on telecom services.

The document also outlines the need for collaboration with various associations such as the Committee of Bankers for the EMT levy, and the Manufacturer’s Association of Nigeria for new excises on specific products. Engagement with these groups is crucial for the successful implementation of the new fiscal measures.

Moreover, the plan involves strategic partners in vehicle importation and manufacturing, particularly for the introduction of green taxes on high GHG emission vehicles, reflecting a growing local vehicle manufacturing sector that largely relies on imports.

To mitigate the impact on vulnerable groups and ensure compliance across the affected industries, the program calls for enhanced regulatory mechanisms by institutions like the Nigerian Communication Commission, the Central Bank of Nigeria, the Federal Ministry of Environment, and the Federal Ministry of Health.

The program also allocates funds for technical assistance, with $5 million each designated for the Federal Inland Revenue Service and the Nigeria Customs Service to aid in implementing these measures. This includes developing systems for better data sharing, risk-based audits, and compliance processes, alongside substantial investments in program management and capacity building.

The comprehensive funding strategy for this governmental initiative includes $1.17 billion from annual budget allocations, a results-based financing of $730 million from the World Bank, and an additional $20 million for project management, tax policy capacity-building, and other expenses.

As the government of Nigeria navigates these potential fiscal reforms, the outcome of ongoing negotiations with the World Bank will play a critical role in shaping the country’s economic landscape and its ability to effectively manage domestic resources.

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