The Global System for Mobile Communications Association (GSMCA) has warned the Senate and Nigerians against the implementation of the proposed 9% Communication Service Tax on voice calls, SMS, data usage and Pay per View TV stations.
GSMCA, a trade body that represents interests of mobile network operators worldwide, argued if implemented, the tax, which has been abandoned for two years before it was revisited by the Senate, would boost the nation’s poverty rate.
What it means: It imposes and collect communication services tax (CST or levy) on charges payable by consumers of electronic communication services in Nigeria (excluding private electronic communication services) at the rate of 9%.
GSMCA argued that the proposed tax would threatens economic growth and would further deepen poverty in the country where about 30 million more people have been projected to fall into the poverty bracket in the next 10 years.
Tax will affect poor households: Based on a research on the impact of taxation on mobile communication services, the association said the tax would have a negative impact on poor households in the country. It would discourage the use of communication services in remote or rural areas due to the impact it will have on cost of voice calls, SMS and data usage.
The body advised that the country should not roll out fiscal policy that discourages the use of broadband services.
[READ MORE: Why Nigeria’s Data woes may not end soon]
According to GSMA, if Nigeria does not implement the proposed tax, its economy would experience unprecedented growth, as the International Telecommunications Union stated that a 10% increase in mobile penetration in a sample of African countries yields a 2.5% increase in GDP per capita.
Is the government shooting itself in the foot? Speaking on the proposed tax, GSMA’s Head of Sub-Saharan Africa, Akinwale Goodluck, said, “The government’s long-term digital ambitions will be severely compromised if these tax proposals go ahead.
“The potential of mobile broadband is clear from the rapid development of the digital economy in Nigeria. The mobile ecosystem already contributes over $21billion to the Nigerian economy and around 16% of total government tax revenue. The focus should be on boosting mobile penetration, and investment in networks to strengthen the economy, rather than undermining this through potentially punitive taxes.”
Affordability issue already existing: Goodluck said the adoption of communication services was low in the country where fixed-line penetration was at less than 1%, so implementing such tax would hamper much-needed penetration.
“Based on GSMA analysis of the total cost of mobile ownership, a 1GB basket in Nigeria cost around 7% of average income in 2018.
“The affordability barrier is particularly evident for lower-income citizens in Nigeria for whom access to a 1GB basket would cost around 24 per cent of income. The new tax, even if only partly reflected in prices, will exacerbate an already significant affordability barrier and hamper the uptake and usage of services, especially for lower-income citizens.”
Telecommunications companies in Nigeria have also condemned the re-introduction of the tax by the 9th National Assembly, stating that the decision would only place more burden on Nigerians. The Association Licensed Telecommunications Operators of Nigeria (ALTON) said the tax would affect the standard of living of Nigerians.
According to the association, the purchasing power of Naira is low, imposing tax on essential services like calls, texts and data will further drag it down.
The Nigerian Senate had proposed the 9% CST in a bid to boost the revenue of the Federal Government.
The Finance Minister, Zainab Ahmed, stated that Nigeria had revenue problem. Hence, President Buhari’s administration and the National Assembly have been drafting potential revenue sources.
These industries drove business activities in September
The development indicates recovery as manufacturers continue to benefit from the ease of the lockdown.
Despite the fact that the Central Bank of Nigeria (CBN) declared last Wednesday that the nation’s Manufacturing Purchasing Managers’ Index (PMI) contracted at 46.9 index points, some industries still drove business activities in September.
The industries are Electrical equipment, up from 33.3 index points in August to 66.7 index points; Transportation equipment from 53.8 to 58.1; and Paper products from 44.4 to 50 within the same period.
Though, the Cement industry and non-metalic mineral products dropped from 64.4 to 58.1 and 66.0 to 50.6 index points respectively, the sub-sectors still contributed to the business activities recorded in September.
This was disclosed by the apex bank in its September PMI report released on Wednesday.
Nairametrics had earlier reported that manufacturing PMI for August stood at 48.5 index points, indicating contraction in the sector for the fourth consecutive month.
Also, out of the 14 surveyed subsectors, 5 sub-sectors reported expansion (above 50 index points thresholds), while the others contracted.
Meanwhile, the production level index for the manufacturing sector indicated contraction in September 2020 for the fifth consecutive month, as well as Employment level and Raw material inventories.
However, the manufacturing supplier delivery time index stood at 53.5 points in September 2020, indicating faster supplier delivery time for the fifth time.
Is the nation coming out of the woods?
Though CBN revealed that only 4 sub-sectors reported expansion in September, contrary to the 6 sub-sectors recorded in August, it is imperative to note that this is an improvement when compared to manufacturing activities in May and June, or the performance in July which saw 12 sub-sectors decline, with one reporting no change, while one expanded.
The impressive performance of cement and other sub-sectors, according to the manufacturing PMI report, is attributable to the expansion in production, new orders, employment, and raw materials’ inventories.
A cursory look at the financials of key players in the industrial goods sector showed that despite the increased cost of higher energy pricing and adverse COVID-19 impacts on transport and naira devaluation, key cement manufacturers still recorded increased topline, driven by demand surge from domestic cement sales.
Back story: Nairametrics had reported on Wednesday that 9 subsectors reported contraction (below 50% threshold) in the reviewed month in the following order:
- Petroleum & coal products
- Primary metal
- Furniture & related products
- Printing & related support activities
- Food, beverage & tobacco products
- Textile, apparel, leather & footwear
- Chemical & pharmaceutical products
- Fabricated metal products and
- Plastics & rubber products
The Non-manufacturing sector PMI stood at 41.9 points in September 2020, indicating contraction in nonmanufacturing PMI, for the sixth consecutive month.
In all, the development indicates recovery as manufacturers continue to benefit from the ease of the lockdown.
However, conditions within the domestic economy remain relatively tight, reflecting continued uncertainties as investors remain cautious of the lingering risk of the pandemic.
Electricity tariff increase is suspended for 2 weeks
The FG and the Nigerian Labour Unions have agreed to suspend the electricity tariff increase for a period of two weeks.
The Federal Government and the Nigerian Labour Unions have agreed to suspend the electricity tariff increase for a period of two weeks. This was part of the agreement reached between Labour and the Government as they deliberated to avert a nationwide strike that would have grounded an already deteriorating economy.
While the strike was over two major issues, an increase in electricity charges and fuel price respectively, the decision to call off the strike was based on the suspension of the electricity bills. The following terms of reference underpinned the agreement between Labour and the Government.
Terms of reference for suspension of electricity increase for 2 weeks.
Terms of reference “The Terms of Reference (ToR) are as follows: To examine the justification for the new policy on cost-reflective Electricity Tariff adjustments.”
- Both parties are to examine the justification for the new policy on cost-reflective tariff adjustment
- To look at the different Electricity Distribution Company (DISCOs) and their different electricity tariff vis-à-vis NERC order and mandate.
- Examine and advise government on the issues that have hindered the deployment of the six million meters.
- To look into the NERC Act under review with a view to expanding its representation to include organized labour.
- The Technical sub-committee is to submit its report within two weeks.
- During the two weeks, the DISCOs shall suspend the application of the cost-reflective electricity tariff adjustments. “The meeting also resolved that the following issues of concern to Labour should be treated as stand-alone items:
- The 40% stake of government in the DISCO and the stake of workers to be reflected in the composition of the DISCOs Boards.
- An all-inclusive and independent review of the power sector operations as provided in the privatization MOU to be undertaken before the end of the year 2020, with Labour represented.
- That going forward, the moribund National Labour Advisory Council, NLAC, be inaugurated before the end of the year 2020 to institutionalize the process of tripartism and socio dialogue on socio-economic and major labour matters to forestall crisis.
What this means: The decision reached between the government and labour means the service reflective tariff regime which started on September 1, 2020, is effectively suspended. Customers are therefore no longer required to pay the service reflective tariffs and will revert to the previous MYTO tariffs of 2015.
- By looking at the “different Electricity Distribution Company (DISCOs) and their different electricity tariff vis-à-vis NERC order and mandate” it appears labour might be looking to recalibrating the tariffs for some Discos.
- According to documents on the tariff order published by the NERC, some Discos have tariffs for residential customers that are as high as N62/kWh while it’s just under N54 for others.
- Labour could also get involved in determining the veracity of the tariff bands that determines which customers pay what as electricity tariffs.
NLC, TUC suspend nationwide strike
Hike in electricity tariff to be suspended for 2 weeks, while new pump price of petrol remain unchanged.
The Nigerian Labour Congress (NLC) and the Trade Union Congress (TUC) have suspended the planned nationwide strike and protest that was to commence on Monday, September 28, 2020, over the recent hike in electricity tariff and petrol pump price.
This follows the agreement reached between the Federal Government and the organized labour during the meeting held by both parties which started on Sunday night and dragged on till the early hours of Monday morning.
The disclosure was made by the Minister of State for Labour and Employment, Festus Keyamo, through a tweet post on his twitter handle.
In the agreement between the Federal Government and organized labour, the hike in electricity tariff is to be suspended for a period of 2 weeks, while the new pump price of petrol is to remain unchanged.
According to the agreement, which was seen by Nairametrics, both parties agreed to set up a technical committee on Electricity Tariff reforms, comprising Ministries, Agencies, Departments, NLC and TUC, which will work for a duration of 2 weeks with effect from Monday, September 28, 2020, to examine the justification of the new policy in view of the need for the validation of the basis for the new cost-reflective tariff.
This is due to the conflicting field reports which appear different from the data presented to justify the new policy by NERC, metering deployment, challenges, timelines for massive rollout.
The technical committee is to be headed by the Minister of State for Labour and Labour, Festus Keyamo.
Other members of the committee include the Minister of State Power, Godwin Jedy-Agba, Executive Chairman, National Electricity Regulatory Commission (NERC), James Momoh, Special Assistant to the President on Infrastructure, Ahmad Zakari as the Secretary.
Also in the committee are Onoho’Omhen Ebhohimhen, Joe Ajaero (NLC), Chris Okonkwo (TUC) and a representative of electricity distribution companies.
The terms of reference for the technical committee include;
- To examine the justification for the new policy on cost-reflective electricity tariff adjustments.
- To look at the different Electricity Distribution Companies (DISCOs) and their different electricity vis-à-vis NERC order and mandate.
- Examine and advice government on the issues that have hindered the deployment of the 6 million meters.
- To look into the NERC act under review with a view to expanding its representation to include organized labour.
FG & LABOUR reach agreement at 2:53am. Deregulation to stay as Govt rolls out palliatives for labour (details in 2 weeks); Electricity tariffs suspended by Govt for 2 weeks with a joint Committee headed by @fkeyamo to examine the justification for the new policy. Strike suspended pic.twitter.com/9tOTlJ9o1l
— Festus Keyamo, SAN (@fkeyamo) September 28, 2020