Nigerian Government Reintroducing Telecom Tax & Fiscal Measures for World Bank Loan.

The Nigerian government is considering reinstating a telecom tax and other fiscal measures to secure a $750 million loan from the World Bank. These measures, previously suspended, aim to bolster revenue and manage resources effectively. The plan targets various sectors, including telecommunications, banking, manufacturing, and imports. Stakeholder engagement is emphasized, particularly with vulnerable groups. The program, part of a larger reform initiative, spans from 2024 to 2028 and includes technical assistance funding for tax agencies. 

A March 2024 programme between Nigeria and the World Bank called Stakeholder Engagement Plan for Nigeria - Accelerating Resource Mobilisation Reforms (ARMOUR) P-For-R (P177308) states that among other taxes, the government is reintroducing the excises on telecom services and the EMT levy on electronic money transfers through the Nigerian Banking System.

The 5% excise fee on telecoms and the import tax adjustment levy on some automobiles were suspended by President Bola Tinubu in July 2023. However, it currently looks as though this suspension may be reversed in order to achieve programme targets for a new, unapproved World Bank loan.

The development goal of the World Bank programme is to improve the government's ability to manage and mobilise domestic resources, including protecting oil revenues and streamlining tax and customs compliance, in order to strengthen the government's financial situation.

It is anticipated that the ARMOUR program's proposed tax reforms will have a substantial impact on a number of different economic sectors.

The plan states that the following parties will be impacted: producers of items like tobacco, alcoholic drinks, and sugar-sweetened beverages (SSBs); telecom and banking service providers; importers; foreign traders; and the general population that pays taxes.

The plan was drafted as follows:

“Domestic Revenue Mobilisation drive in the government ARMOR program seeks to increase revenue on some targeted industries and sectors of the economy. Specific groups and agencies within affected sectors include 

1. Association of Licensed Telecom Operators of Nigeria: The introduction of excises on telecom services requires that all telcos are mobilised to fully participate in the collection of such revenue. 

2. Committee of Bankers: Introduction of EMT levy on electronic money transfers through the Nigerian Banking System would need the buy-in all banking institutions 

3. Manufacturer’s Association of Nigeria: Manufacturers of tobacco products, sugar sweetened beverages(SSBs) and alcoholic beverages who would be required to collect excises on their products are critical stakeholders for the introduction of the new excise regime. They are currently organised into various sectoral groups under the Manufacturer’s Association of Nigeria (MAN). Producers of alcoholic beverages organised under the Distillers and Blenders Association of Nigeria also need to key into the reforms 

4. Importers: Strategic partners involved in importation of different items into the country will be mobilised to participate in the ARMOR program. A key stakeholder group is the Association of Nigeria Customs Agents (ANCLA). 

5. Vehicle Importers and Manufacturers: Stakeholders in the automobile trade industry must be engaged on reforms involving the introduction of green taxes on high GHG emission vehicles. Local manufacturing and assembly of vehicles is growing through a phase of growth in Nigeria. The demand for vehicles is mostly met through importation by vehicle importers under the aegis of Association of Motor Dealers of Nigeria (AMDON).” 

The document also emphasized the importance of engaging vulnerable groups to ensure they are not disproportionately affected by these changes.

Services that will be subjected to the newly introduced excises are regulated by key public sector agencies. The introduction of the new revenue measures will require the application of existing regulatory mechanisms available within these institutions. The concerned institutions include 

1. Nigerian Communication Commission 

2. Central Bank of Nigeria. 

There are also agencies with the mandate for making policies on some of the issues covered in the ARMOR program with respect to policy framework on matters of public interest in Health and Environmental Protection. The government institutions relevant to ARMOR in this regard are. 

1. Federal Ministry of Environment 

2. National Environmental Standards Regulatory and Enforcement Agency (NESREA) 

3. Federal Ministry of Health” 

About the program 

The PforR Program is part of a larger governmental initiative running from 2024 to 2028, aimed at reforming tax and excise regimes, enhancing the administrative capabilities of tax and customs, and ensuring transparency in oil and gas revenue management.

The PforR Program scope includes a subset of actions from the government program to be conducted during 2024 to 2028 at the federal level. The alignment ensures that the World Bank’s intervention supports and enhances the sustainability and impact of the government initiative during the main period of implementation with a focus on reforms of tax and excise regimes, tax and customs administrative improvements, and enhanced transparency of oil and gas revenues remitted by NNPCL. 

The government program is funded from annual budget allocations of $1.17 billion to FMF, FIRS and NCS. The PforR with results based financing of $730 million, and $20 million investment financing, is 62 percent of the program budget” 

FIRS, NCS to get $5 million each 

Additionally, the program outlines specific allocations for technical assistance, with $5 million each going to the Federal Inland Revenue Service (FIRS) and the Nigeria Customs Service (NCS) to support their capacity to implement these new measures effectively. "

This entails making significant expenditures in programme management and capacity building in addition to developing mechanisms for improved data exchange, risk-based audits, and compliance procedures.

Additionally, $10 million will be allocated for project management, capacity-building related to tax policy, and other costs. All things considered, the sum aligns with the reached budgetary targets by financing $20 million of investment prior to the release of $730 million.