The Nigerian government is set to introduce a 5 per cent excise duty on telecommunications, gaming, and betting services as part of a new effort to reform the nation’s tax system. This proposal is included in the “Nigeria Tax Act,” a bill aimed at overhauling existing tax legislation and consolidating various tax frameworks across the country.
The bill, titled “A Bill for an Act to Repeal Certain Acts on Taxation and Consolidate the Legal Frameworks relating to Taxation and Enact the Nigeria Tax Act to Provide for Taxation of Income, Transactions, and Instruments, and Related Matters,” was obtained from the National Assembly and is dated October 4, 2024. According to the bill, services such as telecommunications, gaming, gambling, betting, and lotteries will be subject to excise duties at the rates specified under the Tenth Schedule to the Act. The Federal Inland Revenue Service (FIRS) will prescribe how these duties will be applied.
The proposed Nigeria Tax Act will likely reignite industry opposition, especially from telecom operators. The idea of a 5 per cent excise duty on telecommunications services is not new; in 2022, then-President Muhammadu Buhari announced plans to implement a similar tax, intended to begin in 2023. The proposal was part of the Ministry of Finance’s strategy to increase non-oil revenue to compensate for declining oil income. It was outlined in the ‘2023 – 2025 Medium Term Expenditure Framework and Fiscal Strategy Paper’ by the Budget Office of the Federation.
However, the plan faced significant pushback, including from the then-Minister of Communications and Digital Economy, Prof. Isa Ali Ibrahim Pantami, who argued that the tax would burden the telecom sector. As a result, the excise duty was never implemented.
In July 2023, President Bola Ahmed Tinubu signed four Executive Orders to reduce the tax burden on businesses. These included the suspension of the 5 per cent excise tax on telecommunications services and the postponement of the Finance Act 2023. The Executive Orders were seen as a move to streamline Nigeria’s tax regime and eliminate multiple taxation concerns across sectors.
The reintroduction of the excise duty through the new tax bill suggests that the government is keen to expand its tax base and increase revenue collection. The proposed 5 per cent tax will apply to telecommunications services, including both prepaid and postpaid options regulated by the Nigerian Communications Commission (NCC). It will also extend to gaming, gambling, lotteries, and betting services within Nigeria.
The telecom and gaming industries are likely to respond critically to the proposed tax, as they did in previous years. The addition of a 5 per cent excise duty could lead to higher service costs for consumers and may affect business operations in these sectors. Industry stakeholders are expected to engage in discussions with the government to address concerns about the potential economic impact of the new tax regime.
