Nigeria might bring back a previously suspended tax on telecommunications services in order to secure a new $750 million loan from the World Bank.
This potential policy shift is revealed in a document outlining the Stakeholder Engagement Plan for Nigeria – Accelerating Resource Mobilisation Reforms (ARMOR) program. The plan details the government’s efforts to improve its financial standing.
President Bola Tinubu had suspended a 5% excise duty on telecommunication services in July 2023. However, the ARMOR program suggests this suspension may be lifted to meet the requirements for the World Bank loan, which is currently under negotiation.
The program aims to strengthen the government’s financial health by improving tax collection and managing resources more effectively. This includes measures to prevent oil revenue loss and boost tax compliance across various sectors.
Impact on Stakeholders
The proposed tax reforms will affect a wide range of stakeholders. Telecom operators, banks involved in electronic money transfers, and the general public who pay taxes are all likely to be impacted. Manufacturers of specific goods like sugary drinks, tobacco, and alcoholic beverages will also be subject to new tax regulations.
The plan acknowledges the need for engagement with key industry groups, including the Association of Licensed Telecom Operators of Nigeria (ALTON) and the Committee of Bankers. These discussions aim to ensure smooth implementation of the new measures.
The Manufacturers Association of Nigeria (MAN) will also play a crucial role, particularly for companies producing targeted products.
Program Details and Funding
The ARMOR program is a broader government initiative spanning 2024 to 2028. Its goals include reforming tax and excise regimes, improving tax and customs administration, and ensuring transparency in oil and gas revenue management.
The World Bank’s $750 million contribution represents a significant portion of the program’s budget. The Nigerian government is expected to contribute an additional $1.17 billion through annual budgetary allocations.
Technical Assistance and Capacity Building
The program allocates $5 million each to the Federal Inland Revenue Service (FIRS) and the Nigeria Customs Service (NCS) for technical assistance. This funding aims to enhance their capacity to effectively implement the new tax measures. Additionally, $10 million is earmarked for project management, tax policy expertise development, and other program-related expenses.
