Cash-strapped Nigeria implements 5% tax on mobile services

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Nigeria is Africa's largest wireless market.
Nigeria is Africa's largest wireless market.

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Nigeria, Africa’s biggest wireless market, is moving ahead with a proposed 5% tax on voice calls, mobile data and text messages to tackle a mounting fiscal crisis.

Finance Minister Zainab Ahmed announced the implementation of the tax, delayed since last year, in an emailed statement that highlighted the government’s strained financial picture. As of April, Africa’s biggest crude producer spends more on debt servicing than it brings in revenue.

“Although Nigeria is celebrated as the largest economy in Africa, translating this wealth into revenues remains a challenge,” Ahmed said. The statement did not say when collections of the levy, which is in addition to a 7.5% value-added tax on calls and data, will begin. Communications Minister Isa Pantami earlier this month asked the government to reconsider the tax on the grounds that it could slow the expansion of one of the country’s fastest-growing sectors.

A similar tax introduced by West African neighbour Ghana was blamed for a slowdown in mobile-money revenue by MTN Ghana in its first half results. Ghana, also facing a fiscal crisis, introduced a 1.5% e-levy in May to boost government revenue and reduce its burgeoning budget deficit.

Nigeria has one of the lowest tax-to-GDP ratios in the world, at 6% in 2019, according to the Organisation for Economic Cooperation and Development. The government generated 1.63 trillion naira (about R61.4 billion) in revenue in the four months through April, against 1.94 trillion naira in debt service payments for the period.

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