Nigeria Pursues $750m W’Bank Loan, To Reintroduce Telecom Tax

World Bank's Loan To Nigeria Hits $14.34bn

The federal government may reinstate the telecom tax and other budgetary measures that were previously halted in an effort to obtain a fresh $750 million loan from the World Bank. This is in line with the World Bank and Nigeria’s Stakeholder Engagement Plan for Nigeria: Accelerating Resource Mobilization Reforms initiative.

According to a copy of the plan document available on the World Bank website, among other levies, the government may reinstate the telecom service excise and the electronic money transfer (EMT) duty on transfers made using the Nigerian banking system.

In July 2023, President Bola Tinubu issued an order suspending the import tax adjustment fee on specific cars as well as the five percent excise duty on telecoms.

Though talks between the government and the World Bank are still underway, it looks as though this suspension may be removed in order to satisfy program objectives for a new loan that has not yet been authorized by the World Bank.

Our correspondent’s checks revealed that the government had applied for the loan in the first place in 2021 but that it had been denied for unclear reasons.

The development goal of the program is to improve the government’s ability to manage and mobilize domestic resources, including preserving oil income and strengthening compliance with tax and customs laws, in order to enhance the government’s financial situation.

It is anticipated that the ARMOR program’s proposed tax reforms would have a substantial impact on a number of economic sectors.

The PforR Program is a component of a bigger government program that will run from 2024 to 2028 and is intended to improve taxes and excise regimes, enhancing the administrative capabilities of tax and customs, and ensuring transparency in oil and gas revenue management.

The World Bank’s contribution of $750m constitutes a significant portion of the programme’s budget and the government is expected to contribute $1.17bn through annual budgetary.

According to the plan, affected stakeholders will include manufacturers of goods such as alcoholic beverages, tobacco products, sugar-sweetened beverages, telecom and banking service providers, as well as the general tax-paying public, importers and international traders.

Key industry groups such as the Association of Licensed Telecom Operators of Nigeria are engaged regarding the excise duties on telecom services.

The draft document stated, “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 the 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.

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

“Manufacturer’s Association of Nigeria: Manufacturers of tobacco products, sugar-sweetened beverages 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. Producers of alcoholic beverages organised under the Distillers and Blenders Association of Nigeria also need to key into the reforms.

“Also, strategic partners involved in the importation of different items into the country will be mobilised to participate in the ARMOR programme. A key stakeholder group is the Association of Nigeria Customs Agents.

“Vehicle Importers and Manufacturers: Stakeholders in the automobile trade industry must be engaged in 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 the Association of Motor Dealers of Nigeria.”

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

It also said, “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 the Nigerian Communication Commission, the Central Bank of Nigeria.

“There are also agencies with the mandate for making policies on some of the issues covered in the ARMOR program concerning policy framework on matters of public interest in Health and Environmental Protection. The government institutions relevant to ARMOR in this regard are the Federal Ministry of Environment, the National Environmental Standards Regulatory and Enforcement Agency, and the Federal Ministry of Health.”

 Additionally, the programme outlines specific allocations for technical assistance, with $5m each going to the Federal Inland Revenue Service and the Nigeria Customs Service to support their capacity to implement these new measures effectively.

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