States and telecom Right Of Way

Last week, Minister of Communications & Digital Economy Dr Isa Ali Ibrahim Pantami had to speak out strongly against the increase of Right of Way (RoW) charges for telecom cables by some state governments. Reports in recent months had it that some states hiked the ROW charges by as much as 1,200% from the earlier N145 per metre. Desperation of states to increase their internally generated revenue is understandable and many of them saw the telecoms sector, which is one of the country’s few vibrant economic sectors, as an easy pick.

They however stirred the hornet’s nest. Minister Pantami described the indiscriminate hikes in RoW charges as total disregard of the resolutions reached by the National Economic Council [NEC] in 2013. He said he received with dismay the decision of some states to increase the RoW charges in disregard of NEC’s resolutions. According to the minister, NEC had in 2013 set up a committee comprising governors and ministers to review the issue of multiple taxation in the telecoms industry.

He said, “The committee, after extensive and wide-ranging consultations, resolved to harmonize the taxes applicable to broadband related activities and streamline the taxation management processes across the federation. Specifically, to deepen broadband penetration for the social and economic development of the country, the committee agreed to the uniform Right of Way (RoW) charge of N145 per linear meter of fibre.”

He said his ministry wrote to all the state governments last October, drew their attention to those resolutions and solicited for their support and collaboration towards realisation of the National Digital Economy by fast-tracking the deployment of broadband infrastructure for the provision of affordable internet services to underserved and unserved areas. However, he said, many states disregarded the resolutions and hiked the RoW charges by over 1,200% in some cases. Pantami pointed out the strong correlation between a country’s broadband penetration and its Gross Domestic Product, GDP. He said an ITU study on Africa indicates that a 10% broadband penetration would result in a 2 % GDP increase per capita.

We recall that late last year, we cautioned Pantami himself when he launched a public campaign to force the telecom operators to lower their data charges. Even though millions of Nigerians would love to pay less for telecom data, we cautioned that the telecom operators maintain their infrastructure very expensively and should not be made to charge below their costs. Besides, they made investments in tens of billions of dollars, which they have to recoup. Of course they are making huge operational profits, but they are also paying billions of naira in taxes.

The telecoms industry has generated more value added for the national economy than probably any other sector in recent memory. It has provided direct employment to tens of thousands and indirect employment to millions of people. Of course the public till and the national economy as well as Nigerians should benefit optimally from this very modern economic sector, but such benefits should be carefully calculated and properly calibrated in order not to harm our long-term national telecom aims.

The digital economy is the key to the foreseeable future, and the telecom firms are a critical part of that. Since the benefits and pitfalls are nationwide, the National Economic Council is the proper forum to discuss matters related to it and reach agreements on taxes. Since it has done so, we expect all states to comply. However, since these rates were worked out in 2013, it is probably time for a review.