Aboki: With Increased Access to Telecoms Services, Incoming Govt Can Enrich All Nigerians
AliyuYusufAbokiistheExecutiveSecretaryoftheWestAfricaTelecommunicationsRegulatorsAssembly(WATRA).Heisatelecommunications engineer and policymaker with over 22 years of experience working in Nigeria, Ghana and Indonesia with Ericsson and MTN. Aboki has advanced degrees and training in Communication Engineering, Business Administration and Artificial Intelligence from the University of Manchester, University of Warwick and MIT. He speaks, in this interview with on the power of telecommunications and its adroit regulation to create jobs and prosperity in Nigeria and the Economic Council of West African States (ECOWAS) region. Excerpts:
What is the purpose or mandate of WATRA?
WATRA’s mandate is to shape the development of the telecommunications industry in West Africa by facilitating the harmonization of policies and creating consistent regulatory frameworks among members, that is the 15 members and Mauritania. And by ensuring the efficient use of telecommunication services and resources like spectrum within the region. So WATRA facilitates the exchange of information and expertise among its members. A single regulatory rule or practice can have so much impact on driving up investment and driving down the cost of telecommunications services. It is WATRA’s job to work with members so that they adopt such regulations as quickly as possible.
Nigeria has over 40 federal and state telecom taxes and levies. How does Nigeria compare to other countries in the West African region and globally in terms of taxes on telecom services?
In 2011, Nigeria had taxes as a proportion of the Total Cost of Mobile Ownership (TCMO) at less than 5 per cent. Taxes as a proportion of the Total Cost of Mobil Usage (TCMU) was also one of the lowest in the world. These low rates of taxation were a key reason why telecommunications investment and services expanded in Nigeria. Between 2012 and 2020, the contribution of the telecoms sector to Nigeria’s GDP doubled from 7.7% to about 14.3 per cent . Taxes and levies have crept up in Nigeria. So, we need to be careful. The scope to use telecommunications to create new economic activities and make virtually all aspects of the economy much more productive has been drastically expanded compared to 10 years ago. The digital economy is transforming livelihoods and creating vast economic opportunities. We should not limit the potential of this economic transformation by raising taxes. The more people have access to technology, the more access to the service, the more we have an increase in economic activity. Telecoms should be seen as a driver for growth not a source of economic revenue. The government will end up getting far more revenue when it stimulates investment and innovation, and the use of technology by SMEs, and individuals intensifies.
How strong is the evidence that telecom companies will invest in expanding services and keep the cost of services low when taxes are low? Is there any evidence of that?
Lower taxes and levies provide companies with additional funds to invest in their operations, expand their networks, and improve their services. This will lead to keeping the prices low for consumers. This is a general principle. For governments all over the world, the telecommunications sector is a huge source of revenue. But smarter governments have learned not to tax the telecommunications industry directly, but get more revenue from the much broader growth across different sectors of the economy which the intensive use of telecommunications drives. Foreign investment in the telecommunications sector is now a major source of FDI. The economic growth driven by the digitalization of economic activities could with time deliver taxes that rival the revenue that Nigeria gets from oil.
The evidence is clear that the expansion of the digital economy has a positive spillover impact on economic growth. Imposing a tax that hinders the growth of this economy could delay the emergence of its benefits and potentially hinder tax revenue by impeding economic growth. Smart policymakers and regulators are always looking for ways to reduce the cost of services. In 2020, an influential body, the Alliance for Affordable Internet, recommended lowering taxes on low-cost devices as a way of reducing the cost of mobile usage. You really increase the potential of the telecommunications sector when you reduce the tax burden. Countries that do so avoid delays in the deployment of new equipment and technology and the expansion of services by mobile network operators. When you delay, you are delaying the transformative impact services could have on the economy, citizens, and small businesses in various areas of the country.
One might argue that high telecom taxes and levies are a form of income distribution given that the services are used mainly by urbanites. Do you agree with this?
Taxes do help the government generate revenue, no doubt about that, but they can also have a regressive effect on income distribution. Taxes you apply may disproportionately affect low-income households, they tend to spend a higher proportion of their income. These services are standard across forms so the low-income earners would be negatively impacted so the spillover effect must be considered. This occurs because telecom services are utilized in many other sectors and can enhance productivity in those areas. By the time you carry out any activity that impacts the telecoms sector, then be ready for the ripple effect. So, it certainly impacts other sectors and enhances productivity. I just wanted to highlight this broader impact on overall growth, national incomes, and future revenues of those sectors. If you negatively impact those sectors, those sectors will be hindered and cannot grow optimally.
What is WATRA doing to increase internet penetration, particularly in rural areas?
Let me quickly highlight to give some background because we follow events in West Africa closely. So despite the general growth in demand for internet usage, there is an increase in
Kunle Aderinokun, the digital divide between urban and rural areas. Some countries have an absence of rural coverage. WATRA is working closely with member states to encourage increased partnerships between operators and governments to improve rural coverage.
WATRA is sharing best practices for expanding rural coverage from experiences in similar markets in Southern Asia and Latin America. This includes incorporating coverage obligations in license awards and renewals and strengthening the universal service fund mechanisms. WATRA has promoted the Latin American policy of pay or play which entails using funds to deploy networks in rural areas rather than paying the universal service fund. WATRA is also facilitating roaming agreements between operators and streamlining civil engineering processes for deployment to reduce costs. All these things play a significant role in facilitating the deployment of rural solutions in areas that are unserved or underserved.
What’s the internet penetration rate in Nigerian rural areas?
Right now, we are around 30-40% for basic telecoms services so there’s a lot of room to improve in those areas. We are not talking about internet service, 3G or 4G which are higher-order technologies, we’re talking about basic 2G GSM. There’s a lot that needs to be done.
How can government promote the usage of digital technologies by small businesses that constitute the majority of businesses in Nigeria?
There are successful models for encouraging the use of digital technologies to improve opportunities amongst underprivileged communities and small businesses even in advanced countries. Governments encourage the design and roll-out of training programmes on the adoption of digital technologies working with many industry associations. There are also many initiatives from different government departments to digitalise their engagement and services. Governments also foster partnerships between tech companies and SMEs. Regulators also play a role.
Nigeria’s NCC for instance introduced a very important intervention- value-added services aggregator license-that has made telecos share more revenue with providers of value-added services. These service providers are not only small businesses, they also provide services that are essential to the operations and growth of millions of small businesses. Government intervention could also be useful in areas such as promoting the adoption of e-comemerce platforms by small businesses. The potential here is massive.
Women for instance could make pots or traditional clothing. The global market for ethnic clothing in 2021 was estimated at $89.3 billion dollars. Our music has proven that we can sell our culture to a global market. Technology can enable us sell tangible products inspired by our rich culture to wider markets. We should look on the bright side- the thousands of young Nigerians who are creating brands and selling tailoring services for instance completely online.
From WATRA’s data, how do you think the digital economy has generated jobs for Nigerian youths? How can it generate more?
The digital economy has a huge potential to generate a lot of jobs for Nigerian youths in several ways such as eCommerce, digital marketing, app development, and technical support for businesses that rely on technology. It is important to know that telecoms serve two purposes to the economy, it serves as a supply means to other sectors as a lot more trade is being performed via the internet. I mean a lot of mobile connection transactions plus a high volume of banking activities are carried out online. Recently, you could see the exponential growth, the sector is a distinct circle in the economic system. And we’ve seen the impact when we had this Naira redesign, what role technology plays.
Let me first refresh our minds with some statistics just for context on the impact of ICT on the economy. In 2022, ICT contributed N21.15 trillion (16.51%), making ICT the second highest contributor to Nigeria’s GDP after the agricultural sector. Of the N21.15 trillion, the telecoms sector contributed 82.17%, this is really to show you how much the telecoms sector is contributing to the GDP of Nigeria. Now, there’s no limit to how much employment potential the sector possesses really. For example, there is a shortage of software engineers worldwide, a gap Nigerians can easily fill. We have very talented youth.
There are an estimated 120,000 software engineers in Nigeria, the number can go up with increased access to the Internet through increased broadband penetration in the country. These actions government should take are directly related to jobs in this sector. The sector could employ if service providers join hardware makers to set up firms to serve the Nigerian market. For example, if you look at all these phones that are coming in. Imagine all these are been assembled and manufactured here in Nigeria, with almost 200 million phones used in Nigeria including over 120 million smartphone users.
The demography favours us and we’ve got the skills. Getting the telecoms sector as a source of employment will involve the government reducing the tax burden on the sector. That’s why I mentioned that I wouldn’t advise any increase in taxes and this allows players within the sector to increase