The week ahead – Bold statements

10th January 2025

Nigerian telecommunications companies proposed a 100 percent tariff increase, pending the government’s approval. The proposal, submitted to the Nigerian Communications Commission (NCC), aims to address rising operational costs, including inflation and increased service delivery expenses, Karl Toriola, CEO of MTN Nigeria, said during a Thursday interview on Arise TV. The federal government later agreed to the tariff hike demands, and the new prices are expected to take effect in the coming weeks. This implies that prices of calls, data and SMS will go up for the average Nigerian. However, the hike will fall short of the requested 100 percent increase.

Over the past decade, telcos have pushed for an upward review of tariff prices. They proposed a 40 percent hike in 2022. However, since the naira devaluation in June 2023, telcos posted record losses, further compounding their woes and increasing their requests for tariff hikes. In reaction to the request, the Minister of Communications and Digital Economy, Bosun Tijani, said that the tariffs will indeed be increased, albeit not to the magnitude of 100% that the MTN CEO proposed in his interview. He has yet to state the percentage increase, but we expect this to be announced in the coming weeks. It is a delicate situation – the tariffs have been frozen for a long time, removing the ability of the operators to adjust it to reflect the growing inflation. An increase is therefore necessary. However, its impact will be two-pronged. The same inflation the operators are responding to impacts the consumers, potentially reducing consumers’ airtime consumption as the cost increases. In addition, two SBM reports have shown that after food, Nigerians spend the most amount of money on airtime; thus, an increase in telecommunications cost is likely to increase inflation further, perpetuating a cycle of hardship for many cash-strapped Nigerians for whom data subscriptions and telephone calls form a major spend on their budget. Our counsel, as always, is for the government to eliminate shocks from accumulated pressures like years of inflation and rather implement policies that allow costs to be adjusted annually to reflect inflation. The corollary to such flexibility will then be the demand for investments to support quality service and an enforcement/penalty regime for poor quality service.

Despite improved technology that has made revenue collection more efficient, the cost of revenue collection by Nigeria’s key agencies—Nigeria Customs Service (NCS), Federal Inland Revenue Service (FIRS), and Nigerian Upstream Petroleum Regulatory Commission (NUPRC)—has continued to rise. The three agencies jointly received a total of ₦924.73 billion ($559 million) as part of the cost of revenue collection between January and November 2024. Between January and November 2024, these agencies collectively received ₦924.73 billion for operational costs, accounting for 2.51% of the total ₦36.952 trillion collected. In 2023, they collected ₦22.344 trillion, with a cost of ₦472.13 billion, or 2.11%.

Several agencies in Nigeria have cultivated a habit of testing and discarding technology. From INEC to Customs and the FIRS, these agencies continuously allocate large budgets to acquire technology to ease their operations. While acquiring technology is not inherently bad, it becomes concerning when this practice perpetually consumes national revenue without delivering commensurate value. The cost of revenue collection should decrease with each new piece of technology acquired. It can be argued that the rising cost of collection incurred by these agencies is justified by increased revenue generation and serves as a morale boost to ensure revenue targets are met (and exceeded). However, this becomes troubling when citizens and businesses see no positive impact. For example, improved efficiency in the FIRS aims to enable businesses and citizens to pay taxes seamlessly, resolve tax disputes promptly, and prevent tax officials from arbitrarily assigning tax debts to individuals. Yet, this is still not the case. In its pursuit of meeting revenue targets, Customs frustrated the implementation of the six-month import duty waiver from the federal government meant to ease food prices. The Nigeria Customs Service’s website currently prioritises revenue generation over efficient trade facilitation and national security in its mission statement—a detail that speaks volumes. States, which directly impact citizens’ social well-being, should be prioritised in revenue sharing. The proposed tax reforms that streamline and eliminate the revenue generation duties of certain agencies are a step in the right direction. Unfortunately, these reforms will also necessitate additional technology, further expanding Nigeria’s already bulging bouquet of administrative software. A key provision of the Tinubu administration’s Tax Reform Proposals is the establishment of the Nigeria Revenue Service (NRS), which would fully replace the FIRS and assume the tax collection responsibilities of all other federal government agencies. Modelled after the UK’s HMRC (His Majesty’s Revenue and Customs), the NRS is designed to make tax collection more effective and efficient while allowing other agencies to focus on their core law enforcement duties. However, President Tinubu must overcome opposition to the reform from politicians in Northern Nigeria and secure the National Assembly’s passage of the Tax Reform Bills into law before the NRS can be realised.

Gunmen have killed the Katsina State Chairman of Miyetti Allah Cattle Breeder Association of Nigeria, Surajo Leader, and two others in Kusada Local Government Area (LGA) of the state. Witnesses said that the gunmen also abducted two of the deceased’s wives and his daughter, an undergraduate student. In Zamfara State, gunmen kidnapped at least 46 people, including women and children, in a raid on Gana town, Reuters reported. The attack occurred on Sunday, with dozens of gunmen on motorbikes unleashing a barrage of gunfire on the community and setting fire to several homes, businesses and silos containing foodstuff, residents said.

A few years ago, at the height of animosity against what was perceived as violence driven by criminals of Fulani ethnicity, there were indications that the spiralling security crisis meant just anybody, including Fulanis themselves, could be victims. These victims were not necessarily targeted by anti-Fulani violence in terms of reprisals but rather by Fulanis themselves. Since 2021, these incidents have increased, spreading from the Northcentral (Kwara and the FCT) to the Northwest, further inflaming the Hausa-Fulani rivalry. Surajo Leader’s death appears to have occurred within the wider context of the kidnapping crisis, which has so far spared no one. In recent months, the casualty list has expanded to include individuals across all social classes, from elites, as in Surajo’s case, to ordinary people in Zamfara. The inability to address this crisis effectively suggests that little is likely to change by 2025. Meanwhile, the security services’ operational framework remains largely unchanged from past practices, achieving some success in suppressing rivalries and breaking down the silos in which the various services historically operated. In parts of the North West and East, joint operations involving the military, police, and vigilantes are increasingly common in efforts to combat banditry. However, Nigeria’s experience has demonstrated that kinetic methods alone cannot solve a problem rooted in economic inequality, poverty, and widespread lack. This deepening security crisis is further illustrated by recent violence in Katsina and Zamfara states. The tragic murders in Katsina and mass kidnappings in Zamfara, coupled with the destruction of homes and food silos, reveal the growing audacity of criminal groups operating with impunity. These incidents are symptoms of deeper structural issues and are often underreported, with foreign media providing most of the coverage. This lack of local attention raises concerns about Nigerian journalism and national media priorities, which obscure the crisis and stifle public pressure on the government. Kidnapping and banditry, now thriving economic industries, are fueled by desperation and the collapse of traditional livelihoods in impoverished areas with weak state presence. The proliferation of small arms and the mobility of bandits further complicate containment efforts. The government’s response has been largely reactionary, failing to address the socio-economic roots of the problem. Military actions and negotiations have yielded limited success, as the absence of job creation, infrastructure development, and agricultural revitalisation perpetuates the cycle of criminality. Restoring security in northern Nigeria requires more than military interventions. Strategic investments in education, vocational training, and social services are essential to empower citizens and weaken criminal networks. The government must also bolster media efforts to report these crises, as visibility is crucial for mobilising public outrage and international support. The killings and abductions underscore the human cost of inaction, necessitating a comprehensive approach to tackle the economic and social inequalities driving the violence.

Ghana’s reelected President John Dramani Mahama began his second term with a poignant inaugural address, highlighting the shifting global landscape and its implications for Ghana. He emphasised the need for Ghana to align its economic strategy with global trends to secure sustainable growth. Meanwhile, a few days before, the outgoing finance minister, Dr Mohammed Amin Adam, presented the Expenditure in Advance of Appropriation to Parliament, outlining plans to cover government operations from January to March 2025. The proposed mini-budget, valued at GH¢68.1 billion ($4.6 billion), was designed to address essential government expenses, ensuring the state’s smooth functioning until the incoming administration presents its full-year budget for the remainder of 2025.

Ghana’s fourth president, who transitioned to become the country’s sixth this week, faces a formidable task in raising revenue to fund the West African nation’s escalating expenditure bill. President John Dramani Mahama, on his first day in office, was confronted with an urgent demand from the Ghana Grid Company Limited (GRIDCo). He must secure approximately $90 million to address the country’s looming power crisis caused by the West African Gas Pipeline Company’s planned pigging exercise from 20 January to 16 February. Ghana’s underperforming revenue streams compound the challenges. Key sectors like cocoa fell short of expectations in the just-ended fiscal year. Meanwhile, the government’s access to capital remains constrained, with Treasury Bills as one of the few viable options following the collapse of the domestic bond market due to the Domestic Debt Exchange Programme. In addition to these fiscal hurdles, the Mahama administration is also weighed down by ambitious campaign promises that could further strain fiscal stability within his first 120 days in office. Among these pledges are the abolition of first-year academic fees for public university students and the scrapping of contentious levies, including the Electronic Transaction Levy (E-Levy), the COVID-19 levy, and betting taxes. He also plans to rationalise import duties, which could significantly impact the country’s revenue base. Balancing these commitments with the pressing need for fiscal discipline will be a critical test for President Mahama’s administration.