Inflation: Federal Gov’t Mulls Tariff Hike To Boost Telcos’ Operations

The Federal Government has given an indication that it may give approval to the request by telecommunication companies (Telcos) to increase tariffs on their products to survive the current economic hardship ocassioned by high inflation and foreign exchange challenges.

Minister of Communications and Digital Economy, Dr. Bosun Tijani, made this known on Thursday in Abuja during an event organised by GMSA, which presented the Nigeria Digital Economy Report 2024, showing the negative impacts of inflation on the Nigerian digital sector.

Recall that the telecom operators about two weeks ago had issued a statement requesting a tariff increase in order to survive the current economic realities. However, reactions from the government circles appeared not to favour the move until detailed studies of the micro and macro variables were made.

High Operating Cost: Telecom Operators Press For Tariff Increase

The Minister, who assured the telcos on Thursday that government will do much to improve the business environment, however, stated that extreme care must be taken on the matter of tariff increase most likely because of the serious impact it would have on the already struggling Nigerians.

He added that the challenges faced by the telecom industry can only be overcome through multifaceted approaches and not by only increasing tariff.

He said: “I think it is important to have this debate, that is, for the articulation of how you have seen the role of government. When I was appointed, I think I had a meeting with the associations, and I made it clear that some of these repeated challenges that are set towards government to the best of my knowledge, are not things that we can not surmount.

“And, on your last comment, where you were saying that your company is facing these challenges from multiple angles. It is not just from one perspective, in the middle of that as well, we are in a world, where our people are struggling. So, as a sector, as leaders, we must achieve the things we want to achieve by also being smart and also being extremely practical as well.

“I think the government of the day, for every single demand of a sector, is willing to support, is willing to actually ensure that we improve our business environment. We have a president that is extremely pro-business. And whatever he needs to do to improve the environment, he will.

“There are more macro issues and hard decisions that our country will have to take at some point, and the president will be the one to take some of those decisions. And as we can see, we have looked at some of the reports, it is clear. Where it was talking about the state of the investments before the devaluation. your report was quite clear that the devaluation had a major impact on you and your companies.

“I think what we need to do is, collectively, we have to deepen and address so many of those pains. The solution to these pains will not come from one single thing, which is raising taxes. That is never going to be the solution.

“There is a ton of other things that we must do to ensure that the business environment is conducive for the investors in this case. And government is articulating it, including the tariff conversation.”

Chief Executive Officer, MTN Nigeria, Karl Toriola, told journalists during the event that tariff has become inevitable if the telecom sector must survive.

Toriola said: “I think the chairman of ALTON is very correct, and I must also give credit to the federal government.

“The BBC has put a lot of pressure on quality of service. Coverage rollout, a lot of discussions around fibre, digitalization of digital skills, et cetera, and the tariff increase is obviously very emotive.

“But it is a very big issue that can reduce the investment into the sector. If you do not have the cash to invest, or there is no returns for people to inject cash to invest, they will not. Capital does not float where it makes a negative return.

“There are many other things that can be done to improve the quality of the industry. Spectrum availability is one, taxation. The minister has spoken to that, protection of infrastructure, we have spoken about that and the National Critical Infrastructure Bill is well in motion. And I think a lot of those things we have advanced to a good extent. But the elephant in the room is the tariff increase.

“The price of diesel cannot go from N200 to N1,200 and it does not affect someone, somewhere. And at some point in time, it will become so expensive, people can not fuel base stations.

“Those are the realities that we have to face. The truth is, the price of garri, which is completely produced in Nigeria, has not been stagnant for years. Inflation is real, and affects every sector of the industry, and that is why a tariff increase is needed.

“If you ask the person who is producing garri from Cassava in the village to set the price of garri, at whatever he or she was selling a bag in 2000, let’s say it was N500, and today it’s N500, he or she will stop producing the garri.

“Fact of life. So that is what the tariff increase is about. The practical realities of the cost of production in this economy as it stands today. Being able to cover that and continue to protect the health of the industry.”