A new bill proposing to replace the Federal Government information technology (IT) development agency law is threatening the nation’s largely private local and international investment estimated at near $100 billion.
The bill is seeking to repeal the National Information Technology Development Agency (NITDA) Act No 28 of 2007 with a new law that industry players say will wipe out their huge investments in the industry.
The players in the sector that will be affected by the proposed law include telephone operators (PNL/Fixed line operators, mobile network operators (MNOs)/Indirect Access (IDAs) operators, Infrastructure Providers (interconnect, data centre operators, towers/base stations providers); Internet Services Providers (ISPs) (Wholesale Segment, Retail Segment), Value Added Services Providers (VAS), Over The Top (OTT) players, financial technology (fintech/e-commerce operators, telecom/ICTequipment manufacturers, telecom/ICT consulting firms, and telecom/ICT equipment dealers, have kicked against it.
Sakeholders, acting under the aegis of the Association of Telecommunications Companies of Nigeria (ATCON) and Association Licensed Telecommunications Operators of Nigeria (ALTON), at the weekend, warned against the passage of the bill in its current format as it is capable of wiping out all the gains the industry has made over the last two decades.
ATCON National President, Tony Emoekpere and ALTON Chairman, Gbenga Adebayo in separate reactions, were unanimous that the new proposal, if allowed to sail through, would increase the operational expenditure of the sector as well as its tax burden.
ATCON said if the bill is passed it poses great danger to the telecom and ICT industry in Nigeria as it will ultimately lead to loss of confidence by both local and international investors in the telecom and ICT sector of the Nigerian economy. The proposed Bill allows for takeover of telecom and ICT infrastructure by NITDA based on their determination that they should do that without going through any legal process and that means any private business can be shut down or taken over by NITDA at will. This will destroy investors’ confidence in the sector.
He said the Bill turns NITDA from a development agency to a regulator and the proposed mandate directly infringes on the regulatory activities of other regulators including the banking, financial services, insurance, health care, commerce, education, agriculture, telecommunications etc. The Bill calls for levy and penalties on industry operators that cuts across these other sectors and that will be in direct conflict to the roles of the established regulators in these sectors.
The Bill calls for the establishment of an operating company. It is not clear the role and services this company will be involved in, but it is contrary to the policy of the government in deregulating the economy and not creating state operated companies that will be in direct competition to the private sector. Galaxy Backbone is capable of playing any role required to address the needs of the Federal Government under the provision of digital services to the public sector. “There are thousands of private companies operational in Nigeria to meet the need of the general public hence it is counterproductive to setup another government operated company to compete with the privately funded companies. This will create a situation where the regulator is also competing with the companies it regulates and raises questions in the area of neutrality,” he said.
The Bill imposes huge penalties and fees on the companies doing business in the country. The private sector is already suffering from multiple taxation and huge burden in the cost of doing business in Nigeria. This Bill if passed will worsen the financial burden on the Nigerian citizens as the private sector will ultimately pass this cost of business to the citizens in the form of higher tariff
The proposed NITDA 2022 Bill infringes on the functions of the NCC as stated in the NCA 2003, warning that the existence of two agencies of government in the same space will create unnecessary double regulation, double taxation, confusion, discourage capital investment and negatively impact the Ease of Doing Business Initiative of the Federal Government.
ATCON’s review of the proposed third schedule on companies and enterprises to pay levy under section 17 (2) (a) of this Act includes -mobile and fixed telecommunications companies; information technology companies, gaming companies, and ecommerce companies; foreign digital platforms targeting the Nigerian market; pensions managers and pension-related companies; banks, financial institutions, and fintech companies; insurance companies; and such other companies and enterprises as may be determined by regulations from time to time by the Agency.
“Following our review of the third schedule stated in the NITDA new bill, it is glaring that the whole essence of NITDA wanting to repeal its current Act is geared towards arrogating powers to itself and making monies from not only telecommunication companies but the entire strata of the economy which we can foresee and predict that is going to create unnecessary tension and legal tussles in the country,” Emoekpere said.
On permit and authorization, he said granting of permit and authorization by NITDA should be limited to information technology as the use of “Operators” is ambiguous hence need for specification. The Digital Economy Sector includes telecom segment of the industry will also advocate that NITDA specifies the affected segment of the sector to avoid double license and permit from related commission.
On the proposed establishment of a digital infrastructure and service provision company in the NITDA‘s Bill of 2022, ATCON said the establishment of a digital infrastructure and service provision company is not needed as NCC has already licensed Infrastructure companies (InfraCos) for the six geopolitical zones in Nigeria which have not been able to take off and deliver services because of lack of funding and inability of government to provide the promised funding to holders of the licenses which is principally politically hindered, adding that Galaxy Backbone is already in operation for Federal Government infrastructure implementation.
Adebayo said the powers of the Agency as provided for in Section 6(1) and (12) of the Bill, the Agency is empowered to “implement all government policies on information technology and digital economy,” and “issue and renew licenses and authorizations for the provision of information technology and digital services.” What constitutes information technology and the digital economy are defined in Section 33 of the Bill. By the said provision of Section 33, “Digital Economy” is defined to mean “any aspect of the Nigerian Economy that is based or driven by digital technologies,” while “Information Technology” is defined to include “all forms of technology used to create, store, exchange and use information in its various forms (business data, voice, conversation, still images, motion pictures, multimedia presentations and other forms including those not yet conceived).”
“Going by the foregoing, it is apparent that the Agency is being empowered to regulate activities which are already under the purview of the NCC. Presently, the NCC regulates the activities of all telecommunications companies that fall within the purview of digital economy and information technology.
“Specifically, the NCC with regards to the digital economy is responsible for the monitoring and implementation of the National Broadband Plan (2020 – 2025) and the National Digital Economy Policy and Strategy.
“Closely related to the above are the provisions of Section 6(2) of the Bill, which empowers the Agency to test and approve the use of information technology infrastructure and services before adoption in Nigeria and Section 20, which clothes the Agency with powers to make regulations and issue licenses and authorization for operators in the information technology and digital economy sector.
“This again replicates the power of the NCC, which includes “carrying out type approval tests on communications equipment and issuing certificates on the basis of technical specifications and standards prescribed from time to time by the Commission” as stipulated by the provisions of Section 4(n) of the Nigerian Communications Commission Act (NCA) 2003, and for which the NCC Type Approval Regulations exists,” ALTON said, warning, “If the Bill is passed as presently constituted, there is the risk that the Agency, acting properly under the Bill may issue regulations, guidelines and standards with regards to the use of information technology and digital services, which will conflict with the functions of the NCC. It will also result in double and possibly conflicting regulation for telecommunications companies in Nigeria.”
The group therefore sought its exclusion from the group of persons (Operators) who will come under the control and regulation of the Agency with regards to information technology and digital services.
On the establishment of the National Information Technology Development Fund by Section 13, which shall be used for the advancement of the country’s digital economy objectives and related purposes, Adebayo said in order to fund the activities of the Fund, the Bill provides that, companies and enterprises, including mobile and fixed telecommunications companies with a turnover of N100 million shall pay a levy of one per cent of the profit before tax.
“While ALTON as an association and our members as individual corporate entities are always observant of their tax obligations and other responsibilities, we submit that the tax sought to be introduced by the Bill, in addition to existing taxes and levies will overburden telecommunication companies. Presently, the telecommunications companies in Nigeria are overburdened with over 39 different taxes and levies, a bulk of which are multiple or excessive. If this new tax is added to existing taxes, it will effectively increase Nigeria’s corporate income tax rate to about 36 per cent which is one of the highest rates in the world. This will not give a good image about our country and give the impression that our campaign for ease of doing business in Nigeria is not genuine.
“We therefore, humbly pray for telecommunication companies to be exempted from this head of tax,” ALTON said.
On the power of the Agency to seal premises and impose administrative sanctions contained in Section 6(7), he said the Agency has the jurisdiction to enter premises, inspect, seize, seal, detain and impose administrative sanctions on erring persons and entities who contravene any provision of the Bill. “While our members as law abiding entities are not averse to being regulated, nor do they have the intention to disobey any law, rule or laws of our country, we feel that Section 6(7) is too broad and could give room for abuse of power by the Agency.
“Our fears are founded on the fact that the Bill does not provide for prior warning/notice to be issued to the defaulting person or entity before the Agency exercises the power to enter premises, inspect, seize, seal, detain and impose administrative sanctions on erring persons and entities. Although the Section states that such actions by the Agency are subject to orders of a court of competent jurisdiction, the Bill fails to stipulate whether the Agency is to first seek and obtain orders of court before exercise its powers to sanction defaulting persons or entities or such orders could be obtained after the Agency exercise its powers under the Bill.
“Where the order of court is to be first sought and obtained before the Agency undertakes any of the actions mentioned in Section 6(7), the Section is silent as to whether the orders are to be obtained ex-parte or on notice to the person or entity against whom the orders are sought to be obtained. While the above steps, intended to ameliorate any excesses are proposed, we will prefer the total exclusion of telecom companies from the ambit of the Agency’s operations as there are no provisions for its liaising with the NCC in promulgating any regulations. The fears that its regulations may conflict with existing NCC regulations or duplicate and further complicate them are not unfounded since there is no requirement by the Bill for synchronization between the Agency and NCC,” ALTON noted.
Another provision of the bill identified by ALTON has to do with Classes of Licences and Authorisations as contained in Section 21 of the Bill. It empowered the Agency to classify its licenses and authorizations under any of Product License; Service Provider License; and Platform Provider License.
“Besides mentioning the various categories of licenses, the Bill does not define what these classes of licenses mean, neither is the Bill explicit on the types of activities which are covered by each class of license. The danger in the Bill not defining these licenses and category of activities which they cover is that, the Agency may inadvertently appropriate more powers to itself than intended to be delegated to it by the legislature or, the Agency, may by error, seek to regulate activities already under the regulation of other regulatory agencies.
The ideal circumstances is for these classes of licenses to be fully defined, while the conditions for the grant of the same, may be left for the regulations to be issued by the Agency.
“We believe that the role of NITDA as an agency is for the development of the ICT sector and the focus should be of how to empower the agency on this development and not another regulator for the industry thereby causing unnecessary confusion and disestablishing the gains the sector has made so far to the Nigeria economy,” ALTON said.
In 2021, the Executive Vice Chairman, Nigeria Communications Commission (NCC) Prof Umar Garba Danbatta said over $70 billion had been invested in telecommunications infrastructure deployment in Nigeria since the liberalisation of the industry in 2001.
He said the cash represented a larger chunk of local and Foreign Direct Investment (FDI) attracted into the sector within the period.
Last year, two telecommunication companies, MTN Nigeria and Airtel invested N468.96 billion in expanding the nation’s broadband infrastructure in the first nine months of the year.
The operators spent the cash on expanding their 4G and 5G reach. This signified a 33.93 per cent increase from what they spent in the corresponding period of 2021.
Also, 9mobile said it has invested over N70 billion for its ongoing network modernization. It has also added 600 new sites, equipped with 4G LTE facilities for enhanced operations and market competitiveness.
According to stats from the Nigeria Bureau of Statistics (NBS), the ICT sector contributed N12.32trillion to the Gross Domestic Product (GDP) of Nigeria in real terms last year as a result of rising number of telecom subscribers.
So far, the Federal Government has earned $820.8 million from the auctioning of the fifth generation (5G) licence alone to three players in the telecoms space.
Mafab Communications Ltd and MTN Nigeria Plc, had emerged the two successful winners of the 3.5 gigahertz (GHz) spectrum auction for the deployment of 5G technology to support the delivery of ubiquitous broadband services in Nigeria.
In addition to the revenue generated from the 5G spectrum, revenue is being generated from other spectrum fees. “For example, in 2020, N26,428,642,451.61 was generated as spectrum fees.”
“MTN, Mafab and Airtel all have participated in the auction process and each obtained a lot of 100 MHz from the 3.5GHz spectrum after successfully participating in the auction process.
“This generated $820.8m for the Federal Government. 5G services are now available in at least 225 sites across eight states in Nigeria,” he said.
