Proposed NCC 50% Tariff Hike vs. Economic Rebasing: Impacts on Nigeria’s Economy Policy

Two major developments in Nigeria’s economic landscape are shaping discussions: the proposed 50% tariff hike on telecommunications services by the Nigerian Communications Commission (NCC) and the government’s plan to rebase the economy. While the rebasing is aimed at capturing the true scope of Nigeria’s GDP and attracting investment, the tariff hike could have adverse effects on access to telecommunications, a sector that is pivotal to economic diversification. This juxtaposition raises concerns about the coherence and inclusivity of Nigeria’s economic policy.

The Economic Rebasing: Objectives and Opportunities

Economic rebasing involves updating GDP calculations to reflect changes in economic structures and emerging sectors. Nigeria’s rebasing in 2014 revealed a more diversified economy, increasing its GDP by 89%. The next rebasing promises to:

1. Capture Emerging Sectors:
   Highlight the contributions of technology, telecommunications, and entertainment.
2. Attract Investment:
   Showcase Nigeria’s growth potential to foreign investors by reflecting a modernized economy.
3. Guide Policy Decisions:
   Provide a clearer picture of economic activities, aiding targeted fiscal and monetary policies.

The telecom sector, a significant contributor to GDP, has been a cornerstone of this diversification, fostering digital inclusion and innovation.

The NCC’s proposal to increase tariffs—raising the cost of phone calls from ₦11 to ₦16.50 per minute, SMS charges from ₦4 to ₦6, and 1GB of data from ₦287.50 to ₦431.25—aims to address rising operational costs for telecom operators. However, this policy could have profound implications:

1. Limiting Access to Telecom Services:
   • The urban-rural divide may widen as rural communities struggle to afford increased costs. Higher costs could exclude low-income households and small businesses from digital services.
2. Impact on SMEs:
   • Small businesses, which rely on affordable data for marketing, communication, and operations, could face higher costs, reducing their competitiveness.
3. Reducing Digital Inclusion:
   • Internet access is critical for education, healthcare, business online, and financial inclusion. Higher tariffs could hinder progress in these areas, particularly in underserved regions.
4. Dampening GDP Growth:
   • The telecom sector’s growth may slow, reducing its contribution to GDP and undermining the goals of the rebasing exercise.
5. The number line’s decline will pile up:

The number of phone lines will decline due to the hike in prices. Individuals who previously used four phone lines may reduce them to two or even one. Similarly, small businesses with multiple lines may cut down to manage costs more effectively.

Policy Misalignment: Contradictory Objectives

The proposed tariff hike appears to counteract the goals of economic rebasing by potentially limiting the inclusivity of economic growth. Key contradictions include:

• Digital Transformation vs. Rising Costs:
  Rebasing highlights the importance of the digital economy, yet higher telecom costs could restrict participation.
• Inclusive Growth vs. Socioeconomic Exclusion:
  Economic rebasing aims to reflect contributions from all sectors, but the tariff hike risks sidelining low-income groups and rural areas.
• Attracting Investment vs. Reducing Competitiveness:
  While rebasing can attract investment, higher telecom costs may make Nigeria less attractive for technology-driven businesses.

Real-Life Impacts

1. Rural Farmers:
   Musa, a farmer in Kogi state, uses mobile apps to access weather updates and market prices. Increased data costs could cut him off from these essential tools, reducing his productivity and income.
2. Urban Entrepreneurs:
   Joy, an online retailer in Lagos, relies on affordable data to reach customers. She states:
   “If my monthly data expenses double, I’ll have to reduce online marketing efforts, which will directly impact my sales.”
3. Students in Remote Areas:
   With e-learning becoming vital, students in underserved regions may lose access to educational platforms due to unaffordable data costs.
4. The Digital economy aspirations:              The Nigerian government has prioritized the digital economy as a critical growth sector, aiming to diversify the nation’s economy from oil dependency. Key initiatives include the National Digital Economy Policy and Strategy (NDEPS) and programs to improve digital infrastructure, skills, and innovation. The focus is on creating jobs, enhancing financial inclusion, and fostering technological innovation.

Policy Recommendations: Harmonizing Objectives

To ensure alignment between the economic rebasing and telecom tariff policies, the following steps are recommended:

1. Gradual Tariff Adjustments:
   Implement a phased tariff increase to minimize the shock on consumers and businesses.
2. Subsidies for Low-Income Users:
   Provide targeted subsidies for students, small businesses, and rural communities to ensure continued access.
3. Tax Incentives for Telecom Operators:
   Reduce tax burdens on telecom companies to address rising operational costs without passing the burden to consumers.
4. Invest in Infrastructure:
   Use insights from rebasing to allocate funds for expanding telecom infrastructure, reducing costs for operators and end-users.
5. Stakeholder Engagement:
   Foster collaboration between the NCC, telecom operators, and consumer advocacy groups to align policies with economic growth goals.

Striking a Balance for Inclusive Growth

The proposed economic rebasing and the NCC’s tariff hike represent two critical, but seemingly conflicting, policy directions. While rebasing highlights Nigeria’s growth potential and diversification, the tariff hike risks excluding millions from the digital economy, undermining these advancements.

To ensure a balanced approach, policymakers must prioritize inclusivity and affordability in telecom services while leveraging rebasing to attract investment and guide equitable development. By aligning these policies, Nigeria can achieve sustainable growth and maintain its trajectory as a leading African economy.