Nigeria suspended the implementation of a new telecommunications tax meant to help reduce the nation’s budget deficit that’s expected to hit a record next year.

The government set up a committee to review the 5% levy, which would have come into effect this year, communications minister Isa Pantami said in an e-mailed statement. It will make a decision on the tax after a report is issued. Shares in MTN Group, the country’s biggest mobile provider, gained.

Africa’s biggest oil producer is looking for ways to boost income amid falling crude production, rising fuel subsidy costs and low revenue. The country has one of the lowest tax-to-GDP ratios in the world, at 6% in 2019, according to the Organisation for Economic Co-operation & Development.

The government this month proposed a budget of ₦19.8-trillion (R785-billion) for next year, with 63% of the spending plan to be funded through debt. The expected shortfall is about three times expected government revenue for the period and 5.5% of GDP, well above the 3% legal limit.

The new tax would have boosted government income, but added to the rising cost of operations in the mobile industry in Africa’s largest economy “which is already overburdened with a plethora of taxes totalling about 41 categories” imposed by both federal, state and local governments, said Pantami, who opposed the levy.

Excessive taxation has been the biggest challenge faced by Nigeria’s mobile industry, the minister said. “It is unfair to overburden such a sector that is so central to the nation’s growth and development,” he added.

The tax, if implemented, would apply to all voice calls, text messages, and data services in addition to an existing 7.5% value-added tax.

Mobile phone operators led by MTN’s Nigerian unit and billionaire Sunil Mittal-backed Airtel Africa control more than half of Nigeria’s mobile market. Both firms’ share prices remained unchanged in early morning trading on the Nigerian Stock Exchange, while in South Africa, parent MTN advanced as much as 3.7%.

Telecoms firms in Nigeria recorded US$7.8-billion of revenue in 2021, according to data from the Nigerian Communications Commission.

MTN Ghana blamed a slowdown in mobile money revenue on a similar tax introduced in that country earlier this year.  — Bloomberg