Some months back, I had separate meetings with the Minister of Communication and Digital Economy and the Director General of the National Information Technology Development Agency (NITDA) during which both spoke glowingly about the Digital Transformation Agenda of Nigeria, and of what they were doing to ensure that Nigeria leverages digital technology to transform its economy and society.
The National Digital Economy Policy and Strategy, which is the vehicle for the digital transformation of the country has the vision of making “Nigeria into a leading digital economy, providing quality life and digital economies for all” with a mission that commits that the country to building “a nation where digital innovation and entrepreneurship are used to create value and prosperity for all.”
The strategy rests on eight pillars among which are hard infrastructure, soft infrastructure, and service infrastructure. The idea of developing infrastructure is to address accessibility challenges and make digital infrastructure available to citizens, an important pre-condition for the digital transformation of the country. But while infrastructure is necessary, it is not a sufficient condition for the envisaged transformation. Infrastructure cannot on its own add value to anything. It is only when people use it that it can be of any use. For this reason, another of the pillars of the transformation agenda is Digital Literacy & Skills. This pillar requires digital literacy with a target of 90% by 2025.
However, even with skill, we are still far from being able to use technology to transform the country. People must use both their skills and the infrastructure, Actual use of these is dependent on affordability. Affordability is an economic matter. Technically, it is the ability of people to afford digital services without injuring other critical needs such as food, shelter, health, etc. As a function of economic status, affordability is different for different people. Poor people generally have lower affordability. To level up and promote universal affordability, countries use regulation to bridge gaps in affordability profiles. They also have relevant vehicles to do this.
In Nigeria, the Universal Service Provision Fund (USPF) is the vehicle which is funded through a profit tax on telecommunication services. The USPF tries to drive infrastructure and connectivity to areas where the market has failed. This bridging accessibility makes Developmental Regulation to be another important pillar for the digital transformation strategy.
In concrete terms, affordability is about both the cost of ownership of means of interfacing with digital technology and the cost of its use. The essence of regulation is to improve affordability by bridging the two cost components. Since we hardly manufacture digital devices locally, the cost of ownership is determined by the floating value of the Naira which means that in this period when the Naira is on a free fall, this dimension of affordability is decreasing, with many Nigerians being unable to own devices. Nigeria is one of the countries with the highest volume of importation of second-hand electronic devices, many of which properly could be passed as e-waste. Government seems to be doing nothing about this.
Now the second cost component, that of use, is under attack from the Minister of Finance Budget and National Planning, Madam Shamsuna Zainab Ahmed. She is pushing to raise the VAT on telecommunication use from 7.5% to 12.5%. This is in spite of the fact as studies by the Alliance for Affordable Internet (A4AI) have shown, Nigeria has now the highest cost of use for both voice and data in Africa. Her interest is to raise revenue for the country without consideration of the likely impact of this on the digital transformation agenda. She seems to think about revenue as an end rather than a means to an end. Already more than half of the population is digitally excluded and with this proposed policy, many more people will have to fall off the ladder of the digital world.
Maybe because Shamsuna’s life revolves around Abuja, Kaduna, and flights to Davos and other financial capitals of the world that she cannot imagine the havoc her policy will wreak on affordability in the country. Unlike her, my life frequently intersects with communities that are not on any map. They include names such as Kabigel, Digiza, Jogayel, all of them on the eastern bank of River Jamaare. Each time I want to speak to anyone from these communities, I must travel there because I cannot get them using my GSM. Shamsuna would not understand what I found there. Many of the youth have handsets but they do not have SIM cards in their handsets. They listen to MP3 from their handsets, bringing music of various genres to them. When I asked them why it is that they have handsets but no sim cards, the answer they give tells a classic of regulation.
First, they said that when their sim cards spoil or get lost, it is difficult for them to get a replacement: this is something that Prof. Pantami, the Minster, and Prof. Danbatta, the Executive Vice Chairman of the Nigeria Communication Commission (NCC) would have to find how to address. The one that concerns Shamsuna is that they said even where they have sim cards, they cannot afford airtime, and they rather keep the sim cards home so that it does not either get lost or damaged. With this proposal of raising VAT, many more people will join ranks of those who cannot afford usage and keep their sim cards for decoration at home or for showing to their grandchildren that they too understand the digital era. This is not just rural people. I recall the response of a friend, who was a PhD holder in Computer Science, who once complained to me that he could understand why he had to buy rice, Maggi and other foodstuff but not having to buy “air”, referring to airtime!
There is another thing that the elite culture of the circles in which Shamsuna inhabits will not allow her to know. Many of the people in these rural and poor communities have not been sucked by the individualism of the capitalist system. So, whereas the likes of the Minister have only a “hello” to say to their relatives or neighbours when they speak on phone (unless they are discussing business or office contracts), these rural folks live by a sense of communal responsibility. So, when one calls the other, he or she first asks about all the people in the household of the other, referring to each by name. Then after, he or she switches to other important elements in the household such as the farms, the animals, the weather, etc. Once she or he finishes, it is not yet time to hang up. It is now the turn of the called party to also ask about the household of the call initiator. When this lengthy greeting is over, the call initiator then introduces the purpose of the call. In this way, telecommunication companies smile to the banks handsomely even as they wonder what on earth makes these people spend this long on the phone. In other words, while in the past, telecoms providers could say the telephone was not for the poor, now telecommunication companies recognize that the poor constitute a top demography of their line utilization.
I am not an economist but a mere digital justice campaigner, however, I know Shamsuna’s VAT policy is faulty in two senses, at least with respect to the digital transformation ambition of the country.
First, by raising the cost of use, she will drastically reduce the number of users and the volume of tele-traffic. Once the tele-traffic drops, that means telecommunication and related value addition companies will see their revenue dropping. So, while on paper her VAT collection from the individual users may increase, the volume of company tax contribution to the revenue profile of the country will reduce, providing a net negative growth in the collectible revenue from the telecommunication sector.
But things do not just stop at the reduction in company income tax. Access to digital technology is not just for social interactions. It is about using technology for economic activities. It is these economic activities that could transform the country. By making it difficult for people to make use of digital technology, Shamsuna hampers the economic activities that could aggregate into transforming the country. She will also be hampering economic activities and undermining her VAT drive.
At the time the country is seeking all means to improve both accessibility and affordability, Shamsuna directly attacks affordability while the ripple effect of her policy will, because it will result in a decrease in usage, make companies to no longer be eager to expand their telecommunication infrastructure, and this undermines the accessibility equation. Without expanding infrastructure, one of the key important targets of the Government as spelt out in the National Broadband Plan of driving broadband penetration to 90% of the population cannot be achieved. This is a critical requirement for the digital transformation of the country as we cannot rely on the world-wide-wait speed of non-broadband access to fire the process. Shamsuna’s VAT drive spells doom for this.
So, in the end, one can ask the Finance Minister whether she knows about the digital transformation agenda, and if she does, whether she understands the place of the agenda in the reshaping the economy of the country that she is supposed to be coordinating, and its ultimate transformation into a leading digital economy providing quality life and digital economies for all? Whatever the answers, this illustrates one painful reality of national economic management. It is the extreme lack of coherence within government such that different ministers work across purposes. Such zero-sum management will surely neither achieve the agenda of reviving the economy nor achieve the sectoral goals of different ministers. But digital transformation is too important to be left at the whims of sectoral predilection of ministers.
I close this piece by drawing attention to what my ex-Kuranga colleague, Gbenga Adebayo, Chairman, Association of Licensed Telecom Owners of Nigeria (ALTON) said about the policy: the “burden would be on telecommunications consumers”. That is no statement from an activist and I hope both the public and the government take note of this and call the Minster to order.
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