***Foreign investments nose-dive
***We’re battling unprecedented cost pressures — Operators
By Progress Godfrey
Nigeria’s Information and Communication Technology (ICT) sector recorded its first decline in Company Income Tax (CIT) in four years, reflecting a reversal of fortune in the sector.
The National Bureau of Statistics (NBS) Company Income Tax report showed that CIT from the ICT declined to N63.62 billion in the first quarter of 2026, Q1’26, from N65.52 billion in the corresponding period of 2025, ending a three-year streak of double-digit growth.
Sector stakeholders disclosed that sector has been hit by rising operating costs, dwindling foreign investment, soaring energy costs, rising infrastructure expenses, rising borrowing costs, which, according to them, squeezed operators’ profitability despite sustained growth in demand for digital services.
The ICT sector had posted robust growth in tax remittances over the previous three years.
In first quarter 2023, Q1’23, CIT in ICT rose 21.8 per cent to N35.75 billion in from N29.35 billion in Q1’22. The upward trend continued in Q1’24 increasing by 35.79 per cent to N48.54 billion, and rising further by 34.97 per cent to N65.52 billion in Q1’25.
The reversal in Q1’26 has raised concerns over the profitability of one of Nigeria’s fastest-growing sectors.
Foreign investments
nose-dive
Foreign capital imported into telecommunications sector plunged by 91 per cent year-on-year to a four-year low of $7.24 million in Q1’26 from $80.78 million in Q1’25.
The investment drought persisted despite the 50 per cent tariff adjustment approved by the Nigerian Communications Commission (NCC) in early 2025 to cushion operators against soaring diesel prices and rising financing costs, amongst other operational constraints.
Operators battling
unprecedented
cost pressures
Commenting on the development, Chairman of the Association of Licensed Telecoms Operators of Nigeria (ALTON), Engr. Gbenga Adebayo, said the decline in the sector CIT should be viewed within the context of the industry’s challenging operating environment rather than as evidence of weakening demand for telecommunications services.
According to him, broadband penetration, fintech, e-commerce, digital services and the Federal Government’s digital transformation agenda continue to drive strong demand across the industry.
He, however, noted that growing revenues have not translated into higher taxable profits because operators are battling unprecedented cost pressures.
He stated: “The industry has experienced significant increases in energy costs arising from the removal of fuel subsidies, inflationary pressures on maintenance and logistics, rising security costs, and the substantial capital investments required to expand and modernise network infrastructure to meet growing consumer demand.
“These factors have compressed operating margins and, consequently, taxable profits, even as operators continue to invest heavily in expanding network coverage and improving quality of service.”
Adebayo maintained that the decline reflects structural and transitional economic challenges rather than any weakening of the telecommunications industry.
He added, “The Nigerian telecommunications industry remains one of the strongest enablers of economic growth and digital inclusion. Traffic volumes, data consumption and demand for digital connectivity continue to increase.
“The current environment reflects an adjustment period in which operators are absorbing significantly higher operating and capital costs while continuing to maintain nationwide network availability and invest in future capacity.”
He emphasised that ongoing economic reforms by the Federal Government are expected to strengthen the investment climate over the medium to long term, although they have imposed short-term adjustment costs on businesses.
The ALTON chairman also commended the Federal Government for recognising telecommunications infrastructure as a strategic national asset, while urging policymakers to implement additional measures to improve the industry’s operating environment.
Middle-east crisis,
a major contributor
— CPPE
The Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, also attributed the decline in ICT sector Company Income Tax to rising operating costs, geopolitical tensions, weak consumer spending and insecurity, saying the industry’s profitability came under significant pressure during the period.
According to him, the industry’s heavy reliance on diesel-powered generators, occasioned by unreliable grid electricity, has made energy one of its largest operating costs.
“Consequently, the sharp escalation in diesel, petrol and gas prices—triggered by the geopolitical tensions and conflict in the Middle East—significantly increased operating costs, compressed profit margins, and weakened overall sector profitability,” he highlighted.
Yusuf added that demand conditions were also less favourable during the quarter.
He stated further, “The first quarter is typically a relatively slow business period, with lower transaction volumes following the year-end surge in economic activity.
“This seasonal effect was compounded by elevated inflation, high transportation costs and a sustained erosion of household purchasing power. As a result, consumers became more cautious in their spending, moderating demand for telecommunications services, data consumption and other discretionary digital services.”
He identified insecurity as another major challenge confronting operators.
“Vandalism and destruction of telecommunications infrastructure in conflict-prone areas, particularly in parts of Northern Nigeria, have disrupted network operations and increased maintenance and replacement costs.
“In many instances, security constraints delay access to affected sites, prolonging service outages, reducing network efficiency and limiting operators’ ability to expand service coverage.
“The combined impact of rising operating costs, weaker consumer demand and security-related disruptions inevitably weighed on sector profitability.”
Despite the current challenges, Yusuf expressed confidence that the sector would return to stronger earnings growth as macroeconomic conditions improve.
“As macroeconomic conditions improve and the challenges of energy costs and insecurity are progressively addressed, the sector is well positioned to restore stronger earnings growth and sustain its role as a key driver of economic transformation,” he said.
FX exposure,
regulatory burden
hurting local firms
Offering a technology entrepreneur’s perspective, Founder and Chief Executive Officer of Unitellas Edge Cloud, Mr. Smith Osemeke, said the decline in the sector CIT reflected the impact of foreign exchange exposures, rising infrastructure costs and the transition to Nigeria’s new tax framework.
According to him, while operators continued to generate revenue, the sharp depreciation of the naira significantly increased the cost of imported infrastructure and technology inputs, leaving many firms with lower taxable profits.
His words: “A large part of the gap is outstanding foreign exchange exposure, as telecom and tech infrastructure such as servers, network equipment, tower leases, software licensing and cloud capacity are overwhelmingly dollar-priced, while revenue is earned in naira. When the naira depreciates, a company can have strong operating revenue and still report little or no taxable profit.
“The second factor is timing: the new Nigeria Tax Act framework took effect in January 2026, right at the start of the quarter under review, and some of the dip possibly reflect firms’ and the tax authority’s adjustments to new filing and remittance structures rather than a genuine collapse in earnings.”
Osemeke noted that indigenous technology companies have borne the impact of the current macroeconomic environment more severely than multinational operators with better access to foreign capital and hedging instruments.
He said soaring infrastructure and energy costs have significantly increased operating expenses, while multiple taxes and regulatory obligations continue to weigh heavily on smaller indigenous firms.
“Smaller indigenous operators typically lack the balance sheet to hedge or renegotiate dollar-linked contracts the way the larger telcos have done with tower companies.
“Regulatory burden compounds both. ALTON has repeatedly stated that telecom operators face around 54 separate taxes and levies across federal, state and agency lines—a burden that falls disproportionately on smaller indigenous ISPs and tech firms with thinner compliance and legal teams—and which the association’s leadership has publicly called to be reduced and harmonised, alongside Right-of-Way charges that continue to obstruct infrastructure rollout,” Mr Osemeke stated.
Call for policy
reforms
To strengthen the industry’s long-term contribution to government revenue, Osemeke urged the Federal Government to reduce the cost of doing business through comprehensive policy reforms.
He recommended the harmonisation of taxes and levies, clearer implementation of the new tax framework, targeted foreign exchange support and incentives for local production of telecommunications infrastructure.
Pushing forward the way out, Osemeke stated: “First, government should move decisively to harmonise the current patchwork of taxes and levies into a single, predictable framework, retire multiple taxation and eliminate Right-of-Way charges nationally. A simplified structure would likely improve both compliance and net remittances rather than reduce them.
“Second, telecom and digital infrastructure such as data centres, fibre networks and base stations should be formally classified and protected as Critical National Infrastructure, both to curb the recurring vandalism and theft that have rightly been flagged as major operating costs and to qualify operators for more reliable power access or gas-to-power incentives rather than continued diesel dependence.”
He also advocated tax credits linked to research, innovation and skills development, arguing that such measures would deepen investment, expand the tax base and strengthen Nigeria’s digital economy over the long term.
Also making recommendation for restoration of ICT growth, ALTON boss, Adebayo, said priority should be given to effective implementation of the Critical National Information Infrastructure (CNII) framework to protect telecommunications infrastructure from vandalism and service disruptions.
He also called for greater harmonisation of taxes, levies and regulatory charges across all tiers of government to eliminate multiple taxation, faster approval of Right-of-Way permits, more stable fiscal and regulatory policies, and stronger collaboration between government, regulators and industry stakeholders to support long-term investment and industry sustainability.
