Insecurity, soaring operational costs, others stall ICT tax boom
Foreign Investments Decline in Nigeria’s ICT Sector Amid Rising Costs
By Progress Godfrey
Nigeria’s Information and Communication Technology (ICT) sector has reported its first decline in Company Income Tax (CIT) in four years, signaling a troubling trend for one of the country’s fastest-growing industries.
According to the National Bureau of Statistics (NBS), the CIT from the ICT sector fell to 63.62 billion naira in the first quarter of 2026, down from 65.52 billion naira during the same period in 2025. This decline ends a three-year period of consistent double-digit growth in tax revenue from the sector.
Industry stakeholders attribute this downturn to a convergence of factors, including rising operational costs, diminishing foreign investment, escalating energy expenses, and increased borrowing costs. Despite sustained demand for digital services, these pressures have significantly impacted profitability for operators.
Over the previous years, the ICT sector demonstrated robust growth in tax contributions. In the first quarter of 2023, CIT rose by 21.8 percent to 35.75 billion naira from 29.35 billion naira in Q1 2022. The upward trend continued into 2024 and 2025, with CIT climbing to 48.54 billion naira and 65.52 billion naira, respectively.
The recent decline in CIT has raised concerns about the industry’s long-term sustainability.
Foreign investment in the telecommunications sector has also seen a drastic decrease, plummeting by 91 percent year-on-year to a four-year low of $7.24 million in the first quarter of 2026, sharply down from $80.78 million in the same quarter of the previous year. This investment reduction persists despite a 50 percent tariff adjustment approved by the Nigerian Communications Commission (NCC) in early 2025, intended to mitigate the impact of soaring diesel prices and rising operational costs.
Engr. Gbenga Adebayo, Chairman of the Association of Licensed Telecom Operators of Nigeria (ALTON), emphasized that the decline in CIT should be contextualized within the industry’s challenging operating environment rather than suggesting decreased demand for telecommunications services. He pointed out that continuous broadband penetration, fintech innovations, e-commerce, and the government’s digital transformation initiatives continue to drive robust demand.
However, Adebayo noted that growing revenues have not translated into increased taxable profits due to unprecedented cost pressures on operators. Factors such as rising energy costs due to subsidy removals, inflation in maintenance and logistics, increased security expenses, and significant capital investments necessary for infrastructure modernization are straining operating margins.
“The reduction in CIT reflects structural and transitional economic challenges rather than a downturn in demand,” Adebayo stated. He underscored that the telecommunications sector remains vital for economic growth and digital inclusion.
Dr. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), echoed Adebayo’s concerns. He attributed the decline in CIT to similar pressures including geopolitical tensions, weak consumer spending, and insecurity. Yusuf highlighted the sector’s reliance on diesel-powered generators due to inconsistent electricity supply, which has led to soaring operating costs.
“The increase in fuel prices driven by geopolitical conflicts has notably affected profit margins across the sector,” Yusuf said. He added that demand conditions in the first quarter were less favorable due to elevated inflation and the erosion of household purchasing power, leading to cautious consumer spending.
Security issues, particularly in Northern Nigeria, have also exacerbated operational challenges. Incidents of vandalism and destruction of telecommunications infrastructure disrupt services and increase maintenance costs, hindering operators’ ability to expand coverage.
Despite these challenges, Yusuf expressed optimism that the ICT sector could return to stronger growth as macroeconomic conditions improve.
Meanwhile, Mr. Smith Osemeke, Founder and CEO of Unitellas Edge Cloud, highlighted other significant challenges including foreign exchange exposure and a burdensome regulatory environment for local firms. He noted that while revenues are still being generated, the naira’s depreciation has made imported infrastructure more costly, impacting taxable profits.
Osemeke called for the federal government to implement comprehensive policy reforms, including tax harmonization and support for local production of telecommunications infrastructure. “A simplified tax structure could improve compliance and net remittances,” he argued.
In conclusion, both Adebayo and Osemeke emphasized the need for effective implementation of policies that protect telecommunications infrastructure and foster a favorable environment for investment in Nigeria’s ICT sector. As the sector navigates these pressures, stakeholders remain hopeful for a recovery driven by economic reforms and renewed investment strategies.