A new era is loading from wired cobweb to CDMA, from CDMA to GSM, and now from GSM to satellite: “Elon Musk-owned satellite internet Starlink, is growing rapidly in Kenya after the subscription grew by 1,955.3%, a year after the launch of the internet service in Kenya.”

I got the new iPhone for Ifeoma last week {the only gift that is appreciated very much}.  Today, she said something like “I heard Elon Musk is launching a phone that works through satellite…same number anywhere you go”. You know what? That phone capability exists at scale for the masses. The problem is that the US government does not want to distort the telecom industry yet.

In addition to the thousands (>10k) of Starlink kits we are delivering in response to Hurricane Helene, the @Starlink team and @TMobile activated our Direct to Cell satellites to provide emergency alerts for all phones and carriers of those in affected areas.

The @FCC has also…

— SpaceX (@SpaceX) October 8, 2024

SpaceX has received emergency temporary approval to provide space-based connectivity to T-Mobile customers in Florida who may lose cellular service due to Hurricane Milton.

A source familiar with the situation said the Federal Communications Commission granted SpaceX a 15-day special temporary authority (STA) for the storm’s projected path across central Florida.

SpaceX said in an Oct. 8 social media post that it has enabled basic texting services on T-Mobile phones in areas affected by Hurricane Milton and Hurricane Helene, following similar regulatory approval granted after Helene caused cellular outages in North Carolina weeks earlier.

The company said it has also activated the more than 100 direct-to-smartphone satellites launched so far to deliver emergency alerts to all phones and carriers used by those affected by the hurricanes.

How do I know? When hurricanes hit many parts of Florida a few days ago, they gave Musk’s Starlink temporary approval to activate satellite-based services to mobile devices (your normal mobile phones) via TMobile. That TMobile part is to keep things in check as with a little modification, Starlink will go directly to customers.

Good People, watch your telecom stocks well!

Starlink Sees Nearly 2,000% Subscriber Growth in Kenya

Nigeria is experiencing a vicious circle on revenue at the moment. Unfortunately, increasing VAT on the people will not fix that paralysis: “The Nigerian National Assembly is weighing a comprehensive bill that proposes a notable shift in Nigeria’s tax structure, specifically aimed at increasing the value-added tax (VAT) from 7.5 percent to 10 percent by 2025. According to The Cable, the bill, which outlines a phased approach, suggests that the VAT rate will continue to rise to 12.5 percent by 2026 and will eventually reach 15 percent by 2030.”

Yet, realistically, there are limited options on how to fix the mess. Nigeria lost more than N1.7 trillion of manufacturing sector revenue as recent policies reshaped the economy, according to the Chairman of the nation’s tax agency. Within that N1.7 trillion is billions of Naira of lost tax revenue!  MTN Nigeria which used to be a rainmaker for Nigeria’s national purse lost N137 billion in 2023, N392.69 in Q1 2024 and N175.6 billion in Q2 2024.

If you understand how business works, more than 80% of major non-banking institutions in Nigeria will not pay taxes for years in Nigeria. But the government has bills to pay. So, jacking up VAT is a reaction to that reality. Unfortunately, I wish we do not choose escalating mass poverty with more taxes on already over-taxed citizens.

Would anything happen if we close the House of Reps and have only the Senate? Would anything happen if the government consolidates all the federal universities into 12 universities, saving costs? Would anything bad happen if we trim down the federal workforce? Would anything bad happen if the government cuts down its expenses? Of course, how can you say that Nigeria does not have money when we can embark on building a coastal road network of N12 trillion? Contradictions everywhere

Nigerian Lawmakers Consider Bill to Increase VAT to 10% By 2025

The Nigerian National Assembly is weighing a comprehensive bill that proposes a notable shift in Nigeria’s tax structure, specifically aimed at increasing the value-added tax (VAT) from 7.5 percent to 10 percent by 2025.

According to The Cable, the bill, which outlines a phased approach, suggests that the VAT rate will continue to rise to 12.5 percent by 2026 and will eventually reach 15 percent by 2030.

The proposed increase has sparked significant debate among economists, government officials, and politicians, with various stakeholders pointing at the potential consequences for Nigeria’s economy and its people.

The executive bill outlines the schedule for raising VAT as follows:

• 2025: The VAT rate will increase to 10 percent.
• 2026 to 2029: The VAT rate will rise to 12.5 percent.
• 2030 and beyond VAT will hit 15 percent, a twofold increase from the current rate of 7.5 percent.

The bill states: “VAT shall be charged on the value of all taxable supplies at the following rates: (a) 2025 year of assessment 10%; (b) 2026, 2027, 2028, and 2029 years of assessment 12.5%; (c) 2030 year of assessment and thereafter 15%.”

This VAT hike is part of a larger fiscal strategy aimed at increasing government revenue to support infrastructural development and other essential services. Proponents argue that Nigeria’s current VAT rate is one of the lowest in Africa, pointing to countries such as South Africa (15 percent), Ghana (15 percent), and Kenya (16 percent) as examples of nations that have adopted higher VAT rates to boost revenue.

In February 2021, the International Monetary Fund (IMF) advised the Nigerian government to increase the VAT rate to at least 10 percent by 2022 as part of measures to address fiscal shortfalls. The IMF argued that increasing VAT would help reduce Nigeria’s reliance on oil revenue and enhance the country’s budgetary resilience.

Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, has been a vocal supporter of increasing the VAT rate. He stated on May 8 that the current VAT rate needs to be raised to align with global standards and enhance the government’s ability to finance its projects.

Oyedele emphasized the importance of generating revenue internally rather than relying on borrowing, especially as Nigeria faces mounting economic challenges. He added that a gradual increase in VAT would help bridge the fiscal gap without overwhelming the economy with sudden and sharp adjustments.

However, despite the fiscal justifications, the proposed VAT hike has not gone without opposition. On September 8, former Vice President Atiku Abubakar expressed his criticism of the bill, describing it as “regressive and punitive.”

The former Vice President noted that raising VAT at this time is a misguided policy and regressive, which will disproportionately affect the poor and vulnerable in our society. He said the government should focus on policies that lift people out of poverty, not those that push them further into hardship.

Atiku’s concerns are centered around the potential impact on the average Nigerian citizen, particularly those already struggling with rising costs of living. It echoes the sentiments of many Nigerians who fear that the proposed VAT increase will worsen inflationary pressures, particularly in the cost of goods and services.

VAT is considered a regressive tax because it applies equally to all consumers, regardless of income, meaning that lower-income households spend a larger proportion of their income on VAT than wealthier households.

However, in defense of the proposal, Minister of Finance Wale Edun responded to Atiku’s critique on September 9, clarifying that the VAT rate had remained low for years and that the government’s fiscal reforms are designed to be gradual to avoid any sudden shock to the economy.

Corporate Income Tax (CIT) Reduction

As a counterbalance to the VAT increase, the bill also proposes a reduction in the corporate income tax (CIT) rate, which is expected to encourage business activity and attract foreign investors. The CIT rate is currently set at 30 percent, but under the new bill, it would be reduced to 27.5 percent by 2025 and further to 25 percent by 2026.

The bill stipulates: “Tax shall be levied, for each year of assessment in respect of total profits of every company, in the case of; (a) a small company, at zero percent; and (b) any other company, at the rate of-(i) 27.5% in 2025 year of assessment, and(ii) 25% from 2026 year of assessment.”

Companies with a turnover of less than N20 million are exempt from CIT under the bill, a move intended to support small businesses and promote entrepreneurship.

However, the bill introduces a clause for large companies, requiring those with an effective tax rate of less than 15 percent to pay an additional tax to bring their effective tax rate to that threshold. This clause targets multinational enterprises (MNEs) and companies with a turnover of N20 billion or more annually, ensuring that larger firms contribute their fair share to the tax base.

Oyedele, who also supported the CIT reduction, explained in June that the move would help businesses grow by reducing their tax liabilities. He further noted that reducing the CIT rate could foster a more competitive business environment, which is crucial in a country striving to diversify its economy away from oil dependency.

VAT and CIT in Nigeria

VAT was first introduced in Nigeria in 1993 at a rate of 5 percent, marking a shift towards consumption-based taxation. In 2020, the VAT rate was increased to 7.5 percent under the Finance Act, which aimed to expand the tax base and reduce Nigeria’s reliance on oil revenue.

The CIT rate has undergone several changes over the years. In the 1980s, Nigeria’s CIT was as high as 45 percent, but it was gradually reduced to its current rate of 30 percent to encourage investment and economic growth. The Finance Act of 2019 introduced a graduated CIT system, exempting small businesses with a turnover below N25 million from paying CIT.

While the VAT increase could provide much-needed revenue to fund infrastructure, education, healthcare, and other public services, critics worry that it would exacerbate the economic strain on everyday Nigerians, particularly low-income households.

However, with other tax reforms, including newly gazetted withholding tax regulations, set to take effect from January 1, 2025, Nigeria is entering a period of significant fiscal change. Only time will tell whether these changes lead to economic growth and improved public services or worsen existing challenges.