BusinessDay
Nigeria's leading finance and market intelligence news report.

A revisit of the Nigeria postal bill

Experts have warned that the current draft bill to repeal the Nigerian Postal Service Act and give it monopolistic roles will make the industry less attractive to investors and lead to loss of jobs.

Clause 10 (1) states that the public postal operator will have exclusivity over the delivery of postal articles weighing up to 1kilogram. This provision will hinder consumers who wish to use courier services for the transport of time-sensitive documents internationally; a courier company would be violating the public postal operator’s monopoly.

This proposed legislation in Nigeria would grant monopoly powers to the post office for all packages under 1kilogram. The legislation also proposes levies on the revenues for all couriers operating in the country. These measures would further force consumers and businesses to use the Nigerian Post Office rather than the express service companies, thereby damaging local courier companies, forcing local courier companies to close, and reducing foreign direct investment.

Industry watchers raised fears that such a broad restriction would force Nigerian businesses and consumers to send an estimated 65 percent of their packages through the Nigerian Post Office thereby restricting the market share of the courier investment, which is ingenious to fair competition.

In the eyes of most private sector operators, the current legislation is a threat to the tremendous progress that has been made in Nigeria in previous years and is a step backward.

The Popular view is that if customers must rely on only Nigeria Post Office to transport their packages, competition and services will suffer.

Read Also: NIPOST moves to unbundle itself from dual role

If we must grow the courier and logistics industry to be in sync with the best global trends and changing dynamics then we must revisit this provision of the bill. The provision ascribed would constitute a bad omen for the licensed players and would–be investors, as the desired return on investment may become a mirage if and when the provisions are implemented. The Association of Nigeria Courier Operators (ANCO) has posited it is curious that our submissions and concerns about the bill during the Senate public hearing were not factored into the draft. As Nigerians, operators, and major stakeholders that will be most affected by this reform, I think “the people parliament” should have accorded respect to dominant concerns and valid arguments.

Articles (10)(a) and 68(2)(b) are two main contentious issues in the bill. Article 10(1)(a) gives exclusive powers to the Public Postal Operator (PPO) that is owned by the government and managed by the Nigerian postal service (Nipost) to collect, accept, process convey, and deliver postal articles weighing up to 1kilogram. Articles 68 (2) (b) stipulates a two percent contribution to the commission’s fund by all courier operators from their annual turnover and as part of their annual dues.

While the first provision gives exclusive powers to the courier operator that is managed by the government, the second promotes multiple taxation and another burden on ease of doing business in the sector. Put together, they are anti – competitive provisions that will negate courier and e-commerce growth in the country.

For clarity, the exclusive powers and the additional two percent contribution would further force consumers and businesses to patrons the public postal operator, rather than express service companies, thereby damaging local businesses as well as discourage foreign direct investment and sound the death knell of local courier companies.

Articles 68(2)(b) requires licensees to contribute 2.0 percent if their turnover to the commission’s fund is not a fair method of the levy, as courier companies’ revenue encompasses debts, several other taxes, and levies by various states of the federation like the Federal Airports Authority of Nigeria (FAAN) and airport charges.

The courier industry is currently beset with a variety of taxes at national and sub-national levels, some if which include statutory charges; company income tax, vat, wht, faan, sahco/nahco charges at the airport, annual license renewal with the courier and logistics regulatory department of Nipost (CLRD), Lasaa Signage levies, mobile adverts and similar charges in other states of the federation, all of which are responsible for the high rate of attrition in the industry.

It is clear that the proposal if an additional two percent on revenue will discount the fact that not all revenue becomes profitable and is collectible at the end of the financial year as some portion will be reported as bad and doubtful debts while some will be written off as bad debts.

Again, the desire to introduce two percent on the revenue line creates a cherry-pick scenario without identifying the reality of overheads and other coastline before extracting a profit.

The company income tax averages 35 percent on profit before tax and upon further analysis, two percent on gross revenue in addition to annual licensing fees, will impact profit before tax by over 30 percent, which technically amounts to double taxation. By implication, the industry will be made less attractive to investors when compared with industries without this additional layer of tax, and dividends payable to investors will diminish.

Another provision of the bill, which states that existing licences shall become invalid six months after the coming into being of the postal commission; this is antithetical to entrepreneurship drive and existing investments. The consequences of this provision are that this will lead to massive loss if investments, investors’ confidence and more Nigerians will be thrown into the unemployment market.

Get real time updates directly on you device, subscribe now.