Zainab Ahmed - Afrikan Heroes

A first look at the E-Custom Concession By Chido Nwakanma

September 7, 2020

Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed

After years of doodling on the prospect, Nigeria on September 2 voted for automation of processes at the ports as the Federal Executive Council approved a 20-year concession for the E-Custom project by a consortium of firms. The project attracts a headline figure of $3.1b, but the country would not need to spend a kobo. The concessionaire would invest the sum over the 20-year lifespan of the Public-Private Partnership project.

Instead of spending, the Federal Government says the project will generate revenues in multiples of the approved expenditure. Finance, Budget, and National Planning Minister Zainab Ahmed said FEC approved the project following a memo she presented to the Council. She said: “The purpose of the memo we presented to Council was for a project that will enable the complete automation of the Nigeria Custom Service processes and procedures using the application of information technology in all aspects of Customs administration.”

Minister Zainab Ahmed added: “So, Council today ratified Mr President’s approval for the PPP concession for 20 years to Messrs E-Customs HC Project Limited as a concessionaire for the delivery of customs modernisation project.“This is a project that will not have a direct cost to the government. The investors are providing the financings, and this revenue will be deployed in three phases. They will look over the investment in the concessionary period of 20 years.”

Like most people, I prefer to take these huge figures in byte sizes. Renowned Japanese consultant Kenichi Ohmae advised in The Mind of The Strategist that we break down these things into their constituent units for clarity, then rearrange them.

What then is the simple arithmetic of the E-Custom concession?

The Federal Government has approved a cost of $3.1b for the project. The breakdown is a capital investment of $1.2billion in three phases over three years or the average of $400million annually. On the cost side, the government approved for the concessionaire operational cost of $1.9b over 20 years. It translates to a handsome $95million annually.

What does Nigeria get in return?

The projection is that the concession will yield $176billion in 20 years. On paper, this is excellent. It translates to $8.8billion or N3.5trillion annually. In contrast, the Nigeria Customs Service projects revenue of N957billion for 2020. At the exchange rate of N400-$, it will fetch $2.39billion.

The Nigerian Customs Automation Scheme, led by Bionica Technologies, is a presidential initiative on customs modernisation, e-customs project, and the establishment of a digital/paperless customs administration. It will change the mode of administration and results from the running of Nigeria’s 82 border stations significantly. Yes, 82 customs points in Nigeria!

The Customs Automation Scheme will deliver a single-window model of cargo clearance. Experts say the benefits include paperless customs administration, E-payment of customs duty, E-container loading, and electronic risk-board inspection. There is also a single platform link to all other government agencies and E-permit exchange among operators.

The scheme will reduce delays, bottlenecks and corruption within the ports. More crucially, it will increase productivity, national security and revenue generation by the Customs. Bionica Technologies W.A. Limited is the lead partner of the consortium to manage the concession. Other partners include Bergmans Security Consultant and Supplies Ltd, Paramount Group, Huawei Technology, Smiths Detection, Larsen & Toubro Group and Nuctech of China.

President Muhammadu Buhari approved the concession in September. It follows the success of the consortium in a competitive bidding process conducted in 2016. Ninety-four (94) companies responded to the request for bids by the Nigeria Customs Service. The service pre-qualified 15 companies and invited them to make presentations on their solutions. Bionica Technologies W.A. Limited topped.The Nigeria Customs Service commenced a modernisation process in 2013.

The goal remains to change the narrative of poor or under-performance associated with the service. The Customs Automation Programme will guarantee the evolution of an integrated border management module with a centralised and automated Customs Risk Management system. The system would run real-time scanning. It will also ensure full automation of all customs procedures and business. Integral to the system is the complete automation of Customs operations using the latest smart technologies supplied by Original Equipment Manufacturers. There would also be strategic capacity development for the personnel of the service. Stakeholders in the maritime sector agree on the imperative of leveraging technology to drive efficiency and productivity at the ports. They support the programme introduced in 2016 as part of the seaport reform plan adopted by the Federal Executive Council.

Dr Dakuku Peterside, Director-General of the Nigerian Maritime Administration and Safety Agency affirms that port automation and digital solutions are potential game-changers not only for cargo throughput but also profitability. Peterside cites a global benchmarking study conducted by SAP which found that ports that leverage technology to drive productivity improvements enjoy 36% higher operating margins than their peers. The result informs part of the resolve of the Federal Government to institute a single-window operation in Nigerian ports.

The NCS has been modernising since 2013 and has made some remarkable progress. For instance, it announced in 2019 increased revenue of N1.125trillion due to electronic payment of duties and taxes generated from January to October 2019. The Bionica Consortium asserts that a fully automated system would increase the revenue exponentially.

Job creation is another feature of the port automation programme of great interest to stakeholders. It will also minimise smuggling as well as build partnerships with investors. There is a guarantee of external finance having no direct cost to the NCS for all projects. It is pertinent to note that there is no linkage between the over N30 billion in the comprehensive import supervision scheme accruals which are in the custody of the Central Bank of Nigeria, CBN and the concession scheme.

The 20-year concession arrangement provides latitude for long-term planning. Various ports around the world have successfully run similar programmes. Success stories include Singapore, China, Qatar and Venezuela.

We could not ask for a better deal. Will Nigeria allow it to work? Is it optimal? Will it exist over the 20 years or will a new administration throw it out? Experts in that field will let us know in the days ahead, particularly given that it looks alluring ab initio. The E-Customs Concession comes at a time the government is considering various other concessions for airports and other infrastructure. Will it create jobs or eliminate them? The application of technology has worked both ways, but which will it be for Nigeria?

Chido Nwakamma is of The Lagos Business School.

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry

What Nigeria ’s New Broadcast Media Regulation Means For Media Startups

June 13, 2020

Nearly four years after Nigeria ’s broadcast media code (6th edition) was published in 2016, the country’s National Broadcasting Commission (NBC), in charge of regulating and controlling its broadcast industry has released new amendments to the code. The newly introduced changes are sweeping in their ramifications. NBC says the new amendments were put together after intense deliberations with relevant stakeholders within the Nigerian broadcast media industry.

“The amendments of the Code make provisions for local content in the broadcast industry,’’ the code reads. “It also makes provisions for increased advertising revenue for local broadcast stations and content producers. It significantly creates restrictions for monopolistic and anti-competitive behaviour in the broadcast industry in Nigeria.’’

For investors and media startups within the Nigerian broadcast media space, this is a great call for concern. Recall that the country’s Minister of Finance, Zainab Ahmed, had also issued the Companies Income Tax (Significant Economic Presence) Order, 2020 in pursuance of her power to do so under an amendment to the country’s Finance Act 2019. By the terms of the order, a 7.5% VAT rate is imposed on a foreign entity which offers digital services and which has Significant Economic Presence in Nigeria.

According to the Nigerian Bureau of Statistics, Information and Technology, consisting of broadcasting; motion pictures; sound recording, and music production; publishing; telecommunication and information services; contributed 10.68 per cent to Nigeria’s GDP in 2019 alone. Broadcasting makes up about 80.4 % of this number, followed by motion pictures, music and sound recording and production at 11.9%. Against this background, it has become necessary to assess the implications of the new rules for investors and startups playing in that space.

Online Radio, TV and Streaming Services In Nigeria Now Need Licenses To Operate And Music Artistes Now Have More Of Their Rights Protected

License to operate

This is a sweeping amendment to the previous rules which were entirely silent on online broadcasting. The previous rules only regulated physical apparatus and premises used for broadcasting while the newest amendment to the rules includes all persons wishing to operate web/online broadcasting services within the Nigerian territory. The implication of this is that all online broadcasting or streaming services existing in Nigeria must not only be registered and licensed by the NBC, but must also comply with any programming standards issued by the NBS. Thus the commission, in totality, is bringing all forms of online broadcasting within its control. In the event of breach of the new rules, the online broadcast service shall be blocked, taken down or shutdown completely, the rules state.

New Rights For Musicians

Even though the Nigerian Copyrights Commission is already empowered to be responsible for all matters related to copyrights in music and sound recording in Nigeria, the new rules mandate all broadcast services, online or not, to obtain permission and clearance for use and properly compensate owners of musical works. Failure to comply with this may result in warning and then suspension of broadcast. It is important to note that while the violation of rights by the musical artiste under the Nigerian Copyrights Act could amount to both civil and criminal liabilities for the offender, especially where commercial use is made of the work, violation of the NBC code could lead to suspension of the broadcaster’s license to operate until rectification of the violation is made.

One obvious implication of the new rules is that, if implemented, the number of online broadcast services in Nigeria may drastically reduce; and a major streamlining of music catalogues by broadcast media to meet their budget may be also seen. This would most likely be a major blow to Nigeria-based online broadcast media startups. Currently, it takes between $26,000 to $52,000 to process a TV or radio license in Nigeria, a license which must also be renewed every 5 years. It is hoped however that these measures do not become counter-productive as to promote international media startups at the expense of local ones. Whether online broadcast media would be regulated or not has always been a matter of time, however it is only appropriate that new rules establish new licensing fee schedules and lower licensing fees for broadcast media of such nature. The new rules also failed to classify or define the range of online broadcast media contemplated — online radio, music or podcast streaming? Any other contrary position may most likely be misunderstood by Nigerians as an attempt to limit their freedom of speech.

*Nigeria ‘s new broadcast media rules may make or mar its media and entertainment indus*try *Information and Technology contributed 10.68 per cent to Nigeria’s GDP in 2019 alone*.

Deleting of The Rights of Exclusivity To Broadcast Contents—A Major Blow To Exclusive Content Owners And Creativity

The new amendment entirely deleted provisions on public broadcasting in Nigeria and replaced it with anti-competition rules. By the terms of the new rules, broadcast media in Nigeria are no longer allowed to enter into broadcasting rights acquisition either in Nigeria or anywhere in the world to acquire any broadcasting rights in such a manner as to exclude persons, broadcasters or licensees in Nigeria from sub-licensing the same.

“Any such agreement shall be void,” the rule stated.

The new rules proceeded to give the NBC large discretionary powers to determine whether an agreement restrains competition and creates monopoly, including but not limited to deciding whether the broadcaster has a large market share. The new rule then states that such broadcaster in a dominant position must cease, on being ordered by the NBC, from any conduct that threatens competition in the Nigerian broadcast space.

The implication of the above rules is reduced revenue for the broadcasters; and a possible severe strain on the resources of broadcast media startups which usually, by the nature of their business, require substantial workforce, pay tax to government and renew their licenses. This is also a major turn-off for investors looking to invest in the Nigerian broadcast media startup space. The new rules would also stifle creativity and innovation and encourage mediocre contents especially as there is no longer reward for hard work.

However, the commission may likely be overstepping its regulatory boundaries. Notwithstanding that the law by which it was established [the National Broadcasting Commission Act (1999 as amended)] authorises it to regulate and control the broadcast industry in Nigeria, and consequently establish and issue a national broadcasting code as well as set standards with regard to the contents and quality of materials for broadcast, the law does not however permit it to invade the market, and on its own discretion decide what market competition and monopoly entails. The newly created Federal Competition and Consumer Protection Commission, which also has a tribunal deciding on matters bordering on competition and consumer protection in Nigeria, the decisions of which are further appeal-able at the country’s court of appeal, is specifically mandated to treat issues related to trade competition in the country. Furthermore, the right to grant exclusive or non-exclusive licenses to copyright in broadcast materials are protected rights under the Nigerian Copyrights Act, and also inherently protected under the Nigerian Constitution. It only could be hoped that the commission has not under the guise of regulation arrogated to itself the power to make laws.

*Nollywood is one of the strong players in Nigeria ‘s broadcast media space the new rules may entirely change their course*.

Broadcast Media Startups Must Now Allocate 20% Of Their Weekly Broadcast Hours To Public Service And Must Maintain 75% Local Content On Character

This is the most significant change introduced by the new rules. Going forward, all broadcast media in Nigeria must ensure that they allot a minimum of 20% of their weekly broadcast hours to public service programmes on emergencies, current trends and issues.

“Such programmes shall be given prominence during family times and shall not be less than 120 minutes per transmission day,” the rule reads, in part.

With this, the rules may be making reference to numerous radio and television stations targeting specific audience, or trying to avoid discussing some of Nigeria’s controversial public trends in a country that ranks 115 out of 180 countries on the World Press Freedom Index.

Also curious is the fact that public broadcast media have been completely excluded in some parts of the new rules. But this is not the first time this is happening. For instance, while private/commercial broadcast media licenses go for between $26,000 to $52,000, licenses for broadcast media stations owned by government go for between $2,500 to $13,000.

Under the new rules, broadcast media must also ensure that at least 75% of their production workforce are Nigerians.

Most importantly, the new rules further state that subscription-based services shall ensure that a minimum of 15% of their channel acquisition budget is spent on channels on local content.

Premium Sports and News Content Now On Wholesale

Instead of granting broadcast rights to premium sports and news content exclusively to select Pay TV platforms of their choice, the commission has now mandated all such rights to be placed on wholesale, buy-able by any Pay TV platforms (broadcaster) provided a request in writing to that effect has been made and on non-exclusive basis. Failure to do so will result in the payment of a fine of ₦10,000,000 ($26,000). While this may encourage more players in the industry, especially innovative startups, big players may likely cut down on their investment in the Nigerian market if their earnings are substantially affected, especially as most of the premium sports and news broadcasters in Nigeria are headquartered outside the country.

Another significant introduction in this regard is the new requirement that no prime foreign sports content shall be transmitted in the Nigerian territory unless the owner of such content has also acquired prime local sports content of the same category with a minimum of 30% of the cost of acquiring the prime foreign sports content. Simply put DSTV, a leading prime foreign sports broadcaster in Nigeria for instance, will not be allowed to show the English Premier League unless it acquires rights to and broadcasts 30% equivalent of the Nigerian Professional Football League.

Bottom Line:

If allowed to stand, this may be a major disruption in the Nigerian broadcast media industry where government-owned broadcast media are generally seen as out of touch with modern trends and technologies and foreign media outlets are accepted as more credible, trustworthy and contemporary. On their own, underfunded startups are still finding it difficult to stick out of a sector that occupied more than 10% of Nigeria’s gross domestic product in 2019 alone. Perhaps, Nigeria needs to encourage more innovations in its broadcast media space rather than its current protectionist policies. This it can do by setting minimal rules that will support its nascent startup ecosystem (that houses some of its more than 55.4 percent of unemployed youth population) to thrive.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer.

Businesses In Nigeria To Pay Extra Value-Added Tax (VAT) and New Police Fund Levy

September 13, 2019

Apart from the fact that companies in Nigeria pay a 30 percent flat-rate corporate tax and other range of taxes and levies, now added to this list are the new 0.005% police fund levy (N5 per N100,000) to be paid out of the net profits of companies, and a possible increase in VAT by 2.2 percent (now 7.5%), barring any last-minute rejection by Nigeria’s parliament.

Here Is All You Need To Know

The New Police Fund Levy

Companies in Nigeria will now have to pay 0.005% police fund levy (N5 per N100,000) out of their net profits. The Nigerian Police Trust Fund Act (the “Act”) was passed by the National Assembly in April 2019, and signed into law by the President on 2 July 2019. The Act establishes a Fund, proceeds from which will be used to train police personnel and procure security machinery and equipment.

Imposition of a levy: The Act imposes a levy of 0.005% of the “net profit” of companies ‘operating business’ in Nigeria.
Funding from Federation Account and other sources: The Fund will also consist of 0.5% total revenue accruing to the Federation Account, in addition to proceeds from grants, intervention funds, aids, donations, investment income and so on.
Establishment of a Board: The Act establishes a board responsible for administering the Fund, making investment decisions, and fulfilling other objectives of the Act.
Duration of the Fund: The Fund will be wound up 6 years after its establishment. The assets and liabilities will be transferred to the Nigeria Police Force.

The New VAT At 7.2%

Nigeria ’s Federal Executive Council also approved 7.2 per cent as new Value Added Tax rate for the country, up from the current five per cent.

Although a definite decision has yet to be taken as to the effective date of the new rate, Nigeria’s Minister of Finance, Budget and National Planning, Zainab Ahmed, who spoke with State House Correspondents after the FEC meeting in Abuja, said consultations were in process over when the new rate would apply.

However, the first hurdle the new tax regime will face would be in Nigeria’s parliament which is either expected to approve or reject the proposal. Nigeria’s VAT Act would also have to be amended by the National Assembly before the commencement of the new rate. Already, the Ministry of Finance has hinted effective date to be sometime in 2020.

“We are proposing and council has agreed to increase in the VAT rate from five per cent to 7.2 per cent,’’ she said.

“This is important because the Federal Government only retains 15 per cent of the VAT; 85 per cent is actually for the states and local governments.

“The states need additional revenue to be able to meet the obligations of the minimum wage.”

“This process involves extensive consultations that need to be made across the country at various levels and also it will involve the review of the VAT Act. So, it is not going to be implemented immediately until the Act is reviewed, ” she added.

The Implication of This

Of course, once the old VAT Act is amended, and the new rate becomes effective, the new rate will automatically be applicable to online transactions carried out in Nigeria. Nigeria ’s Federal Inland Revenue Service, the national tax agency has recently announced that digital tax will become effective January, 2020. This is expected to discourage online transactions and shrink the purchasing powers of Nigerians in a country where the gdp per capita is still less than $2000 ( one of the lowest in the world) and over 86.9, representing 50% of the population are still living below the global poverty line (the worst in the world).

Read also: 45 Million Nigerians Set To Be Taxed For Every Online Transaction

African countries generally have an average VAT rate of about 15 percent, the Americas and Oceania have an average rate of 13 percent, and Asia has an average VAT rate of 12.3 percent. VATs are as low as 5 percent in countries such as Canada (federal only), Taiwan, and Zambia, to as high as 27 percent in Hungary. The average VAT rate in Europe is 20 percent, about 5 percentage points higher than the global average. However, the average European corporate income tax rate is 18.7 percent, which is lower than the worldwide average of 22.8 percent. From the above facts, Nigeria alone would have the highest corporate rate in Europe were it a European country. In a bit, Europe’s average VAT rate is justifiable because of its low corporate tax regimes. To worsen situation, African countries have one of the lowest industrial outputs across the world.

Again, although the 0.005% (N5 per N100,000) police fund levy on the net profits of companies may not be very significant, it however places additional tax burden on corporate taxpayers.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.