Index

The spate of insecurity ravaging the Northern part of Nigeria has taken another toll on the telecoms sector in Nigeria. This is as Kaduna state joins Zamfara, Sokoto and Katsina states who shut down telecoms operations in some part of their states to prevent the coordination of banditry and to help the security forces crack down escalating criminal activity and, in particular, gangs who specialize in abduction and extortion.

Zamfara State, alone had 2,177,431 active voice subscribers and 1,592,746 active internet subscribers, out of a total of 192,413,613 active voice subscribers and 144,949,194 active internet subscribers in the first quarter of 2021 who have been affected by this development. With more LGAs in Katsina and Sokoto and the entire Kaduna State, the number of subscribers affected may be very high.

It was estimated that the four big telecom operators might have lost N6.3bn after two weeks of shutting down operations in Zamfara state. While the shutdown has continued in Zamfara State, Sokoto and Katsina states have also shutdown telecoms activities in some local government areas in their states. With Kaduna joining, the telecoms operators, especially the four major ones (MTN, Globacom, Airtel, 9Mobile) would be counting big revenue losses as a result of this. Even their ongoing projects would have been stalled as they business would go on in an atmosphere of insecurity.

According to Governor Aminu Tambuwal of Sokoto State, the seven governors of the North-West had all endorsed the practice of shutting down base stations to fight insecurity, an indication that more could be shut down soon. This is an indication that any dream of an imminent revenue from the affected states by the telecoms operators may be a mirage

The NCC has inaugurated an incidence response facility, called the Center for Computer Security Incident Response (NCC-CSIRT). This is to address incidences of cybercrimes, protect telecoms infrastructure and encourage increased participation in nation’s digital economy. The centre aligns with the National Cybersecurity Policy and Strategy (NCPS) published by the Office of the National Security Adviser (ONSA), which requires each sector to establish a computer incident response team that will provide requisite services to the stakeholders and players within the sector. The NCC-CSIRT is to ensure continuous improvement of processes and communication frameworks to guarantee secure and collaborative exchange of timely information while responding to cyber threats within the telecoms sector.

According to NCC, the CSIRT’s services will commence with four main thrusts, namely; monitoring, incident management, communication, and alert and warning. It has a mandate to assist the telecoms sector in the defence and response to major cyber threats and attacks targeted at the members, provide information, technical as well as policy advisories to strengthen the defensive and response capabilities to cyber threats in the sector. The Centre will liaise with other sectoral CSIRTs as well as local and international security frameworks to protect the communications sector and the general wellbeing of the Nigerian people. The centre will also provide guidance and direction for the constituents in dealing with issues relating to the security of critical infrastructure in their possession; and to periodically assess, review and collate the threat landscape, risks, and opportunities affecting the communications sector and provide advice to relevant stakeholders.

As the internet usage increase since the COVID-19 period, there has been a rise in cyber incidents and criminal activities. The CSIRT will assist the telecoms sector with the management and coordination of cyber security incidents and threats. This will help to provide proactive steps towards building trust, and safety needed for growing the digital economy

In line with the constitution which makes 18 years as the age of consent in Nigeria, the NCC is set to enforce the contract between service providers and their subscribers. One of such is to disallow a minor or a person less than 18 years from engaging in the contract of SIM acquisition which requires a person of proper legal status to undertake. In the Reviewed/Draft Registration of Telephone Subscribers Regulations, presented on Tuesday, October 6, 2021, a subscriber is a person of 18 years and above, with a proper legal status, and matured and rational enough to bear certain responsibilities, obligations and liabilities imposed by a contract.

In order not to contravene the constitution, the NCC intends to limit SIM acquisition to those of this legal status. In the Reviewed/Draft Registration of Telephone Subscribers Regulations, the NCC defines any person below the age of 18 as minor, while a “subscriber is a person from the age of 18 years who subscribes to communications services by purchasing a subscription medium or entering into a subscription contract with a licensee.” It is therefore incumbent on parents or guardian of such people to acquire SIMs in their names for their children and wards under this age. However, they must be ready to take responsibilities for any liability that might accrue thereafter from the use of such SIM card. The policy therefore puts a significant responsibility on parents and guardians to monitor the activities of their minors.

The implication of this policy is that any person below the age of 18 is disqualified from registering and owning a SIM card in any of the network companies in Nigeria. If the policy comes in place, network operators will in the short run delete and loss the subscribers who are not of this age. The ability of them to gain back these subscribers in the long run will depend on the ability of parents and guardians to have the trust that will catalyze them to register SIMs for their adolescents. Even at that, those below the age of 18 without parents, guardians or people who can place adequate trust on them will be lost completely until they reach the legal age of contract as provided by the constitution. This may result to another round of revenue loss to the telecoms companies in Nigeria.

In a bid to Curb Mishaps, the federal government has set up a committee peopled with members drawn from the Nigerian Society of Engineers (NSE), Transmission Company of Nigeria (TCN) and the Abuja Electricity Distribution Company (AEDC) to certify meter installers in the country. This was disclosed by the Nigerian Electricity Management Company (NEMSA), the agency responsible for certifying electrical installation personnel.

According to NEMSA, this committee would ensure that only competent and qualified personnel certified by the agency are allowed to work in the industry. This is to preserve ethics and specialization in carrying out electrical installation works, and ensuring that electricity meters are properly installed. Since the commencement of the certification in 2016, NEMSA has validated over 9,000 of electricity contractors. It has taken the certification of electricity metering more important due to the federal government’s current metering policy and regulations. NEMSA is therefore poised to ensuring that quality electricity meters are installed in Nigeria such that collection efficiency and industry liquidity are maintained. It is important to ensure that meters with the right load capacity are fixed in residential and business areas with the right load requirement to avoid blowing up the system. This will remove the havoc that meters have caused and ensure the safety of life and property as fire outbreaks could happen and cause disaster in those premises or buildings.

Nigeria is working on an ambitious Energy Plan towards reducing the energy shortcomings by year 2030. The plan includes the Government’s flagship project to electrify Five-Million households and Twenty-Million people using decentralized solar energy solutions. This was the submission of President Muhammadu Buhari in the High-Level Dialogue on Energy at the sidelines of the 76^th United Nations General Assembly in New York.

Nigeria has developed Energy Transition Plan, with the support of the UK COP26 Energy Transition Council. The plan has laid out the roadmap to reach net-zero and highlights the scale of the effort required, including the development and integration of renewables into current grid infrastructure at tremendous scale and electrification of all sectors. The plan also takes into account, the provision of access to electricity and clean cooking solutions for those currently without access.

According to the president, the scale of financing required for Nigeria to achieve this plan, amounts to over US$400 Billion across the Nigerian economy in excess of business-as-usual spending over the next thirty years. This breaks down to US155 Billion net spend on generation capacity, US$135 Billion on transmission and distribution infrastructure, US$75 Billion on buildings, US$21 Billion on industry and US$12 Billion on transport. This shows the magnitude of resource required to actualize this plan, and a huge opportunity for oil and gas investors.

A total of N6.14 trillion is owed to Nigerian banks by oil and gas operators and power companies in Nigeria.  The debt rose to this amount in June, 2021, from N5.94tn at the end of 2020. This represents about 28% of the N21.89 trillion loans advanced to the private sector by the banks as of June 2021. The bulk of this loan, N5.32 trillion is owe by Oil and gas firms, while the rest, N823.28billion is owed by power firms. Further analysis of the indebtedness shows that the oil firms operating in the downstream, natural gas and crude oil refining subsectors owed N3.99 trillion, while those in the upstream and services subsectors owed N1.33 trillion. The greater part of the power sector loans, amounting to N482.30billion, is owed by power generation firms and independent power producers, while transmission and distribution firms owed banks N340.98billion.

In another angle, seventy-seven international and Nigerian oil and gas companies are currently owing the Nigerian government about $6.48 billion (over N2.6 trillion). The indebtedness comes from the companies’ failure to remit petroleum profit tax, company income tax, education tax, value-added tax, withholding tax, royalty, and concession on rentals. A breakdown of the figures shows that a total of $143.99 million is owed as petroleum profit taxes, $1.089 billion as company income taxes and $201.69 million as education tax, $18.46 million and $972,000 as Value Added Tax (VAT), $23.91 million and $997,000 as Withholding Tax, $4.357 billion as royalty oil, $292.44 million as royalty gas, while $270.187 million and $41.86 million were unremitted gas flare penalties and concession rentals, respectively.

In what seems like a big support to the clamour by host communities that oil and gas companies operating in the country should site their headquarters in their host communities, the senate has given its three committees on Petroleum Resources Upstream, Downstream Petroleum Sector and Gas the mandate to liaise with the Ministry of Petroleum Resources and the Presidential Implementation Committee on the Petroleum Industry Act (PIA), to facilitate the relocation of oil and gas companies operating in Nigeria to their various operational bases in host communities to ensure unhindered operations.

Sponsored by Senator Albert Bassey Akpan and 23 other Senators, the motion seeks to compel oil and gas companies operating in Nigeria to relocate to their host communities and operational bases in order to reduce the high cost of production militating against maximum revenue from crude oil and gas sales to the federation account. The senators noted that the issue of insecurity and militancy brandished as excuses has been addressed by the Petroleum Industry Act, 2021, which placed certain responsibilities on the security, peace and safety of oil and gas infrastructure on the host communities to safeguard and ensure peaceful coexistence between oil and gas companies and their host communities.

With the relocation to these areas, the workers will also relocate to these areas and as such the government of these areas will benefit from the revenue, that is payment of tax, within the localities that they are exploiting this oil and gas, because the workers will no longer claim that they are not resident in these areas.

Members of the Senate this Wednesday confirmed the appointments of the board members of the Nigerian Upstream Regulatory Commission (NURC), in line with the provisions of Sections 11 and 18 (1-5) of the Petroleum Industry Act, 2021. The Senate Committee on Petroleum Resources had submitted a report, which showed that the nominees demonstrated sufficient knowledge of the workings of the petroleum industry, especially the upstream petroleum sector, as well as the economics of petroleum exploration and production. This formed the basis for the confirmation.

By the approval of the board members for the commission, the Department of Petroleum Resources and its leadership led by Engr. Sarki Auwalu has ceased to exist. The NURC has automatically replaced the Department of Petroleum Resources and assumes its responsibilities. The Petroleum Industry Act, 2021 gives NURC enormous and huge responsibility to set and establish the Commission. All activities in the upstream subsector of the oil and gas industry will hence forth revolve around this new board.

The members of the board are Isa Modibbo – Chairman; Gbenga Komolafe – Chief Executive; Hassan Gambo – Executive Commissioner, Finance and Accounts; and Rose Ndong – Executive Commissioner, Exploration and Acreage Management. The new board has a responsibility to provide a solid and stable foundation for Commission.

One of the new policies introduced in the 2022 Finance Act signed into law by President Muhammadu Buhari on December 31, 2021, is the N10/litre excise duty on all nonalcoholic, carbonated, and sweetened beverages. Government said it aims to discourage excessive consumption of sugar in beverages, with the intention to reduce the incidences of obesity and diabetes in the country. This new “sugar tax” will also raise revenues for health related and critical expenditures.

The process to the imposition of this levy started in the third quarter of 2021 at the interactive session on the 2022-2024 Medium-Term Expenditure Framework (MTEF), when the members of the National Assembly resolved to amend the Finance Act to include levies on all carbonated and non-carbonated drinks. At the forum, the Comptroller-General of the Nigerian Customs Services, Hameed Ali, submitted that all companies, producing alcoholic and non-alcoholic beverages should be subjected to levies as their products are injurious to health. Since the negative health implication is the reason why government is levying alcoholic drinks producers, it is therefore also necessary that the carbonated drinks production with similar health consequences should be taxed, he asserted.

The government has signed into law the 2022 Appropriation Act, signaling its resolve to start levying the excise duties as contained in the Act. The law stipulates that for every litre of carbonated drink produced and consumed in the country, a N10 excise duty is expected to be paid into the government coffers by the producer. Among the companies that will be subjected to this levy are, Coca-Cola Nigerian, 7Up Bottling Company, Rite Foods, La Casera Company, Fayrouz, produced by Nigerian Breweries, and other producers of carbonated drinks in Nigeria. With the commencement of the implementation, the argument has shifted to who bears the burden of the N10/litre levy.

There are various reasons why government imposes taxes. Apart from raising revenue, taxes (sales) are used to discourage the consumption of a supposed harmful product. According to the government, excessive consumption of sugar through any means is one of the reasons why so many Nigerians are infected with diabetes and obesity. Thus, the imposition of this N10/litre on all nonalcoholic, carbonated, and sweetened beverages produced with sugar is therefore it’s way of discouraging the consumption of these products.

Taxation of any kind comes with consequences, referred to as incidences or burdens which affects the distribution of welfare of one or more economic agents. The magnitude of this effect, however, depends on the elasticity of demand of such products, i.e., the degree of responsiveness of consumers to a change in the price of the commodity, in this case, the carbonated drinks. The excise levy on carbonated drinks will no doubt seek to raise the prices of these products. This is the more reason why the burden of the levy will be borne by the consumers of such products. In other words, the demand for the product will remain inelastic, the increase in the price of the products will not have much effect on the consumption of the product even though it will be borne by mostly the consumers. There may be impacts on the company, though.

Increases in taxes everywhere reduces the disposable income of consumers. Where there is no corresponding increase in the disposable income of consumers, the quantity of such products bought and consumed must as a matter of fact reduce. This is where the producers must worry about. Despite inflation, Nigerian authorities have concluded plans to fully deregulate the petroleum sector in July 2022, which has the tendency to shoot prices of commodities to the roof top without a corresponding appreciation in consumer income. Any increase in the price of carbonated drinks, in the era of deregulation and its consequences, will eventually reduce the quantity sold by the producerss in the carbonated drink sector of the FMCG, and ultimately their profitability. This justifies the statement that the existence of a tax often reduces the extent of market transactions.

The companies should leverage the Coca-Cola Company model of how to tackle problems associated with increases in taxes meant to dissuade consumption of their products

1. The companies increase the sizes and prices of other less sugar products. This increase in sizes which may come with a little price addition may attract consumers to these products thereby helping the company to recoup its losses using this market. The use of these methods is important for consumers who believe in the company’s original taste and quality, devoid of sugar.
2. As an old company, another way the company can increase its market share in this tax regime period is by not passing the entire excise levy on to consumers. The company should absorb part of the levy while the consumers will bear the rest. Through this way, the price increase resulting from this will be so minimal such that it will attract more consumers from other competitors whose prices will be fully shifted to consumers.

NB: Labour and the Organised Private Sector (OPS) are currently engaging government to see what can be done to protect the producers. While the discourse is ongoing, it is important that the Coca-Cola Nigeria Limited devises one of the above means or others at its disposal to sustain its market leadership position in the industry.

The fall in the monthly inflation rate seems to have resumed; this is following a drop in the headline inflation rate by 0.03 per cent point in January 2022 from the 15.63 per cent recorded in the month of December 2021. The figure is also lower that the 16.47 per cent record in January 2021 by 0.87 per cent point (NBS, 2022). The food inflation, although highest when compared to others, declined by 0.24 per cent point to 17.13 per cent as against 17.37 per cent recorded in the month of December. All other categories increased in rates. For instance, inflation was higher for almost all other categories, primarily clothing & footwear (15.4% vs 15.1%); transport (15.1% vs 15%); furnishings (14.6% vs 14.5%); miscellaneous goods & services (14.4% vs 14.1%) and alcoholic beverages & tobacco (14.1% vs 13.7%). The NBS stated that the food index was driven by increases in prices of Bread and cereals, Food product, Potatoes, yam and other tuber, soft drinks, Oils and fats and fruit.

The urban inflation rate for January, 2022 of 16.17 percent year-on-year which remained the same with December, 2021 rate was a decrease from 17.03 percent recorded in January 2021. The rural inflation rate also decreased to 15.06 per cent in January 2022 from 15.11 per cent and 15.92 percent recorded in December in January 2021, respectively.

The reduction in inflation in the month of January confirms the fact that the mad rush for food items was the main cause of the increased inflation in December, 2021. However, the National Bureau of Statistics released this result with a caveat that the coming months may witness increase in inflation. The signs are already noticed. With the influx of the adulterated fuel and the increase in the price as much as N1,000 in some states, the pass-through relationship between fuel prices, transport and food products will definitely lead to an increase in inflation in the coming months unless something drastic is done to curb the menace and restore normalcy in the sector.

Consumers should continue to exhibit moderacy in their expenditures.