How not to reform courier and postal services
A popular maxim has it that the more things change, the more they remain the same. But a more warp version of that philosophy appears dominant in our country where things change only for the worse. One of those illogicalities in reforms is the Postal Commission Bill, currently awaiting harmonisation and endorsement of Mr. President. And if it is signed into law, the Postal Commission will be another disservice to public good and sustainability of courier operations in Nigeria.
Let us start from the genesis. Records show that Dalsey, Hillblom, and Lynn International GmbH (DHL) started modern courier services into Nigeria in the 1980s. The provider opened up a gap in domestic distribution, which brought into the picture the likes of ABC Transport and God is Good Motors (GIG). Technology and e-commerce rapidly changed the dynamics of courier and logistics. They opened up the floodgate to small and medium scale players, keke and okada dispatchers, all beyond the regulatory oversight of the Nigerian Postal Service (NIPOST). Yet, the constant evolution of the grey landscape created a need for the sector to be regulated.
The Minister of Communications and the Digital Economy, Dr. Isa Ali Ibrahim Pantami, in accordance with Section 62 of the Nigerian Postal Services Act 2004, approved new guidelines for the regulation of the courier and logistics sector in Nigeria in July 2020. The Nigerian Senate, about three months ago, also passed the Nigerian Postal Service (NIPOST) repeal and re-enactment bill 2021,to restrict the agency to only postal operations, and make it efficient through a regulatory commission.
With the benefit of hindsight, all these reforms are good, if we must grow the courier and logistics industry in sync with global trends and changing dynamics. But of concern for stakeholders are some provisions and powers ascribed to the commission and their implication for the important sector. Indeed, some embedded lines readily 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. As 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 peoples’ parliament” should have accorded respect to dominant concerns and valid arguments.
Articles 10(1)(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 1kg. Article 68(2)(b) stipulates two per cent 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 per cent contribution would further force consumers and businesses to patronise the Public Postal Operator, rather than express service companies, thereby damage local businesses, discourage foreign investments and sound the death knell of local courier companies. Article 68(2)(b) that requires licensees to contribute 2.0 per cent of their turnover to the commission’s fund is not a fair method of levy, as courier companies’ revenue encompass debts, several other taxes and levies by various states of the federation, like the Federal Airports Authority of Nigeria (FAAN) and airport charges.
Ours is an industry that is currently beset with a variety of taxes at national and sub-national levels, some of which include statutory 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 of an additional two per cent 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 per cent on the revenue line creates a cherry-pick scenario without identifying the reality of overheads and other cost lines before extracting a profit, if any. The company income tax averages 35 per cent on profit before tax and upon further analysis, two per cent on gross revenue in addition to annual licensing fees, will impact profit before tax by over 30 per cent, 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.
We the operators are in support of regulation and reforms, but against the two per cent of companies’ annual turnover being paid to the government in view of other payable taxes. The association has suggested that this should come in the form of a commission that would be borne by the consignor, which is the fulcrum of the two per cent contribution to the Universal Postal Union (UPU).
Similarly contentious in the new bill, is the exclusive right of shipment weighing 1kg being granted to the public post operator alone. It does not augur well for the industry as it is not in line with international best practices. Obviously, this will give undue advantage to the public post operator, thus creating an unfair operating environment for investors. As a competitive space, private operators should be allowed to operate in this space and charge three times higher than what the public post is offering. By the way, fixing a physical postage stamp for any transaction above N1,000 would be cumbersome. In this digital age, this is best handled electronically.
Another provision of the bill, which states that existing licences shall become invalid six months after the coming into being of the Postal Commission, is antithetical to entrepreneurship drive and existing investments. Consequences of this provision, among others, appear not to have been properly thought-out. It underscores a flip-flop that could only amount to massive loss of investments, investors’ confidence and more Nigerians thrown out of jobs. Good reasoning and empathy should prevail to keep existing licences valid till their date of expiry.
I implore leadership of the National Assembly to give the bill a human face and business friendly in the interest of thousands of Nigerians that depend on the postal and courier sector for survival. And until that is done, the President should not give his endorsement.
Akinwande wrote from Lagos.