Shareholders of quoted companies have condemned the high charges foreign parent companies and technical partners impose on Nigerian companies in the name of royalties and technical fees, saying local shareholders are being cheated.
The shareholders, who spoke to THISDAY at the weekend have therefore vowed to renew campaign against this practice, which they also described as ‘double billing.’
Many foreign companies charge royal fees for their brands being produced and marketed in Nigeria. They also charge technical fees for professional services they provide to the management of the local subsidiaries.
However, some shareholders who spoke on this development, said while they are not against the charging of the fees, they stressed that the modality for charging the fees is favourable only to foreign partners.
The payment for royalties are always made from revenue, while the payment for management services agreements are paid from profit before tax.
But the President, Renaissance Shareholders Association of Nigeria, Olufemi Timothy, said this is wrong.
“We tried to make them change the payment of technical fees on turnover but they have refused to change. We shall continue to demand this. It is wrong. Technical fees should be charged on Profit after tax (PAT). We disapprove the system the way it is now,” Timothy said.
Speaking in the same vein, the National Chairman, Progressive Shareholders Association of Nigeria, Boniface Okezie, said it is better for the fees to be charged on PAT instead turnover.
However, he lamented that since the foreign partners, in most cases have the majority holding, the minority shareholders have not won this battle.
According to him, the only people who can rescue the Nigerian shareholders are the regulators.
“It would have been better to charge the fees on PAT and not on turnover but since they are the ones who control majority shares and provide technical services there is little minority shareholders can do.
“When it comes to voting, the majority shareholders carry the day because of the number of their shares. I believe the regulators should be the ones to do something to stop this exploitation. They have not done well in this regard at all,” Okezie said.
This is long overdue. Whilst it’s probably not feasible to charge fees on Profits charging fees on turnover is not particularly fair for companies. Some companies prefer to charge fees on Ebitda which is a fairer way of looking at it. Also the agency which regulates fees in Nigeria, NOTAP, is responsible for protecting Nigerian businesses.