Electricity remains one of the major challenges facing businesses in Nigeria, and a report has shown that the eleven (11) Electricity Distribution Companies (DisCos) in Nigeria suffered huge revenue shortfalls in the tune of N1.67 trillion in the past five years.
This is contained in the documents published on the website of Nigerian Electricity Regulatory Commission (NERC) titled: 2016 – 2018 Minor Review & Minimum Remittance Orders for the 11 DisCos.
The breakdown: According to the data contained in the report, all the 11 DisCos in Nigeria recorded an average of N152.3 billion revenue shortfall between 2015 and 2019. A closer look at the report shows that Ibadan Power Company (IBDC) had the biggest share of the revenue shortfall.
NERC noted that it computed and recognised the sum of 235.5 billion as the tariff shortfall for IBDC between 2015 and 2019 year to date.
- Ikeja power Distribution Company followed IBDC closely with the sum of N188.5 billion as revenue shortfall between 2015 and 2019.
- Benin DisCo recorded N164 billion revenue shortfall to rank third, while Kaduna DisCo’s shortfall was estimated at N164 billion.
- Others include Abuja (N154.3 billion), Eko (N145.2 billion), Port Harcourt (N143.3 billion), Kano (N140 billion), Enugu (N140 billion), Jos (N126.2 billion) and Yola (N74 billion).
Recurring Interventions: Power supply has been one of the major challenges facing key economic agents (individuals and businesses) in the Nigerian economy. Despite reforms, the power sector is still faced with several challenges ranging from the electricity supply, revenue generation and low investment level.
Basically, tariffs shortfall recorded by the DisCos came from individuals, firms and even government agencies who are consumers of electricity services. To tackle this, NERC stated in its report that it had issued a new order directing all the ministries and agencies of government (MDAs) to be metered by DisCos.
Most recently, the Federal Government approved N600 billion for injection into the country’s electricity market. According to NERC, the intervention fund was for the payment of the shortfall in electricity invoices for the entire market.
The government made intervention payments in line with the Power Sector Recovery Plan (“PSRP”). According to the plan, all accrued liabilities in DisCos’ financial records arising from tariff shortfalls shall be transferred off the balance sheet and fully settled under the financing plan of the PSRP initiative.
NERC document reads, “All funds retained by the DisCos as represented by excess of market (remittance) shortfalls over tariff shortfall are to be recovered as a full liability of the DisCos, including applicable interest thereon, in line with the provisions of the Supplementary TEM Order, the Market Rules and respective industry contracts with NBET and the MO.
“All DisCos with an excess of tariff shortfall over market shortfall shall be compensated accordingly for the difference. Also, all interest payable by DisCos on unpaid invoices issued by NBET and the MO and attributable to tariff shortfall shall be transferred off the balance sheet of the utilities.”
Recent Development: Recently, a section of the media reported that the Federal Government through the NERC had increased the tariff payable by power consumers across the country. Meanwhile, NERC had quashed the reports, explaining that no tariff has been approved yet.
Following this, Nairametrics published an article to provide an explanation of why NERC is considering increasing electricity tariffs. Specifically, NERC disclosed that the minor review earlier approved came as a result of revenue shortfall that might have arisen due to the difference between tariffs approved by the regulator and actual end-user tariffs.
Despite this, different groups representing power consumers across the country have declared that the purported approved increase in electricity tariff would not stand until there is a considerable improvement in the power supply.
Lagos announces additional tax incentives for businesses, individuals
Waiver of penalty for late payment of liabilities under PAYE that were due during the period when the state was under lockdown.
The Lagos State Government has announced additional tax incentives and reliefs for businesses and individuals in the state, as part of measures aimed at reducing the burden on taxpayers amid the COVID-19 pandemic.
The disclosure was made in a public notice issued by the Lagos State Internal Revenue Service (LIRS) and signed by its Executive Chairman, Ayodele Subair.
The additional tax incentives are part of the several measures implemented by the LIRS to mitigate the impact of the coronavirus pandemic on taxpayers in Lagos and ensure business continuity.
The government had earlier given 3 months extension of deadline for filing annual returns from March 31 to June 30, 2020.
The additional measures being implemented by the state government include:
- LIRS shall be allowing on a case by case basis, the payment of outstanding liabilities in instalments to ease cash flow challenges that may affect taxpayers.
- Waiver of penalty for late payment of liabilities under PAYE that were due during the period when the state was under lockdown (March-May 2020).
- Waiver of penalties due on late filing of 2020 annual tax returns (Form A).
- Waiver of interest and penalty components of outstanding tax audit liabilities from 2009 to 2015 for entities that present and keep to a structured payment plan that terminates on or before December 31, 2020.
- Grant of tax credits of 20% of cash and kind donations made for COVID-19 by resident individuals to Lagos State Government for the 2021 Year of Assessment only subject to a cap of 35% of tax due.
- Increase of payment channels to make payment of taxes easier, simpler and more convenient for all.
- Adopting of video conferencing as the default mode for conduct of Tax Audit Reconciliation Committee (TARC) meetings in consonance with social distancing advisories from Government and other relevant authorities.
The Lagos state government expressed hope that all residents of the state would take advantage of these palliatives and reciprocate the government’s kind gestures by discharging their civic responsibilities by promptly paying their taxes and levies to the state.
Jumia sees competition from startups in growing African e-commerce market
Investors have experienced a couple of twists and turn since the stock debuted in New York.
One of Africa’s leading e-commerce firms, Jumia Technologies AG, is facing a new set of competition from startups in the Africa e-commerce and logistics market, after the coronavirus pandemic increased the demand for online deliveries.
The Co-Chief Executive Officer of Jumia, Sacha Poignonnec revealed that the restrictions and lockdown, which were implemented by various countries as part of measures to contain the spread of the coronavirus, have attracted more entrepreneurs into the e-commerce business. He, however, demonstrated good sportsmanship, saying:
“Greater competition is to be welcomed, given there are still so few people in the region that transact online. I would rather grow the market than just try to take everything.’’
Nairametrics had reported that Jumia reported a loss after tax of 37.6 million euros (N17 billion) in the second quarter of 2020. E-commerce firms were expected to be one of the major beneficiaries of the coronavirus pandemic as consumers, during the lockdown, moved towards online transactions to meet their essential needs.
However, the losses were an improvement on the 66.7 million euros that was reported for the corresponding period in 2019. Apparently, the firm is trying to dig itself out of a massive loss hole.
The Lagos-based online market place, which is listed on the New York Stock Exchange, was one of the pioneers of internet trading in sub-Saharan Africa. Unfortunately, the company’s performance falls behind that of its peers around the world due to various challenges ranging from poor internet connection to now competition.
Jumia investors have experienced a couple of twists and turns since the stock debuted in New York last year. Allegations of corruption, persistent losses in the Nigerian business and a damning short-seller report contributed to an initial share-price slump. But the coronavirus outbreak has helped to greatly increase market value this year.
It was reported earlier that one of the early investors in Jumia, MTN Group Ltd, was considering selling its stake in the business. Reacting to this, Poignonnec disclosed that Jumia may offer MTN’s shares as part of a potential new equity offer within the next 3 years if the Johannesburg-based firm decides to sell.
He also revealed that expanding into food delivery business has helped to increase Jumia’s sales and footprint in its African markets, which are led by Nigeria. This includes grocery and pharmacy orders as well as restaurants takeaways.
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The logistics business unit of Jumai is another revenue stream as it is also now open to third parties who wish to use the firm’s network of drivers to deliver packages.
Ride-hailing: Lagos reduces operational license fee by 20%, as operators meet with Governor
In the meeting with the Governor, all parties agreed to newer resolutions.
The Lagos State Government has reduced the operational license fee placed on ride-hailing companies operating in the state by 20%.
The decision was taken during a stakeholders’ meeting with the State Governor, Babajide Sanwo-Olu on Friday.
Governor Sanwo-Olu’s media aide, Jubril Gawat, who disclosed the outcome of the meeting, also noted that it was attended by operators like Uber, Bolt, and BMP among others.
UPDATE: Today, The Lagos State Govt had a meeting with the E-Hailing Ride Stakeholders which was chaired by the Governor of Lagos State, Mr @jidesanwoolu at the Lagos House, Marina .. The Following resolutions were made which was agreed by ALL Parties: @Boltapp_ng @UberNigeria pic.twitter.com/WNrayVzpMG
— Gawat Jubril A. (@Mr_JAGss) August 14, 2020
The Backstory: Earlier this week, the Lagos State Government had announced new guidelines designed for ride-hailing operations in the state. According to the new regulatory framework by the state which will take effect from August 20, 2020, ride-hailing companies were required to pay the Lagos State Government a 10% service tax on each transaction.
The new guidelines required operators to pay a provisional license fee of N10,000,000.00 for every 1000 cars in their unit and N25,000,000.00 for every unit above 1000 cars. Annual renewal of the license would cost N5,000,000.00 for every unit of 1000 cars and N10,000,000.00 for units with over a thousand cars in operations.
The guidelines also required that the vehicles must be brand new or within the first three (3) years of its manufacture as specified by the manufacturer.
Now, during the meeting with the Governor, all parties agreed to newer resolutions which are:
- There must be comprehensive insurance cover which will cover drivers and passengers.
- A reduction of 20% on the operational licensing fees.
- A flat fee of N20 to be known as Road Improvement Fund which will be levied on each ride/trip.
- A 90-day compliance with documentation for the drivers – There will be a one-stop shop for all the documentation (especially LASSRA Card- Lagos State Resident Registration Agency.
- E- Hailing companies to work with various bodies in the business for a good relationship.
- There MUST be due diligence and background checks on all drivers.
- Riders should desist from offline trips and transactions.
- E-Hailing Firms must make necessary data available to the Govt.
Mr. Gawat also noted that media reports about operators being required to only use cars that are not more than 3 years are incorrect. Instead, the rule only applies to Corporate Cabs.
“This has nothing to do with the E Hailing business,” Gawat said.
On the requirements for sharing data, the Lagos state government said that data shared would be encrypted, and the personal information of ride sharers would not be disclosed.
“This will help Government clear up issues around congestion & also calculation for the charge paid to Government,” he added.
Uber had earlier told Nairametrics, after the guidelines were released, that it was willing to engage the government on regulations to ensure “our operations align with best practices locally and internationally.
“We have always been willing to engage with governments on regulations to ensure our operations align with best practices locally and internationally, as we believe regulations need to support innovative technology ideas that fit 21st-century businesses.
“The current proposed regulations are inconsistent and unclear. We are working to better understand how they will impact the future of our business and network of driver-partners. We will give an update in due course,” Uber said.
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The meeting with the governor was needed, as clarifications were required on the execution of the guidelines.