A new mobile termination rate (MTR) regime for voice services among telecoms companies in Nigeria is underway as part of regulatory measures aimed at creating a level-playing field for all operators and ensuring the continuous growth of the nation’s $70 billion telecoms industry. KUNLE AZEEZ reports
Globally, interconnection is critical to the growth and development of the telecommunications industry and without it, it would be difficult, if not impossible, for subscribers on one network to call other networks, according to experts.
Till date, a key component of the commercial aspect of interconnection is the determination of interconnection rates amongst network service providers.
Already, the telecommunication regulator, the Nigerian Communications Commission (NCC) has said a new mobile termination rate (MTR) would take effect from March 1.
Earlier on September 16, 2016, the NCC, had reviewed a somewhat lopsidedness in the voice termination rate for international inbound traffic, which has made telecoms companies in Nigeria to be net payers of higher interconnection to foreign companies.
To address this imbalance, the regulator reviewed the termination rate from N3.90/min to N24.40/min, for all telecoms companies licensed in Nigeria including the Global System for Mobile Communications (GSM), code division multiple access (CDMA) and fixed line networks, thus, representing over 700 per cent increase.
As at that time, the Commission took the decision as part of an ‘interim measure’ to address the lopsidedness in the termination rate for inbound international calls in the nation’s telecommunications sector. Also, the interim rate was designed to subsist pending the conclusion of a study of the determination of cost-based pricing for Mobile Voice Termination Rates (MTR).
Need for cost-based MTR regime
In a proactive move to ensure continuous growth of the industry, the NCC had recently held a stakeholders’ forum on the cost-based study in Lagos for the determination of mobile voice termination rate for the Nigerian telecommunications industry.
Speaking at the forum, the Executive Vice Chairman of the NCC, Prof. Umar Danbatta, who was represented by the Executive Commissioner, Stakeholder Management, Mr. Sunday Dare, noted that apart from the first interconnection rate, which was based on negotiation between the incumbent operator (NITEL) and other operators, all other determinations have been handled by the Commission due largely to two reasons.
One of the reasons, according to Dambatta, was the negotiated interconnection rate fraught with many controversies, secondly, and more importantly, was a need to ensure interconnection rates are cost-oriented in line with international best practice.
Previous MTR regimes
Till date, there have been four interconnect cost determination regimes in 2003, 2006 2009 and 2013.
According to Danbatta, the 2003 regime was determined via a benchmarking exercise, while the 2006, 2009 and 2013 regime were cost-based and a glide-path asymmetric regime was adopted in 2009 and 2013 respectively, with the 2013 regime expected to expire in 2016.
“However, economic factors such as the rapid devaluation of the Naira in 2016 and the fact that Nigerian network service providers became perpetual net payers to their overseas interconnecting partners, led to the commission setting an interim rate of N24.40 kobo per minute for inbound international traffic after carrying out a benchmarking exercise with other jurisdictions and this rate will subsist until a cost-oriented rate is determined by the commission,” Dambatta said.
Meanwhile, Danbatta explained that further to the above and the expiration of the 2013 interconnect region in 2016, the commission engaged the services of the consultant PWC, United Kingdom (UK) to review and update the existing model taking into account the changes that have occurred over time and produce an interconnection cause model that is more in line with the current realities in Nigeria,” Dambatta stated.
The EVC disclosed that this project formerly kicked-off with the initial stakeholders’ forum held on February 15, 2017 with the primary aim of introducing the consultant to the industry, informing operators of the objectives of the study, and seeking their active participation by way of providing the requisite data and order Information for the study.
He explained that this was immediately followed by a one-on-one meeting with operators and subsequent visits to the offices of some operators for data collection and re-validation during the course of the study.
Danbatta reiterated that the commission has an obligation to create a level playing field for all operators and ensuring the continuous growth of the industry as such, NCC shall ensure the determination of a mobile voice termination rates that truly really relate the cause of deploying the service and interconnection of networks in Nigeria.
Speaking through the President, the Association of Telecoms Companies of Nigeria (ATCON), Mr. Olusola Teniola, the telecoms operators agreed with the Commission that the interim MTRs are long overdue for review and especially when the foreign exchange (forex) issue and the devaluation of the Naira against foreign currencies has created a significant disparity in situations when calls are placed off-net.
According to Teniola, “it appears that there isn’t any evidence to support the claims that the MTR is lopsided. In fact, the recent PwC findings indicated that asymmetrical or symmetrical structure hadn’t had any significant impact on the competitiveness of the Nigerian voice market over the period of the current MTR rates.
“So it suggests that the voice market is already saturated and maybe there are needs to be more incentives placed in the market for increased voice penetration in communities that are still yet to make a call that has already been taken for granted by more than 75 per cent of the population.”
Ratification of MTR categories
He, however, noted that NCC hasn’t decided or made any decisions yet about what new rates will apply from 1st March 2018,” he said.
“It appears that the PwC study recommended categories of MTRs depending on the size and shape of the operator and this, as I write, still needs to be fully ratified and agreed by each operator that this makes business sense.
“Again, it appears that if the MTR rates are reviewed more frequently and the retail voice price in the market reflects a reasonable margin for each operator then this exercise is worthwhile, otherwise, it appears that any further retail price decrease, which is inevitable, will further erode some of the players’ business models unless a significant ramp-up in call volumes is witnessed.”
PWC’s tested model
Asked operators expectations from the study, Teniola said, the PwC study was very empirical and evidence-based and “their model is tried and tested against other jurisdictions and they pointed out that this model had been tailored to our unique environment.”
According to him, “ATCON is not privy to the model and as long as our members have provided full and valid cost data (especially national transmission costs and multiple tax charges) to the consultants, then, there are no reasons to doubt the outcome of the study. It appears that the long-term trend is for eventual convergence of the MTR and that each operator may have to negotiate favorable International Terminating Rates (ITR) with their counterparts outside the country – this makes for some interesting scenario developments playing out in the market going forward.
Meanwhile, as the industry awaits the outcome of the new MTR regime taking off in March, it is believed that the regulator’s effort demonstrates the long-term international benchmarking trends that all operators in the industry will need to take on board going forward towards ensuring a sustainable growth in the industry.
Currency swap: CBN to release framework next week
…slates StanChat, Stanbic IBTC as settlement banks
The Central Bank of Nigeria ( CBN) is set to release the framework for currency swap deal it entered recently with People Bank of China to formally kick- start the transaction in two currencies.
This is as the apex bank confirmed yesterday, that it has chosen Standard Chartered Bank and Stanbic IBTC as settlement banks for Nigeria, China currency swap.
Giving the update, CBN Governor, Mr. Godwin Emefiele, said Nigeria and her business men will reap enormous advantages from the currency swap deal with China.
On the currency swap, the CBN Governor said: “ After a rigorous two and a half year of negotiation with the Peoples Bank of China, we eventually struck deal for a currency swap between Nigeria and China with the intention to boost trade relations between both countries. Like you all know, it will just operate the way normal formal or letter of Credit transaction happened. Like you know, there are some importers from England that will give invoice in Pound Sterling if you want to import goods from England or in Europe, they will issue you invoices in Euro as against the dollars if the choices are theirs”.
“So under the China -Nigeria deal, the Form ‘ M’ or whatever name it’s called, by the time the framework is released, based on negotiation with Nigerian suppliers, that Chinese suppliers would begin to issue invoices in Renminbi . China is Nigeria’s largest trading partner controlling close to 35 percent of total trade. What that means is that all things being equal, by the time we conclude the framework, we should see to it that more invoices would be issued on the local currency against the traditional dollar.”
He described the swap deal a painstaking negotiations thoroughly worked out.
“This was a negotiation that was painstakingly done and I am optimistic that Nigerians will reap the positive impact from this and we do expect that by the time the framework is released, Nigeria will end up being the Renminbi trade hub in the West African subregion because there are currently only three countries in Africa that enjoy the currency swap deal between China and themselves : South Africa, Egypt and Nigeria” .
All await the long grains of Cross River
The quest for food sufficiency and resort to agriculture is a mantra that is fast spreading across the country. In words and deeds, many leaders are preaching the need for agriculture. In Cross River, the world is waiting for the long grain rice, which the state promised. CLEMENT JAMES reports from Calabar
Last year, the Nigerian Customs Service in Cross River State impounded about 1,521 (50kg) bags of foreign parboiled rice which were ferried into the Cross River State through its borders with neigbouring countries.
The Customs Area Controller for the Calabar free trade zone and Akwa Ibom area command, Patience Nanbyen Burromvyat, who made this disclosure, identified the routes as Cameroun and Equatorial Guinea.
That same year, the Nigerian Navy arrested two boats, which entered the country through the eastern waterways with a total of 671 bags of rice and 22 people on board.
One of the boats carried 14 Nigerians with 550 bags of rice, while the other carried eight Cameroonians with 121 bags of rice.
According to the then Flag Officer Commanding, Eastern Naval Command (ENC), Rear Admiral Atiku Abdulkadir, the boats were arrested by men of the Command on board of “Nigerian Navy Ship Makurdi” while on sea patrol.
Clearly, the motivation for this importation or in most cases, smuggling of rice into the country, even against national interest, is the huge profit that is associated with it. Indeed, before the Federal Government started waging war against importation of foreign rice into the country, billions of Naira was being frittered away in foreign exchange.
The lucrative nature of such business has however continued to serve as an alluring factor for those who care little or nothing about national interest.
Apart from the fact that foreign exchange is thrown away through importation of what can be safely and conveniently produced, the attendant job losses have contributed to the army of young Nigerians, who roam the streets in idleness.
To stimulate interest in made-in-Nigeria rice, the Federal Government initiated the Anchor Borrowers’ scheme with the aim of facilitating massive production of rice and its uptake by Nigerians.
In Cross River State, the Governor, Senator Ben Ayade, realizing that easy access to loan facility by rice farmers is key to the overall success of the rice revolution, caused the state to key into the Central Bank of Nigeria’s Anchor Borrowers Scheme.
So far, not less than 12,415 farmers have benefited from the scheme in the state, according to the Special Adviser to the State Governor on Revenue, who is also in charge of the programme, Mr. Emmanuel Akwaji.
He said farmers in all the Local government areas were provided with improved variety of rice seedlings, herbicides, pesticides, fertilizers and cash to facilitate cultivation of the produce.
He explained that successful farmers were selected after a rigorous screening process which included the validation of Bank Verification Number (BVN), and visits to rice farms to ascertain the readiness of each farmer in order to ensure that the beneficiaries had all the requirements as laid down by the Central Bank.
“We went through the different stages of the programme; we started by enrolling the farmers and visiting their farm sites for inspection, validation of BVN numbers and so on. We thoroughly screened the list of pre-qualified farmers before arriving at the number of real beneficiaries to ensure that all those who benefited were genuine farmers and not portfolio ones,” Akwaji explained.
Perhaps, it was to contribute to the Federal Government’s initiative in rice production that the Governor of Cross River State, Prof. Ben Ayade last year unveiled some bags of rice tagged; “Ayade rice,” which he claimed, was produced and packaged at the rice village in Ogoja.
In view of the huge interest in rice cultivation by many people in the state, the governor has since followed up this interest by constructing a multi-million dollar Rice City currently being undertaken in partnership with the Thai-Africa group.
The project, which covers over 3,000 hectares of land, is located along the Goodluck Jonathan bypass in Calabar.
According to the governor, when operational, the project is expected to produce specie of rice that is “highly vitaminized” and good for local consumption and export.
The effort of government to complement the Calabar Rice City and create its brand in the rice sector has resulted in the construction of the state of the art rice mill in Ogoja.
Our correspondent recently undertook a visit to the rice plant and discovered that it is set to commence business.
For instance, virtually all the equipments have been installed.
From the Intelligent DC series colour sorter of large capacities which helps in mass and high speed data transmission system with a strong anti-jamming power, to CCD colour sorter which has high quality trough with an extra width of 300mm, the plant is merely awaiting commissioning.
This sorter has a special anodizing treatment technique which ensures high quality yield.
There is a combined structure of track transmissions and the colour sorting. The stable transmission of materials is able to effectively increase the take out ratio and the net sorting accuracy rate, and this, in turn, will effectively reduce the percentage of damages of the materials in the process of colour sorting.
Our correspondent noticed a rail-like facility which meanders through the expansive hall with the job of sieving the rice, making sure that no stone or any other external element is allowed into the long grain specie.
The rice milling machine consists of two chambers. The first one is the huller. This chamber removes the rice hull. When the hull is removed, the rice becomes brown rice. Brown rice is passed to the next chamber to polish. Polishing is the removal of the outer layer of the brown rice. This layer is also called bran.
When the bran is removed, the rice becomes polished rice and another machine is handed the responsibility of coating it with protein material to become coated rice like the imported rice.
The import of this sophisticated technology in rice production did not go unnoticed as the leadership of Rice Farmers Association of Nigeria, led by its national Vice President, Segun Atto, recently commended the governor for constructing a state-of-the-art mill which is regarded as the best in Africa with the capacity to generate N100 billion revenue annually.
Atto said:“What we have seen so far is very incredible because this is the first time I am seeing this type of thing in the whole country. We are so impressed with what we are seeing today. When we were invited to come and witness what is going to happen here, we never envisaged seeing this kind of facilities.”
While assuring that the group will partner the state, Atto said: “In terms of partnership with the state, we have a lot of areas to benefit from each other. The first benefit is that whatever they are producing here, we are ready to partner them and we will off-take some of them for our own multiplication so that it can be circulated around the country.”
For Chief Godswill Akpabio, the immediate past governor of Akwa Ibom state and Minority Leader in the Senate, sheer technological sophistication of the rice seedlings plant signposts the vision of a great leader.
Akpabio said: “This seeds multiplication plant is the first in Sub-Saharan Africa and with a very high yield producing seedlings, fully vitaminized that when cultivated, will not only feed the people of Cross River State and Akwa Ibom, but the whole of Nigeria. I am really amazed and I say bravo to Governor Ayade.”
Meanwhile, a group of farmers in the state have been falling over themselves to identify with the state government in order to be the first to benefit from the rice plant.
Our correspondent spoke to a farmer in Akpabuyo, who is coordinating farmers in that local government area, Asuquo Nyong and he said rather than wait for the plant to kick-start production and let off its long grain produce to people outside the state, farmers in the state were willing to follow up progress of work to its conclusion.
Nyong said; “We are looking forward to being the beneficiaries of the special variety of this rice. We have brought farmers from other parts of the country to come and assess this plant and what it can produce and they are willing to do everything to benefit from it. We are not going to sleep and allow this opportunity to pass us by.”
He said apart from accessing the seedlings, the finishing product from the Ogoja mill would also be bought and packaged for both national and international consumption. According to him, the state would witness a revolution in the agricultural sector, especially in rice production in no distant time because of the activities at the plant.
“Don’t forget that apart the seedlings, there is the value chain aspect of it and we in the agricultural sector will liaise with the plant management to explore other areas of usage. Believe me, this rice plant is the best thing that has happened to our state in particular and the country in general,” Nyong posited.
There is no doubt that the current struggle by the Federal Government to keep smugglers of rice out of market can only be made easier with the production of best quality rice in the country, comparable not only to the Thai rice, but the Basmati rice, the Chinese Black rice, Jasmine rice, Paella rice, Risotto rice and the Sushi rice of this world which seems to be the intention behind Ayade’s innovative rice plant.
Banks grapple with rising audit fees
Nigerian banks’ on-going efforts to curb expenses seem not to be yielding results in the area of audit remuneration as findings by New Telegraph show that such fees are on a steady rise.
For instance, analysis of 2017 full year results of five deposit money banks (DMBs) show that they spent a total of N2.76 billion on audit fees last year compared with a total of N2.41 billion in 2016.
The banks are Guaranty Trust bank, United Bank for Africa (UBA), FirstBank of Nigeria Limited, First City Monument Bank (FCMB) and Sterling Bank.
Specifically, the analysis indicates that of the five banks’ financial statements reviewed by our correspondent, leading Tier 1 lender, FirstBank paid the highest audit fees of N856 million in 2017 as against N803 million it paid in the previous year.
First Bank was followed by another Tier 1 lender, Guaranty Trust Bank (GTB), which coughed out N712.25 million as audit fees last year compared with N596.23 million that it paid in the 2016 financial year.
The other Tier 1 bank, among these five lenders, UBA, reported that it paid N607 million as audit fees in 2017 as against N490 million it paid the previous year.
It was the same situation for Tier 2 lenders as both FCMB and Sterling Bank also reported higher audit fees for the 2017 financial year compared with the figures they announced for the previous year. FCMB, for instance, reported audit fees of N372.83million for last year, which was higher than the N324.63 million it paid in 2016, while Sterling Bank said its audit fees went up to N215 million last year as against N199 million that it paid in 2016.
Analysts point out that there has been a significant increase in audit fees paid by banks in the country since 2012 when the lenders were mandated by the Central Bank of Nigeria (CBN) to adopt International Financial Reporting Standards (IFRS).
IFRS are a set of international accounting standards stating how particular types of transactions and other events should be reported in financial statements. Issued by the International Accounting Standards Board (IASB), IFRS were adopted by the Nigerian banking industry on January 1, 2012, as part of measures to improve reporting practices, transparency and disclosures, among lenders.
The adoption of these standards resulted in auditors charging banks a lot of money to produce bulky annual reports, running into hundreds of pages compared with the less than a hundred page reports that lenders used to send to their shareholders prior to the industry’s adoption of IFRS.
In a chat with our correspondent, a financial analyst, Mr. Festus Ogieva, noted that several studies had shown that audit fees have become significantly higher under the IFRS accounting standards regime than when the industry was using the Nigerian Statements of Accounting Standards (SAS).
He said: “You cannot compare the volume of information that banks are required to provide under IFRS with what they used to disclose under SAS. Obviously, IFRS adoption has significantly increased the amount of work that auditors have to do in auditing banks’ books. Even though IFRS has improved financial reporting quality, banks have to pay more as audit fees.”
He, however, argued that eyebrows would not be raised if high audit fees help banks to detect fraud.
“There is no evidence that the high audit fees is helping banks to detect fraud as data from the CBN and the Nigeria Deposit Insurance Corporation (NDIC) continues to show that the level of fraud in the system is still on the high side,” he stated.
It will be recalled that NDIC had in March this year announced that it would investigate some banks over the high incidence of fraud and forgeries caused by the non-rendition of returns to the Corporation.
According to the Corporation, it made the decision to probe the banks following a report from its off-site supervision of the DMBs, which revealed the number of fraud cases attributed to internal abuse by members of staff of banks had increased from 231 in 2016 to 320 in 2017.
The Head, Communications and Public Affairs Unit, NDIC, Mohammed Ibrahim, said the 26 responses received from banks in 2017 cited 26,182 cases of fraud and forgeries, which were 56.30 per cent higher, compared to the 16,751 cases reported in 2016.
He stated that the amount involved in the fraudulent activities documented by the Corporation rose by N3.33 billion from the N8.68 billion reported in 2016 to N12.01 billion in 2017.
Ibrahim added that the 22 licensed commercial banks and four merchant banks rendered 286 returns on dismissed workers as a result of fraud and forgeries during the 2017 period.
He stated: “Out of the 26,182 fraud cases reported by the 26 licensed banks, 320 cases were attributable to internal collaboration by bank staff. A total of 320 bank employees had their appointments either terminated or were summarily dismissed in 2017, as against 231 in 2016.”
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