CRITICAL CONCERNS IN RELATION TO CERTAIN PROVISIONS OF THE NIGERIAN POSTAL SERVICES BILL (THE “BILL”)
PASSED BY THE SENATE ON THURSDAY, 19TH JULY, 2018
1. Requirement for Licensees to Contribute 2.5% of Turnover Instead of Profit
Article 39(2)(e) requires licensees to contribute 2.5% of their turnover to the Commission’s fund. This is not a fair method of levy as courier companies’ revenue encompass debts (some of which the courier companies may not be able to collect), several other taxes (FIRS, taxes and levies by various states of the federation, FAAN and airport charges, throughput charges by FAAN pension funds and NSITF, NHF, local government charges, signage fees of various states, etc.).
We propose 1.0 % of net profit rather than turnover. To gauge the viability and practicality of the proposed charge of 2.5% of turnover, NIACA examined similar situations that exist in other markets, and our findings justify our concerns about this proposed charge. For instance, in Kenya, the current annual operating fee for international courier companies is KSHS 100,000 (which is an equivalent of US$993.05) or 0.4% of annual turnover, whichever is higher. In addition to this fee, the Kenyan Communication Commission also collects a levy of 0.5% on gross annual turnover. Despite that Kenya levies this fee on annual turnover, the percentage is less than a fifth of what is demanded in the Nigerian Postal Bill.
On November 10, 2017, the South African Department of Telecommunications and Postal Services released a draft bill that would amend the Postal Services Act of 1998, creating a funding mechanism for a Universal Service Fund (USF). Although the draft bill does not give specific percentage fee, there is discussion of a levy contribution of an undefined amount merely to ensure universal services.
In Turkey, the Postal Service Law requires all service providers to contribute to a compensation fund at a rate equivalent to 2% of their net sales income from the provision of postal services, as well as an administrative fee of 0.0035% of net sales income from the provision of postal services.
2. Rate Fixing
The bill appears to require that courier companies not charge any rates or tariffs unless approved by the Commission, as Article 17(2) criminalizes charging rates not approved by the Commission. This in itself is anti-competitive, which is completely at odds with what the bill aims to achieve. Notably, Article 1(d) and 1(e) provides thus:
“The objectives of this Bill are …
(d) Encourage local and foreign investments in the Nigerian postal industry and the introduction of innovative services and practices in the industry in accordance with international best practices and trends;
(e) Ensure fair competition in all sectors of the Nigerian postal industry and encourage participation of Nigerians in the ownership, control and management of postal organizations”
Article 55(2) states that the Commission shall review and fix minimum tariffs for competitive products–cost coverage plus a reasonable contribution to overhead costs–from time to time in the interest of efficient and reliable service. Overheads vary from company to company, so the universal tariff is not feasible.
Article 55(3) requires licensees to submit any proposed tariff for approval by the Commission. This would hamper business. Denial or delay of approval would kill business eventually as business would operate at a loss and eventually fold up.
Rate fixing for courier companies is not only counterproductive but would stifle investment inflows. We accordingly propose that market forces be left to determine rates.
3. The Public Postal Operator’s Exclusive Power over Postal Articles Weighing up to 1 kg
Article 11(1) states that the Public Postal Operator shall have exclusivity over the delivery of postal articles weighing up to 1 kg. As currently drafted, this appears to suggest that even if there are consumers who wish to use courier for transport of time-sensitive documents internationally, a courier company would be violating the public postal operator’s monopoly by doing so. A clear distinction between postal articles and courier articles is required to denote that, if a customer chooses to have a courier company deliver a document weighing less than 1 kg, this would be a “courier” article and would therefore not be covered by this provision. If unchanged, this Article may have potentially significant negative impacts on commerce in the country (for example, in relation to bills of lading and other documents of trade).
If this provision cannot be dropped, we humbly request that there be some clarification to confirm that courier companies can provide their services in respect to documents with weight of less than 1 kg if sought by the customer. We have seen that in other countries a stipulation added to the effect that courier companies may carry such items if there is a price differential, for example charging higher than what the post office would charge. This, or some other differentiation, is required to avoid the imposition of a damaging monopoly.
4. Stamp Duty Provisions / Denotation of Receipts
Articles 14 and 15 imply that courier companies are expected to stamp waybills issued to its customers. The entire Stamping Protocol would affect the ease of doing courier business unless the Commission works in conjunction with the NPS and courier companies to identify how this can be done electronically and seamlessly. If this is not the intent of the provision, this should be clarified. We propose the establishment of a Memorandum of Understanding between the Commission, NPS and private courier companies on the modalities for implementing this provision without the requirement to affix a physical stamp on each shipment waybill.
5. Compensation for Loss or Damage of a Package
The entirety of the provisions within Article 21 should be stated clearly as relating exclusively to items carried through post (i.e. not express). Otherwise, these provisions will be contrary to the Nigerian Civil Aviation Act which lawfully domesticated the provisions of the Montreal Convention treating the issue of compensation for express shipments. To clarify, Article 22(3) to the Third Schedule of the Civil Aviation Act of 2006 provides thus:
“In the carriage of cargo, the liability of the carrier in the case of destruction damage or delay is limited to a sum of 20 United States Dollars per kilogram, unless the consignor has made, at the time when the package was handed over to the car special declaration of interest in delivery at a destination and has paid a supplementary sum if the case so requires. In that case the carrier will
be liable to pay a sum exceeding the declared sum, unless it proves that the sum is greater than the consignor’s actual interest in delivery at destination.”
We accordingly recommend that a provision be included in the bill that expressly and unambiguously states that issues of compensation relating to documents and parcels transported by courier companies shall be regulated by the Montreal Convention as domesticated by the Nigerian Civil Aviation Act.
6. Commission’s Power to Make and Publish Regulations
Article 51, which empowers the Commission to make and publish regulations relating to critical matters (such as fees, rates and quality of service) should also include a requirement for the Commission to consult widely with all impacted stakeholders before coming out with such regulations. We recommend that there should be an express provision in this Article that the Commission consult widely with all stakeholders before coming up with such regulations.
7. No Clear Distinction Between Courier and Postal Services
The bill makes no clear distinction between courier service and postal service. A clear distinction between the two would put the bill in proper perspective and help in determining what aspects of the bill should apply to Postal Operators (which is a different service from express or courier service).
Crucially, the United Nations Central Product Classification (CPC) confirms that “Postal Services” under CPC heading 7511 only cover the delivery of letters, parcels and packages “by the national postal administration.” These same services, if supplied by private courier companies, are not classified as “postal”, but rather as “courier services” under CPC heading 7512. Accordingly, different rules should apply to the operations of courier companies. For example, while provisions such as Article 10 (2a), 17(2b) and 51(1b) would readily be fitting for postal operators, same cannot be said of these provisions regarding courier companies.
So, for example, Article 11(1) states that the Public Postal Operator shall have exclusivity over the delivery of postal articles weighing up to 1 kg. A clear distinction between postal articles and courier articles is required, to denote that if a customer chooses to have a courier company deliver a document less than 1 kg, this would be a “courier” article and would not be caught by this provision. However if the intent of the provision is to confer such exclusivity, this would be an issue we would want examined more closely.
Furthermore, Article 31(a) states one of the functions of the Commission as having ‘the sole and exclusive responsibility for the regulation and supervision of the “postal sector”. There is nothing definitive to conclude that “postal sector” as used here includes the courier industry.
National Postal administrations are usually state monopolies and often limited by price differentials and types of services provided. The Postal Operator uses means authorized by International Postal Agreements (being the Universal Postal Union) for exchanging services with postal authorities in other countries. Postal administrations are also subject to the exemptions and privileges prescribed in these agreements. Courier service operators on the other hand are privately owned entities or publicly listed companies offering speedy delivery of letters and packages to enable global supply chains, value-added trade, and e-commerce. The emphasis is on specific delivery timelines, end-to-end control, and provision of proof of delivery with track and trace capabilities.
We view the legislation in its current form to be harmful to business, investment, and the Nigerian consumer. The exclusive access by the postal operator for all items weighing up to 1kg (2.2 pounds) significantly impacts carriers’ ability to service a significant share of the market in Nigeria. Small, low-value parcels are the hallmark of the growth of e-commerce across Africa, and limiting the access to these parcels exclusively to Nigeria post is debilitating to the investments that private carriers are making in Nigeria’s market. As the Nigerian Post is granted exclusivity to much of the market under the current text, private sector entrants will hesitate to invest in Nigeria given the parcel shipping limitations and burdens.
We propose that the entire provisions of the Bill be reviewed holistically with a view to making a clear distinction between postal service on the one hand and courier or express service on the other.
8. Power of the Commission to Suspend or Revoke License Without Appeal
Article 50 confers on the Commission the right to suspend or revoke a license. This section does not, however, provide for an appellate body to hear appeals against the suspension or revocation of licenses. We are of the view that the Commission should not be the final authority in view of implications for the company, employees, investors and national interest. We recommend that a provision be made in the section for an appellate body to hear appeals against suspension or revocation of licenses.
9. Representation on the Board of the Regulator
We observe that the membership of the Commission’s Governing Board does not include any representation by private courier associations who are critical stakeholders in the activities/business that this bill regulates. We recommend that Article 27(2) be amended to include a representative of the courier associations among the Board membership.