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NCC moves to check capital flight by telcos

By The Citizen

The Nigerian Communications Commission (NCC) is moving to check capital flight by telecommunications operators as it reviews its guidelines on confirmation of reasonableness of services (CRS) often claimed by operators.

Considering the special nature of telecom transactions, the NCC was charged with approving and issuing of reasonableness certificates for all intangible telecoms transactions denominated in foreign currencies.

It was gathered that in spite of the significant growth recorded in Nigeria's telecoms industry since it was liberalised in 2001, very little of the $25 billion Foreign Direct Investment (FDI) in the sector over the years has been retained in the country.

To this end, the NCC is reviewing its CRS guidelines to reflect current industry dynamics in a bid to address the issue of capital flight as well as encourage the development of software skills and local content in the country's vibrant telecommunications market.

The country's telecoms industry, according to industry watchers, loses billions of dollars annually in remittances on software purchases for network expansion and licence renewal, international roaming traffic service for voice and SMS, bandwidth purchase from offshore carriers, amongst others.

This current development, according to the commission, has necessitated the review of the guidelines to bridge the gap between FDI in telecoms and CRS remittances. The NCC is also looking to ensure efficient utilisation of foreign exchange (FOREX) by telecoms companies.

In 2002, the Central Bank of Nigeria (CBN) requested for regulatory collaboration and support from the telecoms regulator for the CRS, specifically for telecoms-related transactions.

Based on the partnership, the NCC provides expert advice to the apex bank on CRS transaction remittances. Though CRS is based on CBN's regulation on international trade transactions, the telecoms regulator took over this regulatory oversight to support the apex bank.

The commission developed the initial guidelines for CRS application processing in 2003, clearly highlighting expectations from the bankers, telecoms operators and the vendors in respect of CRS invoices. But the guidelines do not address the realities of today.

Lolia Emakpore, director, policy and competition, NCC, said the commission processed CRS invoice applications valued at $894.5 million in 2012. She spoke at a stakeholders' conference on CRS held in Lagos, Tuesday.

According to her, software remittances accounted for over 40 percent of the total cost of CRS processed over the last three years, adding that the NCC processed and approved over 5,580 invoices in the telecoms industry between 2010 and 2013.

'Over 745 applications were declined due to integrity tests, ranging from over-invoicing, expired contract agreements, as well as duplications of invoices, etc,' she said.

Emakpore identified submission of invoices with job completion date that is over two or three years, expired contract agreements, and lumping of invoices for software and the associated hardware elements as some of the challenges relating to CRS processing, adding: 'We have dealt with overdue invoices - over six months from date of issue.'

On the amendments, she said: 'We propose the following amendments to the existing CRS procedures: Invoices submitted to the NCC must not be dated more than 6 months from the date of job completion; extension of the initial 14 days processing cycle to 15 working days; basic operating software with associated hardware components does not qualify for CRS processing.'