Paper by Director, Policy and Competition

Director, Policy and Competition

NCC Mrs. Lolia Emakpore

CONFIRMATION OF REASONABLENESS OF SERVICES FOR FOREIGN EXCHANGE TRANSACTIONS IN THE TELECOMMUNICATIONS INDUSTRY: TRENDS, CHALLENGES & WAY FORWARD

Presented by





Mrs. Lolia S. Emakpore

Director, Policy and Competition

Nigerian Communications Commission


　

November 05, 2013

OUTLINE Introduction
Types of Intangible Telecommunication Services
Trends
Subsisting Guidelines & Industry Dynamics
Challenges
Way Forward
Conclusion
　

INTRODUCTION
The Confirmation of Reasonableness of Services (CRS)is a regulatory collaborative and support initiative between Central Bank of Nigeria (CBN) and Nigerian Communications Commission (NCC)
The CRS is based on CBN Regulations on International trade transactions
NCC provides expert advise to CBN on Reasonableness of Transactions and remittances for intangible goods.
CRS commenced in 2002 with focus on telecom intangible


INTRODUCTION
NCC developed the initial Guidelines for CRS application processing 2003, after an industry consultation, incorporating the expectations from Key Stakeholders, Bankers, Operators and the Vendors.


INTRODUCTION ..Contd.
Imperatives for Confirmation of Reasonablessness of Service are to:
Check Capital Flights
Encourage Development of Telecom Software Skills and Local Contents in Nigeria
Ensure efficient utilization of Forex by the Telecoms companies.
Control of Forex Round Tripping
Bridge the gap between Telecoms Foreign Direct Investments (FDI) and CRS remittances


TYPES OF INTANGIBLE TELECOMMUNICATION SERVICES
These include:

International Roaming traffic service for voice and SMS

Bandwidth Service for internet and data traffic

Interconnection Services

Software Purchases for Network Expansion and System upgrades

Software License renewal and Network integrity Maintenance

Blackberry Services and arrangements with Research in Motion.


TRENDS
Over the years, the NCC processed CRS invoices applications running into millions of pounds sterling, dollars and euro currencies as follows.


TRENDS
Increase in Software Purchase for Network Expansion and Upgrades
Software remittances accounts for over 40% of the total cost of CRS processed over the last three years as shown in the Table above.
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.

GUIDELINES ON CRS PROCESSING
Sequel to the 2009 forum, the NCC developed the following guidelines:
Invoice authentication (duly signed, dated and numbered)
Invoices submitted must not be dated beyond(6 months) at the time of presentation to the NCC
Early commencement of expiring contract agreements
Provision of Job Completion Certificates & Site Inspection(where necessary)
Separation of software and hardware components in the invoices, etc
Independent verifications and third party confirmation of prices
The processing time line of 14 days from the date of receipt of CRS applications from the Banks.


INDUSTRY DYNAMICS
Due to Global Trends and Rapid Technology Changes
There is a need to Review the current CRS Guidelines and Procedures to reflect industry dynamics
The reviewed CRS guidelines would address emerging challenges.


CHALLENGES
The current challenges experienced processing include:
Over due invoices – over six months from date of issue.
Submission of invoices with Job completion date that is over two or three years
Expired Contract Agreements
Lumping invoices for software and the associated hardware elements
Operators distributing same set of CRS invoices applications to two or more different Banks for processing
Bankers requiring the NCC to approve Contract Agreements between Operators and Vendors


CHALLENGES.. Contd.
Delay in receiving responses from operators on queries raised during processing.
Invoices do not reflect amounts stated in the contract agreements
Incomplete Documentations
Invoices not duly signed by Operators and vendors (signature, date, name of signatory, company stamp, etc) by both parties.
Arithmetic errors in Bank letters and invoices
Aggressive follow-up of CRS applications by Vendors
　

PROPOSED AMENDMENTS
The following are proposed 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-day cycle
Basic Operating Software with associated Hardware components does not qualify for CRS processing.


PROPOSED AMENDMENTS
Bank should reflect each Vendor invoices rather than multiple Vendors’ invoices combined in one application/letter.
Invoices submitted on expired contract agreements shall be declined.
Submission of same set of invoices by Operators to multiple Banks shall be sanctioned


PROPOSED AMENDMENTS Operators to submit certificate of delivery and installation of software within three months of completion specifying:
(i) Location (ii)Date of Installation (iii)Expiration date (iv)Specification of the intangible products
NCC will monitor from time to time the installation and deployment of approved software and other related intangible services on the operators’ networks
　



CONCLUSION
Need to develop local capacity and skills in Software development aimed at reducing forex remittances, increased local content and creating employment as well as entrepreneur opportunities.
　
　
　

THANK YOU