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N60bn Interconnect Debt Threatens Telecoms Industry

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  • N60bn Interconnect Debt Threatens Telecoms Industry

The Nigerian telecommunications industry is currently plagued by massive interconnect debt. While the verified figure is put at N60bn, the unverified is said to be around N1.27tn, EVEREST AMAEFULE writes

A massive interconnect debt valued at more than N60bn is threatening the nation’s telecommunications industry, investigation has revealed.

Interconnect debt results when an operator fails to settle the cost of termination of service rendered to it by another operator in the industry.

Interconnection is important in the telecoms industry because it enables the subscriber to experience the smoothness of a connected or one network.

Thus, with interconnection, a subscriber does not care and does not need to know whether the person at the other end of the network subscribes to another network operator.

Investigations revealed that but for the stringent conditions put in place for disconnection by the industry regulator, the Nigerian Communications Commission, some operators would have been disconnected as a result of high interconnect debt.

It was also learnt that interconnection was one of the issues that the regulator struggled to handle from time to time for the peace and harmony of the industry.

Apart from high interconnect debt, other interconnection issues troubling the industry include unverified interconnect debt claims, a just and equitable interconnect rate, interconnect infrastructure and policy.

The regulator is currently involved in an effort to determine a cost-based interconnect rate for the industry. It had hired PricewaterhouseCoopers to help it carry out a study for the determination of a cost-based interconnect rate.

The consulting firm presented its findings to the NCC and operators recently and a determination of new interconnect rate is expected as early as April.

Industry sources claimed that the unverified interconnect debt in the telecommunications industry was as high as N1.27tn.

The President, Association of Telecommunications Companies of Nigeria, Mr. Olusola Teniola, confirmed the high incidence of unverified interconnect debt in an interview with our correspondent, but added that only about N60bn of such claims had been verified.

Teniola said that the problem of high interconnect debt was impacting on the ability of operators to raise the money required for the smooth operation of the industry, noting that with reducing margins, the ability of the operators to raise funds was fundamental.

“It is a serious issue for the industry because it impacts on the ability of the industry to raise funds. This industry requires long-term financing,” he stated.

The Chairman of the Board of the NCC, Senator Olabiyi Durojaiye, confirmed at a recent meeting that the regulatory agency had been miffed by the high incidence of unpaid interconnect debt.

According to him, the problem is one of the issues that the regulatory agency sought to address through the recent Corporate Governance Code, which the commission articulated and gave the industry recently.

Durojaiye said, “The commission is particularly concerned with issues of massive interconnection indebtedness and unethical practice of masking of international calls. This sort of unethical behaviours is part of what the Code of Corporate Governance is set up to address.

“Henceforth, the commission will be taking very tough measures against any detected unethical behaviour and industrial malpractice in order to safeguard the health of the entire industry. Compliance with the spirit of the code is a necessity.

“Going forward, the commission, as part of its initiatives to ensure compliance, will intensify monitoring level of compliance. To encourage satisfactory compliance, the commission has instituted an annual reward system to recognise and commend the most compliant companies.”

In promoting the corporate code governance, the NCC has held three workshops across the country. The first one was held in Lagos; the second in Enugu, while the third was held in Kano.

A non-Executive Commissioner of the NCC, Mr. Clem Baiye, said apart from interconnect debt, some operators in the industry had acquired a reputation for not settling their debts promptly.

He expressed hope that the Corporate Governance Code would instil in the operators the consciousness of discipline required for ethical practices and self-regulation.

However, Teniola believes that the articulation of the Corporate Governance Code by the industry regulator is not enough to resolve the recurring problem of interconnect debt.

For the ATCON boss, the NCC needs to go beyond articulation to enforcement of the code, because according to him, the policy for interconnection is even more important.

He stated, “The Corporate Governance Code in writing will not solve the problem if it is not enforced. The need for enforcement cannot be overemphasised.

“The commission can ensure that each operator puts in place an automated robust system that can reconcile the interconnect debt situation. The regulator needs to force operators to pass traffic through interconnect clearing houses.”

Teniola said one of the issues responsible for unverified interconnect debts was that most interconnections happening within the industry were through peer-to-peer mechanism.

According to him, only 10 per cent of traffic must pass through interconnect operators.

If this percentage is raised to at least 50 per cent, he said, operators would have the confidence to invest in interconnect infrastructure.

This, he added, would eliminate the high incidence of disputed and unverified interconnect debts and invariably contribute to prompt settlement of such debts.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Guinness Nigeria Postpones Spirits Importation Exit, Extends Deal with Diageo

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Guinness Nigeria Plc has announced a delay in its plan to halt the importation of spirits as it extended its agreement with multinational alcoholic beverage company Diageo until 2025.

The decision, communicated through a corporate notice filed with the Nigerian Exchange Limited on Tuesday, cited a longer-than-expected transition period for separating its business from Diageo’s.

Initially slated for discontinuation in April 2024, the importation of premium spirits like Johnnie Walker, Singleton, Baileys, and others under the 2016 sale and distribution agreement with Diageo will now continue for an additional year.

The extension comes as the process of business separation between Guinness Nigeria, a subsidiary of Diageo, and Diageo itself faces unexpected delays.

In October, Guinness Nigeria had announced plans to cease importing spirits from Diageo, a move aimed at reducing its foreign exchange requirements.

However, the separation process has encountered unforeseen hurdles, necessitating the extension of the importation agreement.

The notice, signed by the company’s Legal Director/Company Secretary, Abidemi Ademola, highlighted the ongoing efforts by Guinness Nigeria and Diageo to implement the separation, originally scheduled for completion by April 2024.

The extension underscores the complexity of disentangling the businesses and ensuring a smooth transition.

Guinness Nigeria reaffirmed its commitment to the long-term growth strategy, aligning with Diageo’s decision to establish a new, wholly-owned spirits-focused business.

Despite the delay, both companies remain dedicated to managing the importation and distribution of international premium spirits in West and Central Africa, with Nigeria as a key hub.

The postponement comes amid challenges faced by Guinness Nigeria, including significant exchange rate losses, which amounted to N49 billion in the 2023 half-year operations.

Despite these setbacks, the company remains optimistic about its future prospects in the Nigerian market.

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Private Sector Warns: Interest Rate Hike to Trigger Job Cuts and Inflation Surge

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As the Central Bank of Nigeria (CBN) announced a hike in the Monetary Policy Rate (MPR) from 22.75% to 24.75%, concerns have been raised by the private sector regarding the potential ramifications on job stability and inflationary pressures.

The move, aimed at curbing inflation and stabilizing the exchange rate, has prompted apprehension among business operators who fear adverse effects on the economy.

Representatives from the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) and the Nigerian Association of Small Scale Industrialists have voiced their worries over the increased difficulty in accessing affordable credit.

They argue that the higher interest rates will impede the private sector’s ability to borrow funds for expansion and operational activities.

This, they fear, could lead to a reduction in business investments and subsequently result in widespread job cuts across various sectors.

The Lagos Chamber of Commerce and Industry (LCCI) acknowledged the necessity of the interest rate hike but emphasized the potential negative consequences it may bring.

While describing it as a “price businesses would have to pay,” the LCCI highlighted the current fragility of the economy, exacerbated by various policy missteps.

They cautioned that the increased cost of borrowing could stifle entrepreneurial activities and discourage expansion plans critical for economic growth and job creation.

Experts have echoed these concerns, warning that the tightening monetary conditions could exacerbate inflationary pressures and hinder economic recovery efforts.

With inflation already soaring at 31.70%, the rate hike could further fuel price hikes, especially in essential goods and services, thus eroding the purchasing power of consumers.

However, CBN Governor Yemi Cardoso defended the decision, citing the imperative to address current inflationary pressures and ensure sustained exchange rate stability.

He emphasized the need to restore the purchasing power of ordinary Nigerians and expressed confidence that the economy would stabilize by the end of the year.

Despite assurances from the CBN, stakeholders remain cautious, calling for a more nuanced approach that balances the need for price stability with the imperative of fostering economic growth and job creation.

As businesses brace for the impact of the interest rate hike, all eyes are on the evolving economic landscape and the measures taken to mitigate its effects on livelihoods and inflation.

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Breaking Barriers: Transcorp Hotels CEO Shares Journey from Crisis to Success

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Dupe Olusola

Dupe Olusola, the Managing Director/CEO of Transcorp Hotels Plc, reflects on her remarkable journey from navigating the depths of a global pandemic to achieving unprecedented success in the hospitality industry.

Appointed in March 2020, amidst the onset of the COVID-19 pandemic, Olusola found herself at the helm of a company grappling with the severe economic fallout and operational challenges inflicted by the crisis.

Faced with a drop in occupancy rates from 70% to a mere 5%, Olusola and her team were confronted with the daunting task of steering Transcorp Hotels through uncharted waters.

Undeterred by the adversity, they embarked on a journey of transformation, leveraging creativity and resilience to navigate the turbulent landscape.

Implementing innovative strategies such as introducing drive-through cinemas, setting up on-site COVID-19 testing facilities, and enhancing take-away services, Transcorp Hotels adapted to meet the evolving needs of its guests and ensure continuity amidst the crisis.

Embracing disruption as a catalyst for growth, Olusola fostered a culture of collaboration and teamwork, rallying her colleagues to overcome obstacles and embrace change.

Through unwavering determination and a commitment to excellence, Transcorp Hotels emerged from the pandemic stronger than ever, breaking profit and revenue records year after year.

“It’s indeed been a great opportunity to learn and relearn, to lead and to grow. When you see success stories, remember it’s a journey with twists, turns, ups and downs but in the end, it will all be okay”, she said.

Olusola’s leadership exemplifies the power of adaptability and perseverance, inspiring her team to transcend limitations and chart a course towards unprecedented success.

As Transcorp Hotels continues to flourish under her stewardship, Olusola remains steadfast in her dedication to driving innovation, fostering growth, and breaking barriers in the hospitality industry.

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