As coronavirus induced lockdown takes effect in many states in Nigeria, Electricity Distribution Companies (DisCos) are reporting 60% loss in revenue due to the economic impact of the lockdown on households.

Everyone is cutting down on expenses, prioritizing survival as people’s means of livelihood have been halted by the lockdown.

The DisCos that used to rake in millions through estimated billing said it has become difficult for many to pay due to the crisis. The situation has resulted in 60% loss of revenue for the distribution companies since the majority of Nigerian households are not metered. Data from the Nigerian Electricity Regulatory Commission (NERC) shows that only 3,895,497, representing 40.26% out of 9,674,729 registered electricity consumers use meters.

NERC attributed the unwillingness of customers to pay to estimated billing, which is believed to be more of extortion.

“Thus, 59.74% of the registered electricity customers are still on estimated billing which has contributed to customer apathy towards payment for electricity,” NERC said.

The Ikeja Electric Distribution Company (IKEDC), had in March, as a gesture of goodwill, promised not to disconnect customers during the first phase of the 14-days lockdown. This has made it difficult for the company to disconnect as usual, households who failed to pay their bills.

The DisCos had earlier got into negotiation with the Federal Government to provide free electricity for Nigerians in the face of the lockdown in order to cushion the effects. But the parties failed to reach a deal as the Discos demanded N200 billion from the FG as payment for the electricity supply during the period of the lockdown, but the government distanced itself from the demand.

Metering has been a bone of contention in the Nigerian electricity sector for long, a situation that has existed to the gain of the DisCos as many households are placed on estimated billing. The MAP initiative was introduced in March 2018, to solve the continuous problem between consumers and DisCos over billing but it has failed to live up to expectation.

In February, the NERC rolled a new regime of billing for the DisCos, putting a cap on estimated billing. In a document titled: Order on the Capping of Estimated Bills in the Nigerian Electricity Supply Industry (NESI), signed by James Momoh the NERC Chairman, and Dafe Akpeneye, its Legal, Licensing and Compliance Commissioner, the Regulator said there is a limit to how much the distributors could charge, especially residential areas.

According to the document: “A consumer of XYZ Disco resident in White Acre under R2 (single phase) tariff class has an energy cap of 78 kilowat/hour per month and a tariff of N42 per kilowatt/hour. The maximum that XYZ Disco can invoice such a customer is 78kW/hr x N24/kWhr =N1,872 per month.”

The document added that customers should not be compelled to pay estimated bills if DisCos do not provide prepaid meters.

“The customer shall remain connected to supply without further payment to the DisCos until a meter is installed on the premises under the framework of MAP Regulations or any other financing arrangement approved by the commission,” it said.

Unfortunately, this new regime failed to take effect as DisCos continued with their old pattern. Consumers were forced through disconnection to pay high rates of estimated bills because the marketers count on them to meet up with outrageous targets.

Recent development has however, turned the table around, and the hunter has become the hunted.

DisCos across Nigeria are lamenting about their losses as the priority of consumers have changed from bills to survival. Moreover, many businesses have been shut down following the lockdown order, and the distribution companies complain that the volume of energy supply remains the same.

It is believed that the metering plan (MAP) that was introduced last year has been sabotaged so that DisCos will continue to issue outrageous bills to unmetered customers.

The MAP programme allows third-party investors to provide meters at costs segmented according to the capacity of the meters, and thereafter, get paid through customers’ retail payment for electricity. The process has been abused so that consumers who applied for the meters hardly get them unless they pay twice the original cost.

One of the reasons for the scarcity and high cost of meters has been attributed to the upward review of import levy on electricity meters from 10% to 45%, by the Ministry of Finance. The implementation went into effect immediately resulting in abandonment of thousands of meters at the ports.

COVID-19 has turned the tide with a huge implication for the electricity distributors, limiting their earnings to 40%. And the DisCos are expected to lose more in revenue generation if the lockdown is extended beyond the two weeks.

The Federal Inland Revenue service (FIRS) issued a statement demanding that booming businesses in Nigeria increase their tax payment as other businesses have been shut down following the surge in coronavirus pandemic cases.

In circular entitled: Update On Palliative Measures to Cushion Effect of COVID-19 on Taxpayers, dated 22 April 2020, and was signed by the FIRS Executive Chairman, Muhammad Nami, the tax body asked corporate organizations to commence their annual tax return earlier than supposed, to enable the federal government to generate the much needed revenue.

“Further to my statement on Monday 6th April 2020, on the palliative measures put in place to cushion the effects of COVID-19 on Taxpayers and my assurance to keep you updated with information specific to Taxpayers as it becomes expedient. I wish to appeal to a section of taxpayers, whose sectors are experiencing a boom and significant increase of income at this point in time, for a high level of cooperation in payment of their taxes.

“As I have done in many public fora in recent times, I wish to acknowledge and reiterate the difficulty businesses are going through at this time of COVID-19 pandemic. You will note that early in the lockdown we put out palliative measures to cushion the effects of the economic shocks occasioned by the pandemic on taxpayers. Nonetheless, we wish to acknowledge that some sectors such as Telcos; financial institutions, e-commerce, supermarkets, manufacturers/processors of certain products, etc. are experiencing boom due to increased transactions as a result of the lockdown or even despite the pandemic.

“As is currently obvious, the economic downturn that resulted from the global shutdown occasioned largely by the COVID-19 pandemic has continued to put pressure on revenue generating agencies including the FIRS; thereby straining governments to bridge budgets funding gaps.

“In view of the above, I wish to specially make an appeal to corporate bodies in the sectors mentioned above to go the extra mile at this time to cooperate with us in making special arrangements to pay their taxes. They may consider, for instance, a situation where they can commence payment of their annual returns earlier than the due date apart from their normal monthly obligations. This has become necessary in order to ease some of the cash flow gaps being experienced by the government at this critical time.

“I look forward to positive responses from the aforementioned sectors. Let me assure you once again that we will continue to provide support to all taxpayers as directed by president Buhari in his lockdown speech of Sunday 29th March 2020, and will keep you updated with information specific to taxpayers as we deem fit,” the statement said.

As expected, backlash followed the statement. Nigerians reacting to the new step taken by FIRS believe it is quite insensitive for the tax body to be talking of taxes in the face of global pandemic that is taking a toll on businesses, which has other countries waiving taxes in order to sustain their economy.

“All you’re interested in is putting further strain on an already overstretched economy. How are financial institutions, e commerce, supermarkets or manufacturers experiencing boom when the purchasing power of the masses has been drastically reduced & there is restricted movement,” a Twitter user responded.

In another response, the FIRS was urged to employ another method in tackling the deficiency in revenue generation because none of the sectors of the economy is exempt from the ravages of the pandemic.

“It’s an ill-thought and knee jerk policy from the tax man. Like you said, virtually all sectors are limping from low purchasing power, devalued naira, increase in logistics and also sundry unbudgeted costs. A better tool kit would have been to use Tax Anticipation Notes,” a Twitter user wrote.

Compared to what other countries around the world are doing to help businesses, the FIRS’ move to implement early taxation is believed to be anti-business.

“Another low for the FIRS and this govt. other countries are giving businesses relief package, Nigeria is adding more burden. Dear business owners, pay your tax only as at when due. You need that cash more than the govt. this is not the time to be unnecessary generous,” Oke Umurhohwo wrote on Sunday.

Earlier, the Inland Revenue Service has announced some measures it has taken to help businesses. In a circular it shared on the 6th of April, the tax body outlined a 6-point provision it has made to ease the pain of economic strain on businesses. That includes using the e-filing platforms to submit documents instead visiting FIRS’ offices. Waiving the Late Returns Penalty (LRP) for early tax payers, extending VAT remittance from the 21st of the month to the last day of the month and the period of filing PIT returns for Foreign Affairs, Non-Residents, Military and police has also been extended to June 2020. Taxpayers who have difficulty offsetting their liability due to scarcity of forex were granted a window to pay with naira.

To many, these measures are much less a remedy to the plights of businesses because the national supply chain has been disrupted, and every business is feeling the heat. Companies have started laying off staff to ease the economic burden. And in the disruption of the national supply chain, no business is an island; it’s only a matter of time.

The telcos mentioned by the FIRS as an example of booming business are losing now more than other times as subscribers are being discreet with spending, many are relying on text messages for communication. It is believed that the Inland Revenue Service has made their decision based on the assumption that companies are depending more on online platforms to conduct meetings and conferences, which has been translated to mean more revenue to the telcom service providers.

However, the fury has been based on the FIRS’ inability to see that more businesses and people have halted their telcom services due to the lockdown and financial constraints stemming from the health crisis. And the supermarkets are likely going to run out of supplies very soon, with borders and ports shut, goods and service delivery will be hampered and the stores will have little or nothing on their shelves.

It also means that there is more withdrawal from financial institutions than deposits, a further strain on the banks that are now depending more on interest rates to generate revenue due to closure of businesses.

The ecommerce industry is symbiotic with other businesses. People make online purchases because they have the money. In the face of economic turbulence that calls for prudent spending, the online stores aren’t much better than others, especially when there is restriction of movement and transportation is limited to essential goods and services only.

The statement

UPDATE ON PALLIATIVE MEASURES TO CUSHION THE EFFECT OF COVID – 19 ON TAXPAYERS – 22nd April 2020

Further to my statement on Monday 6th April 2020, on the palliative measures put in place to cushion the effects of COVID – 19 on Taxpayers and my assurance to keep you updated with information specific to Taxpayers as it becomes expedient, I wish to appeal to a section of taxpayers, whose sectors are experiencing a boom and significant increase of income at this point in time, for a high level of cooperation in payment of their taxes.

As I have done in many public fora in recent times, I wish to acknowledge and reiterate my concern on the difficulty businesses are going through at this time of COVID – 19 pandemic. You will note that early in the lockdown we put out palliative measures to cushion the effects of the economic shocks occasioned by the pandemic on taxpayers. Nonetheless, we wish to acknowledge that some sectors such as Telcos, Financial Institutions, eCommerce, Supermarkets, manufacturers/ processors of certain products, etc are experiencing boom due to increased transactions as a result of the lockdown or even despite the pandemic.

As is currently obvious, the economic downturn that results from the global shutdown occasioned largely by the COVID – 19 pandemic has continued to put pressure on revenue generating agencies including the FIRS, thereby straining Governments to bridge budget funding gaps.

In view of the above, I wish to specially make an appeal to corporate bodies in the sectors mentioned above to go the extra mile at this time to cooperate with us in making special arrangements to pay their taxes. They may consider, for instance, a situation where they can commence payment of their annual returns earlier than the due date apart from their normal monthly obligations. This has become necessary in order to ease some of the cash flow gaps being experienced by the government at this critical time.

I look forward to positive responses from the aforementioned sectors. Let me assure you once again that we will continue to provide support to all Taxpayers as directed by President Muhammadu Buhari in his lockdown speech of Sunday 29th March 2020 and will keep you updated with information specific to Taxpayers as we deem fit.

Muhammad Nami

Executive Chairman