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SME logistics companies struggle for survival as NIPOST fee, multiple levies pile on

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SME logistics companies struggle for survival as NIPOST fee, multiple levies pile on

Adetoke Ogunranti, a multimedia journalist, started her small logistics company in March with four motorcycles. She aimed to have another source of income. Three months later, Ogunranti was forced to sell off two of the four bikes.

“Police, local government officials and NIPOST are taxing out of business,” Ogunranti said on Friday evening. “There was a month I paid ₦23,000 to extortionist policemen.”

Ogunranti is one of many logistics company owners who are being forced out of business by harsh policies and illegal taxes.

“This extortion from Local Government and constant harassment from thugs or touts are way too much,” Mercy Makinde, the chief executive officer of Amazon Delivery, which started operations in May 2020 said.

“Every local government has its own papers. Ikorodu alone has three papers. Yet all you really need to operate a dispatch company in Lagos is a letter of clearance from the Ministry of Transport after your Nigerian Postal Services license, ” Makinde said.

Earlier in July, OPay announced the closure of three of its business units in Nigeria including its logistics service, OExpress.

OPay blamed the harsh business conditions in the country, the ban on the operations of the commercial motorcycles, and the lockdown induced by the COVID-19 pandemic.

First a logistic boom
The demand for logistic companies came with the rise in the volume of businesses done online, either on established e-commerce platforms or on social media.

A 2019 document by the United States’s Department of Commerce put the value of the e-commerce industry in Nigeria at $12 billion. Another estimate valued it at $18 billion. The US Commerce Department said it expected the industry to be worth about $75 billion by 2025.

While big players such as Jumia and Konga have recognisable websites and logistic operations, small and medium scales operators, who favour social media, rely on independent logistic companies to deliver products to their customers.

As the numbers of small and medium-sized vendors and the volume of patronage increase, so does the demand for more logistics companies to bridge the gap between them.

…and then comes the pain
Makinde said that, before she started her Amazon Delivery in May, she paid all necessary fees to the government. That included 250,000 licensing fees to NIPOST.

NIPOST said in a statement that the fee was introduced as a part of new regulations aimed at upping ease of doing business, ‘rejigging’ the logistics and courier sector of the economy and improving the efficiency of the players in that sector.

The new regulation categorised logistics companies into international, regional, state, municipal or intra-city, and SME operators.

International operators are to pay ₦20 million as a license fee, national ₦10 million and regional operators ₦5 million. State, municipal and special SME operators are to pay ₦2 million, ₦1 million and ₦250,000 respectively. Each operator, irrespective of the category, will pay 40% of the license fee as renewal fee annually.

“The new regulations that are a great improvement on the old one, are aimed to rejig the logistic and courier ecosystem of the economy and significantly improve efficiency, and make courier and logistic operation more effective, in line with President Muhammadu Buhari’s administration policy on ease of doing business,” said NIPOST’s General Manager, Corporate Communications, Franklin Alao.

Minister of Communications and Digital Economy Isa Pantami said on Saturday that the fees were not part of the new regulations he approved. Pantami said the NIPOST’s Postmaster-General was contacted on Friday to put halt the collection of the fees.

But at least five SME operators told The Guardian that the imposition of the licensing fee without proper consultation with operators and NIPOST’s refusal to give them time to pay may have been deliberate.

Already, logistics companies are closing down, some temporarily, until they can deal with the challenges of paying the fees and constant harassment in the hands of officials, who claim they work for NIPOST and local governments.

A few operators The Guardian talked to on Friday and Saturday said they were properly registered with NIPOST and the Lagos State Government. But that has not mitigated their pains.

They complained of multiple—and mostly unknown—“ridiculous” levies. They said their motorcyclists were harassed by touts working for the government.

“We launched in May 2020 with the mindset that we were on the side of the law,” Wendy John-Opute of Tepco Logistics said. Little did we know we would be held by some touts on the road that claims to be members of the task force enforcing the law on behalf of Lagos State Government.

“We were harassed and arrested because of the papers which the MVAA claims Lagos State isn’t issuing.”

The documents John-Opute referred to include mid-year licence, stage carriage and documents, and a goods-only paper (in Ikorodu alone).

Several calls and an SMS sent to the spokesperson of Lagos State Ministry of Transport were not immediately replied.

Is NIPOST to blame?
A strategy expert and the convener of Lagos SME Bootcamp, Ayo Bankole, told The Guardian that it is abnormal for NIPOST to be a regulator and operator in the same industry. Bankole said NIPOST may have devised a way of kicking SME operators out of business to remain relevant.

He insisted no data will support NIPOST’s demands of such licence fees from medium and small-sized operators.

“For a lot of companies on the upper end of the MSME spectrum, their capital base may not be more than ₦10 million,” the strategy expert said. He added that “taking ₦2 million out of that ₦10 million will have a huge impact on their business. I’m so pained that SMEs contribute so much to this economy. Most [are] on survivalist mode and callous regulators like NIPOST will ruin them.”

The ongoing clampdown on logistics company motorcyclists in Lagos, Bankole, said, may be the result of a collusion between the federal agency and Lagos State Government.

In February, the state banned the operations of commercial motorcyclists and tricyclists, pointing to security, passenger safety and disregard for traffic laws as reasons for that law. Ride-hailing companies such as Gokada and Opay modified their operations to go into logistics. OPay eventually closed its logistics and ride-hailing service in July.

“I currently have one bike. Am I supposed to take a loan to cover for the license?” asked Olamiji Omosanaya, the owner of Truce Logistics Services in a chat with The Guardian on Saturday. She started the business after quitting an e-commerce firm that was on the verge of folding up.

“I have a rider who has three children and takes care of them from the salary he gets from this job. How is he expected to survive? The system has terribly failed us, and we need a change in [those] policies. NIPOST cannot regulate courier services while operating as one. That is a conflict of interest and shouldn’t be allowed in a sane climate.”

For Bankole, there is only one way out of the problems the logistics companies are facing: NIPOST should repeal its new regulations, and state governments should protect the businesses.

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