NIPOST Reform And Unbundling: Facts And Figures By Istifanus Sule
While considering the 2024-2026 Medium Term Expenditure Framework, the National Assembly was faced with a suggestion by its joint Senate and House of Representative committees of Finance, Loan and Debt Management on the two NIPOST Subsidiaries established by the immediate past administration of President Muhammadu Buhari. The committee suggested that the two subsidiaries should be investigated and if it is found that they are irregular, and illegally established, they should be wound up and deregistered.
The committee came up with this stand based on the information available on the use of individual names as shareholders instead of the Federal Government agencies those individuals were representing, wondering why that was so since NIPOST is a property of Federal Government. It was also, observed that for the reasons best known to the committees, the Bureau of Public Enterprises, the agency that anchored the reform and incorporation of the subsidiary companies was not invited by the chambers for cross-examination and facts findings.
Why did the Federal Government unbundle NIPOST?
In addressing the concern of the National Assembly, it is important to state that the Federal Government took the step to halt the underperformance of NIPOST in rendering its mandate as a first-class parcel delivery service.
There is no gainsaying that the NIPOST has lost its sway in the logistics delivery service despite the huge potentials in logistics industry that would have propelled the government raking in billions of naira as revenue from non-oil and gas sector. It is pertinent to note that many households in Nigeria have turned to logistics carriers without appropriate license. This is due to the unregulated nature and free-for-all entry and exit, in the absence of strong enforcement of the Regulators.
This shortfall is glaring as the logistics sector attracted various companies seeking to have a share of the new gold in the courier and logistics services while NIPOST that has been an autonomous entity since 1992 has been seen not utilize fast changing innovation and customer taste, to transmute into a leading courier and logistics service provider in the country.
In 2017, the Federal Government through the National Council on Privatization (NCP) took a bold step to reverse this trajectory trend and commenced the project Nigeria Postal Sector Reform initiative. The reform was meant to restructure, modernize, and optimize the operations of NIPOST.
The reform has unbundled NIPOST and created two subsidiary independent business entities, namely, NIPOST Transport and Logistics Services Limited and NIPOST Properties Development Company Limited. While the former is to handle the transportation and logistics, the latter was set up to develop and maintain the many properties of NIPOST spreads all over the country that worth trillions of naira on the philosophy of commercial viability.
NIPOST’s Dwindling Fortunes
Despite having offices in the 36 states of Nigeria and the FCT, NIPOST force in the market continues to dwindle with drop in revenue but increasing personnel cost. A cursory look at the NIPOST performance in actual revenue generation from 2016 to 2022 from the data released by the National Bureau of Statistics (NBS) and the Federal Government Budgetary allocations for the period 2016 – 2024 showed that the revenue of the agency reduced from N8.80 billion in 2016 to merely N3.01 billion in 2022 (66%) reduction. While within the period of 2016-2024, the Federal Government budgetary allocation to NIPOST continuously increased from N6.69 billion in 2016 to N18.45 in 2024. The analysis in tabular form is presented below:
Year
Actual Revenue
Budget
2016
N8.80 billion
N6.69 billion
2018
N7.05 billion
N9.09 billion
2019
N5.37 billion
N8.86 billion
2020
N4.71 billion
N9.09 billion
2021
N3.63 billion
N12.50 billion
2022
N3.01 billion
N13.20 billion
2023
Yet to be release
N13.70 billion
2024
–
N18.45 billion
As Nigerians await the unveiling of the revenue performance for the year 2023, it remains to be seen if the revenue would go up due to inflation and or the unification of the exchange rates. This would further show how serious the agency could meet up its projected revenue target of N10.8 billion in 2024.
The performance of the NIPOST in recent years shows that the agency has not invested in assets that would drive it in competing favourably in a sector that is perforated with various types of companies milking what the logistics industry offers to the Nigerian economy. Meanwhile, data shows that the agency has expanded its reach with an increased number of post offices and postal agencies. However, this expansion is not reflected in actual revenue growth.
This alarming trend poses a serious challenge to the fiscal space available for essential public services across various sectors such as security, healthcare, and education. The dichotomy between service expansion and revenue decline is vividly illustrated by the NIPOST financial performance in recent years. Over the span of seven years, from 2016 to 2022, the total revenue generated from NIPOST plummeted from N8.84 billion to N3.01 billion. Surprisingly, during the same period, the number of post offices and postal agencies saw a substantial increase, rising from 1,858 in 2016 to 2,251 in 2022.
One would logically expect that the expansion of post offices should correlate with an upswing in both operating and financial performance. However, the reality is quite the opposite, as the agency’s revenue continues to dwindle while the quality of its services becomes poorer.
The Annual Postal Services Data for 2016 indicates that the total mails, including domestic and international, amounted to 33.68 million. Domestic mail handled constituted 21 million (63% of total mails), dispatched abroad accounted for 7 million (23% of total mails) and mail received from abroad and delivered in Nigeria totaled 4.9 million (15% of total mails).
Moving to the Annual Postal Services Data for 2022, and the total mail handled, both domestic and international, increased to 35.6 million. However, a closer look reveals a concerning shift. Domestic mail handled decreased to 15.7 million, dispatched abroad amounted to 543,893, and mail received from abroad and delivered in Nigeria surged to 19.5 million.
This stark contrast in the figures underscores a deteriorating situation where service quality has not translated into revenue growth. Even in instances where performance indicators may have shown improvement, the financial bottom line remains unaffected. The expansion of post offices, a step that should have catalyzed increased revenue, has paradoxically led to a decline in the agency’s financial standing and effective service delivery.
In essence, NIPOST struggle to bridge the gap between service performance and revenue highlights a broader challenge in optimizing public services for sustainable fiscal health. This shows that NIPOST took an insignificant portion of the local and international market share in the industry. From the business perspective, the trend is attributed to arms-chair marketing strategy encouraged by the fact that the government is putting the wage bill, while the agency feels comfortable with the revenue generated in upsetting its operations cost.
This scenario calls for a comprehensive re-evaluation of strategies, perhaps emphasizing efficiency and innovation to ensure that service expansion becomes a catalyst for revenue generation rather than a drain on financial resources. Addressing this disconnect is essential to safeguarding the delivery of critical public services and maintaining a resilient fiscal space.
NIPOST Subsidiary Companies
Unlike existing NIPOST departments in charge of E-Commerce, logistics and property management, the new subsidiaries have been designed to operate independently and private sector driven devoid of public entity bureaucratic bottlenecks. It is also, important note that, unlike the parent company, NIPOST that is drawing huge funds from annual national budget, the subsidiaries are to utilize the take-off grant provided by the NCP to acquire necessary tools to embark on business to generate their personnel, operations, capital costs and remit dividend to the Federal Government.
While over the years, NIPOST only sublet its properties on long lease, dilapidated staff quarters, etc that generate meager returns, the new subsidiary company is opt for huge investment through Public Private Partnership (PPP) to resuscitate the properties for high returns on investment through Build Operate and Transfer (BOT) arrangement. Furthermore, NIPOST delivery machinery is seen to be ineffective due to delays in final delivery, of which the effect has resulted in customer dissatisfaction, loss of revenue, and loss of market share to competitors. Accordingly, the new subsidiary is poised to revert the trend by offering efficient and technologically driven operation for improved service delivery, as a self-sustaining entity.
Whereas corresponding NIPOST departments that have been in operation for decades are embedded and controlled by NIPOST management, the newly created subsidiaries are empowered to operate outside the NIPOST management control. The blueprint on the NIPOST reform that gives birth to the newly created subsidiary unveiled at the Bureau of Public Enterprises (BPE) (the secretariat of the National Council on Privatization) website, supported by the KPMG business plan provides for sustainable business operation.
As for the claim of irregularity in the registration of the two subsidiaries, the fact remains that the two agencies of NIPOST Properties & Development Company Limited and NIPOST Transport & Logistics Services Limited were duly registered with the Corporate Affairs Commission (CAC) by the Bureau of Public Enterprise. It was also confirmed that at the time of registration (June, 2020), the representatives of the subscribers to the Memorandum and Articles of Association (MEMART), being the Bureau of Public Enterprises (BPE), Ministry of Finance Incorporated (MOFI) and the Nigeria Postal Services (NIPOST), were listed as the shareholders of the Company holding the shares on behalf of the organizations.
The initial registration had the names of the heads of agencies as the shareholders in the agencies due to the prevailing law of CAC which enforced disclosure of beneficiary owners of companies registered on its portal for transparency’s sake. However, the reversal of this law through CAMA has allowed the shares of the agencies to be in the name of the respective federal government agencies with NIPOST holding 80%, the Ministry of Finance Incorporated (MOFI) and Bureau of Public Enterprises (BPE) holds 10% each. Accordingly, the BPE consulted the CAC and the records duly updated and the concern have been fully resolved.
It is pertinent to note that the creation of NIPOST subsidiaries is a positive move aimed at optimizing the services of the agency for the benefit of all Nigerians. The subsidiaries when fully operational would serve as a huge non-oil revenue source to the Government.
Surprisingly, distractions are still on with the intention of some hands to discredit and destroy the whole process against prevailing national interest. Any good attempt for salvaging a giant public entity like NIPOST should be a welcome development in the interest of the nation. The effort aligns with the Renewed Hope Agenda of President Bola Ahmed Tinubu to resuscitate any ailing sector for improved performance and revenue generation.
The Honorable Minister of Communication, Innovation and Digital Economy, Dr. Bosun Tijjani has received over ten thousand comments to his post seeking the view of Nigerians on his NIPOST reformation agenda on assumption to duty, which I personally contributed my view, in a quest for a better Nigeria. Consequently, Nigerians are waiting to see the Honorable Minister’s action on the prioritization of national interest against personal interest of the few who benefit from the failure of NIPOST, in addition to its competitors.
Mr. Istifanus Sule (Jagaban) wrote from Wuse II, Abuja.
