Ken Nwogbo
Lagos

Opponents of local recharge card manufacture have mounted campaign to puncture government’s directive that the cards be produced locally. Government nevertheless seems bent on the December 31, 2004 deadline to stop the importation of the cards.

FOUR years ago, Legal giant and foremost Nigerian telecom lawyer, Mr. Paul Usoro (SAN) warned the country to pay attention to local inputs as it prepared to launch its telecom revolution.

Mr. Usoro was alarmed that little or no attention was given to local manufacture of telecommunications equipment and infrastructure.

In a paper that year Mr. Usoro observed that «currently, there is no Nigerian company that is seriously involved in the manufacture of any telecommunications infrastructure or equipment. As Nigeria seeks to meet its telecommunications policy objectives, it is paramount that attention be paid to the manufacture of telecommunications equipment and infrastructure.»

He warned that «failure to do this will result in Nigeria continuing as a net importer of telecommunications infrastructure and equipment».

But as Nigeria joined in the excitement of the successful launch of Global System for Mobile Communications (GSM) services, the need for local input was lost on all its citizens

In the past years, lives have certainly been changed and businesses improved with communications thanks to the telecommunications.

Companies in the industry have also made money but most of it is sent outside. The country as soon as they are taken from the subscribers.

Apart probably from human resources almost every other input is imported and paid for in dollars.

Then, Mr. Usoro’s alarm reverberated this year when President Olusegun Obasanjo, thought that there are few things that could be done locally to save the country and the companies the hard earned foreign exchange.

At a meeting with the key players in the sector, the President hinted that from January next year, that, government would no longer accept the importation of recharge cards into the country

The directive, government said would reduce pressure on the national currency, the Naira, as well as provide employment for more Nigerians.

All GSM operators, MTN Nigeria Communications Limited, Vmobile Nigeria (formerly Econet Wireless Nigeria), Glo Mobile (the Mobile arm of the second national carrier Globacom) and M-Tel (the mobile subsidiary but independent of national carrier, NITEL) as well as most private telecommunications operators manufature their recharge cards from outside the country.

MTN Nigeria recharge card is manufactured by NamlTech in Johannesburg, South Africa, which is the sole pre-paid voucher supplier for MTN.

Cards Technology, a local switching company currently prints M-Tel recharge cards at Nitecrest in Lancashire, United Kingdom.

Nigeria’s second largest mobile operator Vmobile and Glomobile also print their recharge cards in Europe.

Executive Vice-chairman, Nigerian Communications Commission (NCC), Mr. Ernest Ndukwe said this would, however, have to stop with effect from next January.

The directive has continued to receive commendation from a cross section of stakeholders in Nigeria with many of them pointing out that the move would serve as a wake up call for the major operators.

Local companies like, Masterstroke Limited, said local recharge card production is possible and has assured that it has the capability to meet and even exceed international standards.

The company has been flaunting an impeccable service record which includes printing recharge cards for most of the Private Telecommunications Operators (PTOs) and international calling cards used in the country.

GSM network operator, Mtel Nigeria was one of the first to declare that the first batch of its made in Nigeria recharge cards would be ready soon.

Its chief executive officer, Mr. Aad Lois, said the company is committed to adding value and local content.

«I can tell you that our locally made recharge cards would be ready soon and they would read made in Nigeria» Mr. Lois said

Some stakeholders, nonetheless, posit that government’s objective for local production of scratch cards can only be achieved if a number of incentives is put in place to attract adequate investment and expertise in the scratch card sector.

They argue that for many manufacturers, local production will carry a higher cost than exporting into Nigeria, and they’ll only transfer expertise if the government offers these incentives, most notably those pertaining to tax relief or a reduction of excise duties on equipment.

This group called for tax relief through Pioneer Status, tax relief if a large proportion of local raw materials are used in the production process, tax relief if there is massive labour involvement as well as tax relief for investment in disadvantaged areas.

But critics have introduced a curious twist the argument, insisting that the licensing of recharge card production will naturally create a new cost point for the producers (in the form of levies to the regulator) which is likely to be passed on to the customers by telecom companies in the future.

They said that the licensing of producers may lead to the creation of an oligopoly and potential clogs in market supply, adding that operators will be subject to the production capacities and competences of a few licensed players.

«The potential attendant effect is that like the Nigerian oil industry where the breakdown of one refinery causes absolute chaos in supply» they insisted.

«The Central Bank of Nigeria (CBN), does not license the printing of cheque books even though it requires security printing. The cheque books represent an exchange of value for the banks as the recharge cards represent value exchange for the Telco’s. And if in the same local environment one experienced regulator (CBN) has successfully operated for decades without over regulating the system in the execution of its function, then perhaps the government needs to encourage the regulator in the telecoms industry to borrow a leaf from the CBN’s books.» They argued further.

Opponents of local manufacture of recharge card also said that Nigeria would be the first country in Africa to implement such a ban.

Issues of security were also raised. Security they claimed is the most important consideration in the scratch card manufacturing process because the focus is on the protection of the pin code used by the customer to recharge their account. Security is integrated in the environment of the production process, as well as in the card itself

According to them, the accepted practice with regard to the sourcing of scratch cards has been; that scratch card suppliers are part of the operator’s supplier chain, just as the regulator do not determine network suppliers, it is not the part of its optimal role to determine which suppliers individual operators should use. In a competitive market environment, operators will always opt for suppliers that offer them the highest quality at the lowest possible price. If it is in the operators’ own interest to source scratch card production locally (and it generally is), they will actively seek to do so as part of continuous efforts to reduce costs.

The other is that the licensing of scratch card manufacturers is beyond the purview of the telecoms sector’s watchdog, but is an intricate part of each country’s industrial policy; in this context, the creation of a card manufacturing operation is subject to the same labor, business, and environment regulations as that of any other production facility, and any authorizations have to be afforded by the relevant government authorities.

The opponents, also argue that regulatory intervention in the operator’s value chain would hamper Nigeria’s ability to benefit from the latest technologies, including the latest tools to facilitate payment for mobile services and combat fraud: scratch cards are only a part of a complex and sophisticated billing value-chain; any restrictions in Nigeria on the development of one element of the value chain will limit the rapid deployment in the country of the latest billing technologies, such as roaming vouchers.

NCC intervention is described as inconsistent with a key objective of universal access and the licensing of card manufacturers by the NCC would be an unnecessary regulatory intrusion into the operator’s supply decision-making process, in an extremely competitive sector where operators need as much flexibility as possible. Scratch card vouchers are not only a billing tool; they are a tool of differentiation and brand loyalty.

They noted that regulatory intrusion into the operator’s decision-making would send a negative signal to the investment community, especially now that operators need all the necessary goodwill to raise adequate funding: the message would be that of unexpected regulatory intervention in areas that global best practice generally regard as part of the operator’s purview.

The resistant by operators may not be unconnected with the fact that some of them have offshore companies which they use as pseudo vehicles to frit out their earnings in dollars.

Many also question operators’ reluctance to submit themselves to regulation, adding that if they are allowed to do, so the result would be chaos and confusion.

Despite the campaign, government appeared unbent and had gone ahead through the NCC to penciled 27 companies to go to the final stage of the process leading to authorization to manufacture telecommunications recharge cards locally.

The Companies are, Controcards Ltd, Nitecrest , Masterstroke Packages Ltd, Security Printing and Allied Solutions (SPAS), Hemnugg Ltd, Value Trust Inv Ltd, NIC Systems & Graphic In-Line Ltd, Austine Brooks Nig Ltd , Prudence Business Solns Ltd and Smart City Plc

Others are, Kalila Nig Ltd, Southbeach Company Ltd, Cards Technology Ltd, Intergra Telecomms Ltd, SNECOU Group of Companies Ltd, Royal Alliance Ltd, Airtel Ltd, Alfa Juliet Mangler Ltd, Exxis Facility Management Ltd and HeyGate Press Ltd.

The rest are, Advantel Limited, Nelag & Company, NamlTech Ltd, Gijima Technologies Ltd, Premiumideas Ltd, Orga Cards System and Xcard Ltd.

President Obasanjo has assured that there would be no giong back and it appears that is how it will stay despite stiff resistance from some operators.