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Tag: revenues

  • Unlocking needed non-tax revenues 

    Unlocking needed non-tax revenues 

    • By Collins Okeke

    Nigeria is facing major revenue challenges. The 2023 total budget deficit is N10.78 trillion. The Federal Government intends to finance the deficit mainly by new borrowings totalling N8.80 trillion. This is in addition to the current debt stock of N49.85 trillion as of the end of the first quarter (Q1) of 2023. 

     Experts predict Nigeria’s debt service to revenue ratio may surpass 100 per cent in 2023, which will limit the fiscal space and the government’s ability to pay for its operations and functions unless urgent measures are taken to build revenue. The solution is to generate more revenue which will potentially impact jobs. 

     The Federal Government’s decision to remove fuel subsidies, float the naira and liberalise the foreign exchange market will bring in substantial revenue. But more sources of revenue will be required. The Federal Government appears mostly focused on tax revenues and a small fraction of non-tax revenue from oil and gas. This article highlights vast opportunities in non-tax revenues.

     Legal framework for public revenue

     The constitutional basis for public revenue in Nigeria is Section 162 of the Constitution which creates a scheme of public revenue. Of note is subsection 10 which defines the Federation’s “revenue” as follows:

    “Any income or return accruing to or derived by the Government of the Federation from any source and includes –

     (a) any receipt, however described, arising from the operation of any law;

    (b) any return, however, described, arising from or in respect of any property held by the Government of the Federation;

    (c) any return by way of interest on loans and dividends in respect of shares or interest held by the Government of the Federation in any company or statutory body”.

    Surprisingly, this is not a very well-known provision of the Constitution, but it is so important that a great deal of attention ought to be devoted to it. Awareness of this provision is very important. The scope of Section 162 is so wide that it embraces all types of public revenue which are divided into two parts, tax, and non-tax revenue.

    Adequate attention has not been paid to other non-tax revenue by the government in Nigeria besides those in the oil and gas sector. This has to change by creating relevant processes to build awareness. 

    The Federal Government has set up a strategy concerning tax revenue with the establishment of a Presidential Committee on Fiscal Policy and Tax Reforms. The idea of the committee is welcome.

    Tax revenue is vital as a key source of sustainable revenue to enable the Federal Government to carry out economic development. But there is also non-tax revenue. What we have done here is highlight some streams of non-tax revenue that the government can focus on for increased revenue. This list is not exhaustive.    

    Enforcement of Section 162

    Most ministries, departments and agencies (MDAs) of government are not fully aware that they are required to statutorily transfer all revenues generated by them to the public purse created by Section 162 (1) and styled as the Federation Account. Even though the Constitution sets out the legal basis of public revenue, it is vital that a major law or executive order is immediately issued to require all MDAs to make statutory transfers of all non-tax income to the federation account without exceptions. Strict implementation of this process will immediately double non-tax income of the Federal Government.

    Aggressive assets sale/concession/PPP

    It is estimated that there are about 50,000 abandoned federal projects across the country valued at over N 10 trillion. This is in addition to Federal Government landed property across Nigeria estimated modestly at N5 trillion.

    The Ministry of Finance Incorporated (MOFI) is a Federal Government investment agency that holds N30 trillion worth of Federal Government assets.   The Federal Secretariat in Ikoyi Lagos alone is worth at least N120 Billion and has been abandoned for over 40 years. Appropriate frameworks need to be developed to monetise these assets.

    Local content enforcement

    Local content is a policy that ensures that there is “Nigerian content” (local content) in the execution of projects.  It is mostly applied in the oil and gas industry by the Nigerian Oil and Gas Industry Content Development Act. Local content policy creates indigenous Jobs and retains revenues that would have otherwise gone abroad.

    Local content policy in oil and gas has been successfully implemented in engineering but not in other services like legal, banking, insurance, and shipping.  Local content will need to be vigorously implemented under the Local Content Act.  This will bring huge revenue accruals and jobs.  Experts estimate Nigeria loses over $1 billion yearly from non-enforcement of local content in legal services alone. Imagine the loss from banking, Insurance, and shipping.

    Land administration

    The value of the Nigerian Housing Inventory is estimated at over $6 trillion but 80 per cent of properties in Nigeria are dead capital. They have no revenue value. The solution is a massive reform of property titling to link property to the financial system.

    This will bring dead capital to life and transform it into revenue which banks can recognise as collateral to impact the economy. This will massively generate revenue and inject needed cash into the economy. 

    Financial services

    The financial services sector is performing sub-optimally, largely on account of weak institutions. To maximise revenue, the starting point is to strengthen key institutions. For instance, the Development Bank of Nigeria needs to be properly capitalised so it can support the economy. A credit guarantee agency needs to be established to support viable business proposals. It is absent in Nigeria.

    When viable business proposals are guaranteed, the economy gets stimulated and expanded, and that gets converted to goods and services that are sold to consumers. The result of a viable financial services sector will be huge non-tax revenue accruing to the government. These institutions when revamped can inject over N10 trillion of taxable credit into the economy. 

    Maritime

    This is potentially the largest economic sector outside oil and gas. A recent report by a Dutch consultancy firm, Dynanmar, shows that Nigeria loses about N20 billion daily (which annually is about N8 trillion) at the Lagos ports due to poor infrastructure.

    In other maritime sectors, Nigeria is estimated to be capable of generating N7 trillion annually and four million jobs over four years but to deliver the following needs to be done: overhaul of ports infrastructure, cabotage enforcement, the passage of critical maritime legislation such as the Maritime Zones Bill, Ports Harbour Bill, etc. These laws, when passed, will generate non-tax revenue and attract massive investments in the sector.

    Space

    Space is the next big investment arena. Space infrastructure companies received a record $14.5 billion of private investment in 2021 and the numbers are growing. 

    Read Also: Adeleke vows to revoke 33-acre govt land

    These companies are ushering in next-generation small satellite capabilities with enormous value to commercial and government customers, including organisations in the energy, mining, manufacturing, transportation, finance, security, agriculture, and communications.

    For Nigeria to fully derive benefit from these opportunities in terms of investments and development including revenue and jobs, the 2006 Space policy and 2010 NASRDA Act needs to be updated. The government needs to issue an Executive order mandating MDAs to procure only satellite data generated by NASRDA.

    Judgment debts

    Nigeria is owed approximately N5.2 trillion in judgment debts by over 5,000+ debtors across 10 MDAs.

    These debts are in the form of debt liabilities to the Federal Inland Revenue Service (FIRS); refunds to the government by companies who failed to deliver on projects for which payment had been effected, unpaid credit facilities granted to both corporate entities and individuals by the Bank of Industry (BOI) and Bank of Agriculture (BOA); judgment debt in favour of government, debts owed Pension Transitional Arrangement Directorate (PTAD) by insurance companies, etc.

    To recover these debts, there needs to be an inventory of all debts owed to the Federal Government. The Federal Government also needs to put in place an appropriate policy and legal framework to facilitate the recovery of these debts.

    Immunity from criminal prosecution

    This is a controversial but workable process that has succeeded in other jurisdictions. Legal protection is granted to persons with ill-gotten wealth to encourage them to bring back stolen monies on conditions.  If introduced this can generate huge revenue.

    Reorganisation of revenue collection

    According to the Federal Inland Revenue Services, Nigeria lost over $ 178 Billion to tax evasion by multinationals in 10 years. It is, therefore, vital to strengthen the revenue collection processes of the government. To achieve this, there has to be a one-stop shop for revenue collection. Currently, many agencies are collecting revenues. This is not efficient.

    Reform of legal framework

    Some of Nigeria’s tax laws are stale and require modernisation. Some date back to the 1930s. Further to this is the need to digitalise the collection of non-tax revenues. Reform of non-tax laws and digitalisation will bring in new revenues.

    Conclusion

    The above-highlighted non-tax revenue opportunities are not exhaustive. Other non-tax opportunities can be identified. Looking at all these areas and without any serious study, it shows that we are almost at N100 trillion. With concerted deep study, it is possible to even exceed the N100 trillion mark.

    The government should explore new sources of revenue to close the budget deficit and grow the economy. We strongly feel that a special case can be made for non-tax revenue.

    • Okeke is the Associate Partner/Head of Public Sector Practice Group at Olisa Agbakoba Legal (OAL)

  • Boosting Lagos infrastructure with tax revenues

    Nigerians usually get into the fray each time popular footballers are charged by the Spanish authorities for alleged tax offences. Lionel Messi, Cristiano Ronaldo and Neymar have at various times, been linked to tax fraud, triggering outbursts in Nigeria about the propriety of such actions. The emotional attachment to these footballers or their clubs often beclouds the underlying issues: tax evasion, manipulation or underpayments, which are unlawful.

    Messi and his Argentina teammate, Javier Mascherano, were found guilty of tax offences last year and sentenced to prison. But the convictions were suspended and replaced with fines. As a people not given to paying taxes, more so without corresponding social benefits to citizens, arresting anyone over tax issues, to an average Nigerian, represents an overreach by government. The finer details of how taxation is linked to development are lost in the heat of argument.

    In the modern world, the overarching purpose of taxation is to fund government expenditure. Taxation itself is a major tool with which to generate income for government, and employed in dealing with some non-revenue objectives such as curtailing objectionable conduct, reducing inequality, allocating resources and incomes in society as well as shielding local industries from unfavourable competition.

    Since taxation has become an acceptable practice in more advanced societies, which itself is anchored on the belief that sustaining government is a shared responsibility, everyone understands and respects the imperative of tax payment. It is a duty. Tax avoidance is seen and treated as criminal and despicable disservice.

    Regardless of how we feel about taxation, whether as individuals or corporate entities, there is no denying the fact that it is one of the tools that empower the people to hold their leaders and governments accountable. By paying your tax, you are handed an instrument to query the government and demand accountability and transparency. In doing so, the government will have no choice but to perform and strive to meet the people’s expectations in terms of social projects and developmental objectives.

    Using the instance of Lagos, Nigeria’s commercial capital, despite unwavering efforts of the state government, huge gaps still exist in the provision of pivotal infrastructure to drive economic development. Ranging from roads, power, housing, transportation, water, schools and hospitals, to even recreation centers and courts, there are so many things requiring attention. Everyone feels the need and effect.

    The government, according to available records, depends on three major sources of revenue, namely Internally Generated Revenue (IGR), Federal transfers and capital receipts. A closer look shows that IGR is the main income earner for the state, contributing an average of 66 per cent between 2012 and 2016. In 2016, this revenue source yielded N291 billion, translating to about N25 billion per month.

    However, owing to the huge infrastructure deficit and the vision to build a  Mega City that is safe, secure, functional and productive for all of its projected 24 million people, it is clear that the current revenue position is grossly inadequate to achieve the desired outcome. On the flip side, the state has the potential to improve on its IGR to the projected N50 billion per month from next year.

    This is what makes tax efficiency imperative. What is tax efficiency? There are several ways of looking at tax efficiency. Given a natural aversion to taxation, people consistently seek ways to get around paying taxes.  But in countries where payment of taxes is inevitable, the common resort is to seek ways to reduce the amount paid as tax. Amongst issues commonly cited for tax avoidance are high tax rates, lack of transparency, uncertainty and arbitrary exemptions; complexity and corruption as well as massive tax evasion by the rich and powerful. In a nutshell, people dodge taxes when the system is not efficient.

    Experts say that an efficient tax system is one that is fair, simple, well-organised and enforceable. Underlining this conclusion is the understanding that the wellbeing of society demands the contribution and cooperation of everyone. Therefore, people must be convinced that paying taxes is in their interest since the system has taken into account their interest and capacity and that the proceeds will be utilized for the common good. This is why a closer look at measures taken by the Lagos State Governor, Akinwunmi Ambode and his team to implement an efficient tax regime that is beneficial to all stakeholders.

    According to Ambode, “Even with the kind of resources we have in Lagos, it is very clear that there is a huge infrastructural deficit in the state. In addition, the resources are not so huge as to make Lagos globally competitive and deliver the social infrastructure we all crave. So, where will the money to drive the Lagos of our dreams come from? The economy is not doing as well as we want it to. We cannot tax the people any more than we are doing presently, but we have to become more efficient in tax collection because that is the major source of revenue with which we can protect the future, as well as improve the welfare and well-being of all Lagosians.”

    To the extent that tax policy in Lagos has two key objectives, efficiency and equity, which I expect would benefit me and the economy, I proclaim myself a tax ambassador and encourage everyone to key into this goal and support the government. Everyone suffers when taxes are not paid. Nonetheless, making every Lagosian understand the imperative of paying taxes is a task requiring extensive enlightenment, underpinned by transparency in the utilisation of taxes to address collective needs, more so in infrastructure development.

    Recent news reports indicating that the Lagos House of Assembly is looking at ways of enhancing Land Use Charge collection in the state are also encouraging. It is unfortunate that so far, only a relatively small fraction of houses pay Land Use Charge in Lagos. It is hoped that the House of Assembly will deploy the instrumentality of the law towards helping to ensure that many more houses are brought into the tax net to contribute towards developing the infrastructure that is so urgently needed in Lagos State, Nigeria’s economic nerve centre.

    • Alabi is a Lagos-based social/economic analyst.
  • Revenues from VAIDS to hit N23b by year-end

    Revenues from VAIDS to hit N23b by year-end

    About N6 billion more is expected from the Voluntary Assets and Income Declaration Scheme (VAIDS), bringing the total revenues from the scheme to N23 billion by the end of the year, it was learnt yesterday.

    Federal Inland Revenue Service (FIRS) boss Babatunde Fowler, broke the news at a media workshop on VAIDS.  He said the scheme had yielded N17 billion within six months of implementation.

    According to Fowler, the scheme has generated enthusiasm among taxpayers, many of whom are coming forward to declare previously undeclared incomes.

    Fowler said VAIDS is necessary  now for the nation, particularly with shrinking oil revenues.

    At the workshop, experts presented papers on the role of data in VAIDS implementation, similar to tax amnesty programmes in other countries as well as how VAIDS works and its benefits.

    He said VIADS gives tax payers the oportunity to regularise their tax status.

    In exchange for honestly declaring previously undisclosed assets and income,tax payers benefit from the forgiveness of overdue interest and the assurance that they would not face criminal prosecution for tax offices or be subject to tax investigations.

    He said the  FIRS would offer free advisory services to taxpayers, who are ready to comply with the VAIDS. Fowler said the FIRS would help prospective declarers with documentation and advice, when the service is approached.

    According to the FIRS chairman, taxation is a more reliable source of revenue than oil. He urged those who have earned undeclared incomes to take advantage of the window provided by VAIDS to regularise their tax status.

    The workshop featured presentations by tax experts on the role of data in taxation, tax amnesty programmes in other countries and the provision of VAIDS.

    The FIRS’ Deputy Director, Tax Policy and Advisory Department,  Gabriel Ogunjemilusi  said  strengthening tax system has emerged as a key priority for the service in improving the resilience of the national economy and supporting its growth objectives.

    According to him, the country has been struggled to achieve its yearly tax collection targets, despite the valuable revenue stream its represents.

    Efforts, he added, have been made to broaden the country’s tax base by collecting new data on current and prospective individual and corporate taxpayers, to address tax evasion and avoidance.

  • IMF: debt service may consume 60% of govts’ revenues 

    IMF: debt service may consume 60% of govts’ revenues 

    The International Monetary Fund (IMF) has warned that Nigeria and other oil producing countries in Africa may be overburdened with the high cost of debt servicing.

    It said such costs are expected to absorb over 60 per cent of governments’ revenues this year in Nigeria, Angola and Gabon. Public debt, the IMF said, rose above 50  per cent of gross domestic product (GDP) in 22 sub-saharan African countries at the end of 2016.

    Unveiling a report titled: “Fiscal Adjustment and Economic Diversification”, its Senior Resident Representative and Mission Chief for Nigeria (Africa Department), Mr. Amine Mati said diversification and fiscal consolidation are needed to be implemented in the region.

    “Fiscal pressures pose risks to the weakened financial sector in Nigeria and other sub-Saharan Africa countries,” IMF said.

    It  noted that exchange rates pressures have eased in many countries such as the case of Nigeria but cautioned that debt stocks have risen throughout the region.

    “Diversification offers a path to growth, since the region is imbued with significant potential for raising revenues,” IMF said.

    It said what the region required was getting the policy mix right and playing to their strengths.

    The IMF report noted that growth has picked up but is set to remain subdued with inflationary pressures receding. It therefore forecast a GDP growth of 2.6 per cent in 2017.

    According to the report, broad-based slowdown in sub-Saharan Africa is easing, but the underlying situation remains difficult.

    Hesaid growth is expected to pick up from 1.4 per cent  last year to 2.6per cent this year, reflecting the one-off factors particularly the rebound in Nigeria’s oil and agricultural production, the easing of drought conditions that impacted much of eastern and Southern Africa last year early 2017 and a more supportive external environment

    While 15 out of 45 countries continue to grow at five per cent or faster , growth in the region as a whole will barely surpass the rate of population growth and in 12 countries, comprising over 40 per cent of sub-saharan Africa’s population income per capita is expected to decline in 2017.

    An additional growth of 3.4 per cent is expected in 2018, but IMF said “momentum is weak and growth will likely remain well below past trends in 2019. Ongoing policy uncertainty in Nigeria and South Africa continues to restrain growth in the regions two largest economies.

    “Excluding these two largest economies, the average growth rate in the region is expected to be 4.4 per cent in 2017, rising to 5.1 per cent in 2018-19. But even where growth remains strong, in many cases it continues to rely on public sector spending, often at the cost of rising debt and crowding out of the private sector.”

  • Adeosun, G24 discuss tax revenues, compliance

    Adeosun, G24 discuss tax revenues, compliance

    Boosting tax revenues and compliance to drive sustainable economic development in Nigeria is featuring prominently in Finance Minister  Kemi Adeosun’s discussions  with fellow finance ministers in the G24 Group at the ongoing International Monetary Fund (IMF)/ World Bank Spring Meetings in Washington D.C.

    She said at the forum that revenue mobilisation is critical to the success of the nation’s economic reform agenda.

    “We have an unacceptably low level of non-oil revenue, and much of that is driven by a failure to collect tax revenues,” she said.

    “With a tax to the Gross Domestic Product ratio of only six per cent, one of the lowest levels in the world, we have a lot of work to do, if we are going to build a sustainable revenue base that will deliver inclusive growth.

    “Our data gathering programme over the last year has now given us the tools we need to be more aggressive at pursuing tax avoiders, both domestically and abroad.”

    Adeosun pointed out that just as some of her contemporaries in the G24 have done successfully in their countries, Nigeria is focusing  on tax in 2017 through an asset and income declaration scheme to address its low tax revenue collection and ensure improved compliance, a broader tax base and more sustainable revenue.

    The minister also stressed the need for strong budget implementation and transparency to create trust and accountability in government, saying: “While we focus on raising revenues and bringing people into the tax system, we must be equally aggressive in our approach to budget implementation and transparency.

    “Our people must know where their hard-earned tax contributions are being spent and the impact that they are having on national development and the daily lives of citizens. This will be a core focus for us.”

    The minister met separately with the ratings agencies Moody’s and Fitch to update them on progress towards economic reform objectives, and with the World Bank country team to discuss the status of ongoing projects in Nigeria and the pipeline of projects for 2018.

    She is due to attend meetings on closing the financing gap for water, affordable housing finance, food security and nutrition in the coming days as part of government’s focus on sustainable solutions to some of Nigeria’s most pressing social challenges.

  • Group warns of declining revenues, SMEs collapse

    The Association of Micro Entrepreneurs of Nigeria (AMEN) has warned small and medium scale companies to brace for significant declines in revenues this year.

    Its President, Prince Saviour Iche said many SMEs were  closing shop, following the high cost of raw materials and tougher restrictions on foreign exchange (forex) to buy raw materials.

    According to him, SMEs may disappear from the industry, despite their cost-cutting efforts.

    While some SMEs have suffered a downturn in sales, profits have also taken a hit and Iche fears factory closures would be inevitable.

    He said many firms were still mired in hardship, resulting in an increase in dissolved firms.

    Although growth opportunities for SMEs still preside, he said the high operation costs is beginning to impact SME performance.

    He explained that lower revenues is instigating firms to pull back on investment somewhat but business priorities have remained stable.

    Despite the economic challenges, he  said small businesses have continued with fewer resources, adding that some frustration is being seen in the SMEs’ sector at the pace of change and the time it is taking for policy initiatives to be felt among the nation’s small business community.

    Access to credit, he  maintained, still remains the most serious obstacle to the success of small-to-medium enterprises.

    He urged the government to set up a centre for credit services for struggling SMEs.

    He urged the Central Bank of Nigeria (CBN) to  issue policies to encourage commercial banks to set aside preferential capital packages to lend to SMEs.

  • BATNF’s interventions boost rural farmers’revenues

    BATNF’s interventions boost rural farmers’revenues

    The British American Tobacco Nigeria Foundation (BATNF) has being commended for enhancing farming among smallholders in rural areas.

    BATNF-International Institute of Tropical Agriculture (IITA) Oke-Ogun Cassava Enterprise Value-chain Development Projects  Field Supervisor, Olatunde Ogunsanya, said the foundation’s interventions have impacted on the lives and businesses of the beneficiaries of the BATNF Cassava Enterprise in Otu Community, in Itesiwaju Local Government Area of Oyo State.

    About 46 smallholder farmers, including women, he said, own large farms, and have access to input, such as improved cassava stems, pesticides and herbicides to preserve their crops.

    “We are proud to say that BATNF’s intervention has positively impacted scores of lives, especially those of women farmers who hitherto operated at subsistence level. Due to support from BATNF, they now work on a large scale, with established market links giving an average women farmer the growth opportunity to net over N500,000 annually,” said Ogunsanya.

    He noted: “The beneficiaries, who now pay labourers to work on their farms, happily share the news of their successes, having triumphed over challenges ranging from limited farmlands, insufficient inputs, lack of resources to expand their farmlands, to encroachment on farmlands, which have drastically reduced.”

    Ogunsanya said BATNF kicked off its three cycle cassava projects in Otu in 2014 with 30 smallholder farmers. About 150 smallholders in Otu, Ogboro Igboho, and Ago-Are communities of Oyo State are benefiting from BATNF’s interventions through the technical partnership with IITA. This collaboration further underpins BATNF’s leading role as a not-for-profit organisation committed to improving the lives and businesses of smallholder farmers in rural communities across Nigeria.

    Speaking on behalf of the beneficiaries, Mrs. Victoria Ojumola, who started farming about 10 years ago, praised the Foundation for assisting farmers when the community was confronted by various challenges.

    “Before BATNF’s intervention, farming, though lucrative, was not encouraging as most farmers did not have the financial muscle to combat farming challenges. With the coming of the Foundation, farmers were given fully prepared hectares of land, together with sufficient cassava inputs, fertiliser and lots of chemicals to preserve our crops. Most importantly, BATNF supported us by erecting customised signposts to mark boundaries so as to protect our farmlands from further encroachment,’’ Mrs Ojumola said.

    She added: “With the availability of hectares of land, among other support from the Foundation, about 46 of us operate on a large scale in our community. The disposition to farming is fast-changing due to successes we have recorded through the support from BATNF. Some people, who previously abandoned farming due to inherent challenges, have now made a U-turn, indicating interest to embrace their choice vocation. Now I am able to train three of my children at the university level due to the expansion of my farmland.”

  • ‘Drop in global airlines revenues affecting growth’

    The Director-General of the Nigeria Civil Aviation Authority (NCAA) , Captain Mukhtar Usman, has said revenue flow to airlines globally has dropped, owing largely to discontinued state funding , sustained deregulation / liberalisation as well as intense competition and privatisation.

    Usman said passenger and cargo traffic at many airports are declining due to dwindling purchasing power of passengers and shippers.

    He spoke in Abuja at the Airport Business Summit and Expo, where he delivered a paper titled: “The acts of promoting a sustainable air transport economy”

    According to him, the cost of providing standard air transport services has continued to rise with continuous innovations in the facilities and increasing demand for customer satisfaction.

    The NCAA boss noted that in Nigeria, for instance, aviation fuel constitutes about 50 per cent of the airlines’ direct operating costs.

    He said high cost of funds and the steady devaluation of the local currency in which the airlines’ income is mostly denominated has had huge impact on the business.

    Usman said in the last two and half decades many small and average airlines have either collapsed or gone bankrupt.

    His words: “One of the few areas in which significant performances has been recorded is the operation of low-cost airlines, which have benefitted from a shift to cheaper travel.

    Usman said the big challenge for Nigeria is creating a friendlier and more enabling environment for airlines.

    Proffering solutions, the NCAA boss said: “ The national political leadership should ensure that square pegs are put in square holes, giving the regulatory body the necessary autonomy by resisting unnecessary interference in the latter’s statutory operations.”

    He added that government’s interference should be limited to ensure an enabling political and economic environment to engender economic viability and sustainability of the aviation industry.

  • BlackBerry revenues slump 46.5%

    Smartphone maker BlackBerry Ltd reported weaker-than-expected quarterly results at the weekend but forecast higher revenue and said it might replace its operating system with Google Inc’s Android platform.

    Revenue fell 46.5 per cent to $490 million, well below the analysts’ average estimate of $610.6 million.

    Net income was $51 million, compared with $68 million in the prior quarter and a year-earlier loss of $207 million.

    The Waterloo, Ontario-based company, which is pursuing a turnaround plan based on selling more software, said it expected modest revenue growth in the remaining two quarters of this fiscal year, after nine quarters of falling sales, and a return to profitability in the fourth quarter.

    It also confirmed widely expected plans to launch an Android smartphone later this year. This marked a shift away from its own BlackBerry 10 platform that failed to regain market share ceded to Apple Inc’s iPhone and a slew of Android-powered devices.

    “This phone is the answer for former BlackBerry users who miss the physical keyboard but also need apps,” Chief Executive Officer John Chen said on a conference call.

    The company could jettison its own platform if the Android device gains acceptance with its core base of government and financial industry clients, Chen added.

    BlackBerry shares, which fell as much as 8 percent before the morning bell, were down 2.7 per cent at $6.84 in Nasdaq trading.

    “What they said on the call, speaking more about the outlook as opposed to the results itself, painted a less bleak picture,” said Cormark analyst Richard Tse.

    BlackBerry, whose smartphone market share has dwindled, said earlier this month that it would buy rival mobile software maker Good Technology for $425 million. It expects the deal to help win new clients for its services business, a priority as it shifts its focus to device management software for enterprise customers.

    Still, analysts noted revenue growth from the software arm was weak.

    “I’m happy to give them credit for patent licensing, but that’s not what we’re talking about in terms of high-value recurring revenue,” said CIBC analyst Todd Coupland.

    Excluding restructuring charges, a non-cash credit tied to the value of debentures and other one-time items, the company reported a loss of 13 cents a share for the second quarter ended on Aug. 29.

    On that basis, analysts polled by Thomson Reuters I/B/E/S had, on average, forecast a loss of nine cents.

     

  • Hewlett-Packard revenues fall as PC sales slide

    Technology giant Hewlett-Packard has reported falling profits and revenues as sales of personal computers fall.

    For the three months to 31 July, HP said net income fell to $854m (£544m) down from $985m a year earlier.

    Total revenue fell 8.1 per cent to $25.35bn, with revenues at HP’s personal computer and printer business down 11.5 per cent. Later this year, HP is due to split into two, separating its computer and printer business from its corporate hardware and services operations.

    The split is part of a radical restructuring plan, which has already resulted in tens of thousands of job cuts in recent years.

    Revenues at HP’s personal computer business were down 13 per cent, with revenues from sales to consumers down 22 per cent.

    HP also gave a full-year profit forecast that was largely below what analysts had expected. For the year to October, it is predicting adjusted profit of $3.59-$3.65 per share, compared with analysts’ estimates of $3.64 per share.