B.E November 2018 Edition

Dear Esteemed Member,

Welcome to November 2018 edition of Business Essentials. Following several months of negotiations and the intrigues that followed, the Tripartite Committee on the National Minimum Wage finally concluded its work and submitted its recommendation to the President. In this edition, we examined the economic impact of the recommended new National Minimum Wage on individuals, businesses and at large, the aggregate Economy if eventually passed into law.

We continue to monitor closely, the relentless drive of the Federal Government at boosting non-oil revenue. President Muhammadu Buhari had in October, signed an Executive Order (008), the Voluntary Assets Regularization Scheme (VOARS), which among other things compels Nigerians with offshore assets and incomes to pay taxes on them. We present to you an overview of the scheme, the specific provisions and the issue of taxation.

Also in this edition is a summary of The National Pension Commission’s (PENCOM) recently released guidelines on Voluntary Contribution (VC) under the Contributory Pension Scheme. We distilled herein the key highlights of the guidelines, which includes eligibility, withdrawals and very important, taxation.

Our regular Law Report Review, Upcoming Learning & Development programmes and other activities at the Secretariat were not left out.

Have a pleasant reading.

Timothy Olawale


In this Issue:

  • Macro-Economic Indices and Prognosis: An Overview
  • The Economics of Wages: Assessing the Economic Impacts of the Proposed New National Minimum Wage.
  • VOARS: An analysis of Executive Order 008
  • PenCom Releases Guidelines on Voluntary Pension Contribution
  • PICTORIAL: Pictures from the presentation of the recommendation of the Tripartite Committee on the National Minimum Wage to President Muhammad Buhari.
  • Law Report Review / Legal Opinion:
  • Upcoming NECA/ITF Interactive Forum


As Nigeria’s economy approaches a major political change with the upcoming 2019 general elections, a further drop in capital importation is to be expected. The National Bureau of Statistics (NBS) data released for the second quarter of 2018 showed the first slide in the total value of capital importation into Nigeria since the economy returned to growth after the recession. Capital importation dropped by 12.53 percent from $6.3 billion in the first quarter of the year to $5.5 billion in the second quarter of 2018. Foreign Portfolio Investment (FPI), a very important component of the country investments, while maintaining its position as the largest contributor to capital importation fell by 9.76 percent.

It is expected that the planned $2.4 billion Eurobond issuance to be used to fund part of the 2018 budget might be a one off flow capable of distorting capital importation decline, although investors would require yields that would compensate the risk that comes with interest rate at over 14 percent.

The inauguration of the Presidential Enabling Business Environment Council (PEBEC) in 2016 as a flagship initiative to reform the business environment has being a mirage going by the release of the 2019 Doing Business Index released by the World Bank, which saw Nigeria fall to 146 out of a ranking of 190 countries despite an ease of doing business score of 52.89.  There are more fears that this new development would likely deter foreign investors.

In October 2018, the Central Bank of Nigeria (CBN) recorded an abrupt US$2 billion drop in foreign reserves since February 2015, settling at US$41.53 billion as at 16th November 2018. The decline in capital importation coupled with a sharp decline in foreign reserves will put pressure on the naira despite the effort of the CBN to defend and stabilize the naira at different times.

The Central Bank of Nigeria’s (CBN) Business Expectations Survey report for the month of October showed a less optimistic view on the macro economy as respondents’ overall confidence index (CI) on the macro economy dipped. According to the report the Consumer Index eased to 23.2 index points relative to 24.8 points in September. Firms identified insufficient power supply, high-interest rate, unfavourable economic climate, financial problems, unclear economic laws, unfavourable political climate, insufficient demand and access to credit as the major factors constraining business activity in the current month. The businesses outlook for October 2018 however, showed greater confidence in the macroeconomy at 64.4 index points compared to 61.6 index points previously buoyed by improvements in the volume of the total order, business activity, and financial conditions.

Central Bank Monetary Policy Committee Meeting Review

The CBN MPC held the last meeting for the year between November 21-22, 2018 to appraise recent developments in the global and domestic macroeconomic and financial environments, as well as the economic outlook for the first half of 2019.

On domestic output developments, the Committee noted the positive outlook for output growth, evidenced by the Manufacturing and Non-manufacturing Purchasing Managers Indexes (PMI), which stood at 56.8 and 57.0 index points, respectively, in October 2018, indicating expansion for the 19th and 18th consecutive months. This was attributed to the stability in the foreign exchange market, implementation of the 2018 capital budget and the on-going intervention of the Central Bank of Nigeria (CBN) in the real sector of the economy. However, the recent incidence of flooding across the country and the impact of herdsmen attack on farming communities could affect output growth for the rest of the year.

Overall, the Committee believes that, even though output recovery remains fragile, the effective implementation of the 2018 capital budget, relative improvements in power supply, progress with counter-insurgency in the North-East and sustained intervention by the CBN in the real sector, will improve the investment climate and reduce unemployment. Consequently, the MPC reaffirmed its support for all initiatives designed to stimulate domestic output growth.

The Committee noted the benign performance of inflation, as headline inflation (year-on-year) decreased to 11.26 percent in October 2018 from 11.28 percent in September 2018 after two consecutive months of marginal increases. The drop in headline inflation was driven by food inflation, which moderated to 13.28 per cent in October from 13.31 per cent in September 2018. Core inflation, however, inched up marginally to 9.9 per cent in October 2018 from 9.8 per cent in the previous month. On a month-on-month basis, headline and food inflation also moderated to 0.74 and 0.82 per cent in October from 0.84 and 1.0 per cent in September 2018, respectively, while core inflation increased from 0.64 per cent in September 2018 to 0.80 per cent in October 2018.

Furthermore, it stated that the moderation in inflation was largely seasonally driven and was therefore, unsustainable as prices were expected to pick towards the end of the year. However, the MPC observed that the near-term upside risks to inflation remained; the disruption to agricultural production and distribution arising from flooding, the insurgency in the North-East, herdsmen-farmer crisis, the high cost of energy, anticipated spending in the run-up to Christmas festivities and campaign-related spending towards the upcoming 2019 general elections. Accordingly, the Committee enjoined the appropriate authorities to continue to address these challenges and to sustain the implementation of the 2018 budget and the Economic Recovery and Growth Plan of the Federal Government to ameliorate the supply side constraints.

On exchange rate, the Committee averred that the average naira exchange rate remained relatively stable and converging at both the Bureau-de-Change (BDC) and the Investors’ and Exporters’ (I&E) window segments of the foreign exchange market during the review period. The exchange rate at the I&E window opened at N364.00/US$ and closed at N363.90/US$ with a daily average of N363.87/US$ between September 26 and November 16, 2018. At the BDC segment, the exchange rate opened at N360.00/US$ and closed at N361.85/US$, with a daily average of N360.98/US$, over the same period. The relative stability in the foreign exchange market, the MPC noted, was attributable to the sustained policies of the Bank to increase the supply of foreign exchange from autonomous sources.

The Committee continues to hold the view that although loosening would encourage the flow of credit to the real sector, help in reduction of the aggregate cost of credit and spur business spending and investment, thereby reinforcing the CBN’s support for output growth and economic recovery, it, however, believed that doing so will reverse more rapidly, the gains of price and exchange rate stability achieved so far given the liquidity impact that would entail.

As for tightening, The MPC hold the view that, while tightening will strengthen the stability of the foreign exchange market because of its dampening effect on the demand for foreign exchange, it was however convinced that this would simultaneously dampen investment growth, widen the output gap, depress aggregate demand and weaken output growth.

In the light of the above, the MPC voted to:

  • Retain the MPR at 14 per cent;
  • Retain the asymmetric corridor of +200/-500 basis points around the MPR;
  • Retain the CRR at 22.5 per cent; and
  • Retain the Liquidity Ratio at 30 per cent.

Macroeconomic Forecast (November-December)

Variables December 2018 January, 2019
Exchange rate(Official)N/$ 364 365
Inflation Rate(%) 11.32 11.45
Crude Oil Price(US$/Barrel) 77.00 78.00


The concept of a minimum wage is universal and has its origins in the Poor laws of the 18th century Britain, the early days of the industrial revolution. Workers were of the view that capitalists were exploitative. They believed that minimum wage helps mitigate the imbalance of power between employers and low-wage workers. In the absence of a wage floor, it was assumed that employers could take advantage of workers’ vulnerability and weaknesses. This could undermine the purchasing power of low income earners.

Global events and the need to have s standard mechanism for setting minimum wages across the globe led to the crafting of Convention 131 (Minimum Wage Fixing Convention) of the International Labour Organization

In Nigeria, the minimum wage has been a subject of acrimonious debate for years with policy makers and labour in a virtual deadlock. The tripartite Committee on National Minimum Wage (NECA – NLC/TUC/Government) recently reached an agreement on a figure of N30, 000, averting a threatened showdown between organised labour and Government. N30, 000 is 67% higher than the current wage of N18, 000. The minimum wage was last reviewed in 2011, when a 140% increase was implemented from N7,500. At that time, N18, 000 was worth $200 in the forex market. According to the recommendation, the minimum wage should be reviewed at least once every 5 years which implies that this review is almost two years overdue.

One of the major justifications for the wage review remains the deteriorating macroeconomic conditions i.e. lower purchasing power. This has resulted in a higher cost of living and a decline in the standard of living. The proposed minimum wage – at about $83 per month – is still suboptimal compared to what was paid in 2011, when the dollar equivalent of the minimum wage was $200. To restore a low wage earner back to the level it was in 2011, the optimal minimum wage would be approximately N72, 000. Nonetheless, the implementation of the new wage is expected to have both positive and negative impact on individuals, households, businesses, as well as the aggregate economy.

Impacts of the Proposed National Minimum Wage

A higher minimum wage would without doubt, boost employees’ purchasing power, increase aggregate demand and ultimately stimulate economic growth. Consumption accounts for a significant proportion of the Nigerian National income model. Hence, a boost in consumption would significantly impact on the country’s national income. In addition, an increase in consumption would induce investment spending, which would then have a multiplier effect on the overall economy.


While it is expedient to implement the new minimum wage, it is more important to broaden the country’s revenue base. There is an urgent need to deepen non-oil revenue collection and increase the efficiency of tax collection. There is also a need to boost aggregate output which is constrained by the inadequacy of existing infrastructure – especially power supply. An improvement in power supply will lead to a reduction in demand for alternative sources of energy such as diesel and this would reduce firm’s operating costs, increase profit margins and improve organization’s ability to pay the proposed minimum wage without ripple effects on the business. In addition, higher profits imply more revenue to the government in form of higher tax receipts.



The Nigerian Government’s relentless drive to boost non-oil revenue is clearly evident with intensified audits, increase in treaty networks, promulgation of new Transfer Pricing Regulations and the launch of tax amnesty schemes.

While the already concluded Voluntary Assets and Income Declaration Scheme (VAIDS) was applauded by various stakeholders, including taxpayers and tax authorities alike, the recently introduced Voluntary Offshore Assets Regularization Scheme (VOARS or the scheme) has not received similar accolades. The VOARS, which was introduced by the Presidential Executive Order 008 (VOARS Order) on 8 October 2018, provides a platform for taxpayers, who have defaulted in the payment of taxes, to voluntarily declare their offshore assets in exchange for a one-time levy of 35% on all offshore assets and immunity from prosecution for tax offences and other offences related to those offshore assets.

The VOARS Order has generated a varied mix of reactions as many stakeholders are unclear about its modality of operation and whether it is of any beneficial interest to the average Nigerian taxpayer.

In this newsletter, we analyze the provisions of the VOARS Order and its impact on taxpayers.

Overview of VOARS

VOARS is a Scheme that gives taxpayers, who have defaulted in the payment of their taxes, a platform to voluntarily declare all offshore assets and foreign-sourced income relating to the preceding 30 years of assessment in exchange for a one-time levy of 35% on all offshore assets in lieu of payment of default taxes amongst other benefits. The Scheme is scheduled to run for a 12-month period commencing 8 October 2018.

Similar to the recently concluded VAIDS, this Scheme provides some form of clemency to taxpayers who would take the opportunity to regularize their tax affairs. The benefits being offered by the VOARS are:

  • Permanent waiver of criminal prosecution for tax offences and other offences relating to the offshore assets;
  • Immunity from tax audit of the declared and regularized offshore assets;
  • Waiver of interest and penalties on the declared and regularized offshore assets;
  • Receipt of Offshore Assets Regularization Compliance Certificate on the declared and regularized offshore assets;
  • Freedom to use and invest duly regularized offshore asset in any manner in Nigeria or overseas.

The VOARS Order mandates the Attorney General of the Federation and Minister of Justice to set up the VOARS in Switzerland. Taxpayers who wish to take advantage of the Scheme are required to access the VOARS facility in Switzerland by paying a 2% facility access fee and making all necessary disclosures there.

In addition to payment of tax liability in full, including interest and penalty, any defaulting taxpayer who fails to take advantage of the Scheme would be liable to an investigation, charges and enforcement procedures concerning offshore assets held anywhere in the world.

Furthermore, such defaulting taxpayer would lose the right to plea bargain and any relief which may have been granted to such person would be withdrawn. The defaulting taxpayer would also be made to undergo a comprehensive audit. In respect of partial or dishonest disclosure, any sum, which has been paid in relation to the Scheme, may be counted as part payment of any further outstanding tax liability arising from other undisclosed information.

Specific Provisions of the VOARS Order and Our Views

Persons Covered under the Scheme

The Order provides that the Scheme is targeted at “all persons, entities and their intermediaries, who are holding offshore assets and are in default of their tax liabilities in any way whatsoever”, including persons who:

  • are not already under investigation by law enforcement agencies for theft of public funds or obtaining offshore assets through corrupt practices;
  • own offshore assets but are yet to declare them with the relevant authorities;
  • earn income on offshore assets but are yet to declare such income to relevant tax authorities;
  • are registered taxpayers but have not been filing returns or have additional disclosures to make;
  • have been underpaying or under remitting tax;
  • are under a process of tax audit, investigation or dispute and are prepared to settle out of court;
  • have applied for and received a Special Clearance from the Federal Government to participate in the Scheme;
  • have been determined to be innocent after investigations or legal proceedings.

Although the Order does not specify the taxes covered under VOARS, the Order specifically refers to tax defaults under relevant statutes in its recital. Hence, it is expected that VOARS covers all tax defaults under Nigerian tax laws including Personal Income Tax (PIT), Companies Income Tax (CIT), Capital Gains Tax (CGT) and so on. In addition, given that VOARS is targeted at tax defaulters, individuals, including expatriates, who have been tax compliant, should not be required to participate in the Scheme.

The VOARS is silent on the impact on taxpayers who have already participated in the VAIDS. However, based on the provisions of the VAIDS, it would appear that taxpayers who took advantage of the VAIDS would not be required to participate in the VOARS. This is because taxpayers that honestly participated in the VAIDS should have already been granted amnesty for tax related offences.

Tax Base

The Order defines offshore assets to include liquid assets (bank balances), stocks and bonds held in portfolios, insurance policies, shares in listed or unlisted offshore companies, property assets and all manners of assets held directly or indirectly through corporate entities, trust structure and non-Nigerian resident companies and intermediaries.

Considering that the Order requires the declaration to be in respect of all assets and income derived within the past 30 years, there are concerns regarding the availability and accessibility of certain information required by the Scheme. For example, there may be challenges accessing bank balances for the past 30 years given that the Prudential Guidelines for Deposit Money Banks in Nigeria requires banks to retain their transaction records for a maximum period of 5 years (except as otherwise stated). Similarly, some other foreign jurisdictions like Switzerland have a limitation period of 10 years for retention of banking records. Thus, taxpayers may be constrained by the paucity of information on their offshore assets.

On another note, although the PIT Act and the CIT Act state that a taxable person is to be taxed based on his/her income received inside or outside Nigeria, it is instructive to note that both Acts expressly exempt income derived from dividend, interest, rent and royalties, brought into Nigeria through government approved channels, from tax.

Specifically, the PIT Act goes further to exempt fees and commission, received by a taxable person abroad, from tax, provided such fees and commission are brought into Nigeria through government approved channels.

Thus, it would appear that the VOARS would not apply to taxpayers, whose foreign income falls within the specified exemptions under the PIT Act and CIT Act and who have consistently repatriated the income to Nigeria through government approved channels.

Tax Rate

Although the 35% levy offered by the VOARS is not, in effect, a tax rate, there are certain concerns with respect to the basis for the imposition of 35% levy on assets and income derived within the past 30 years.

Given that CGT is charged at 10% of gains from disposal of assets and the effective income tax rate for individuals is about 19%, and that of companies is 30%, a rate of 35% may be significantly higher in certain instances and may not be an incentive for taxpayers. However, in cases of compounded interest and penalties (which might have accrued over a period of time, e.g. 5 years) in addition to the actual tax payable at 19% or 30% for individuals and companies respectively, the actual tax liability of the taxpayer may be significantly higher than the 35% tax rate imposed on the asset value under the VOARS. Thus, depending on the nature of assets and the period within which the tax default arose, the VOARS may or may not be a viable option for a taxpayer.

In addition, the Order does not state the modality for determining the value of the assets. It remains unclear whether the market value or historic value of the asset would be used in calculating the levy of 35%.

It is expected that the government would issue further guidelines or regulations to provide additional clarity on the modality for the implementation of the VOARS.


Taxpayers who wish to take advantage of the VOARS are required to access the VOARS facility in Switzerland by paying a 2% facility access fee. Also, taxpayers would need to comply with the procedures required by the Swiss authorities or Regulations governing the Scheme in order to obtain an Eligibility Certificate to declare offshore assets through the Scheme. In addition, the Scheme would provide an opportunity for taxpayers to establish a Swiss nexus for their offshore assets held anywhere in the world for such taxpayers to access the VOARS.

In order to benefit from the VOARS, the Order requires taxpayers to make their disclosures through the VOARS facility in Switzerland, which is the qualified intermediary for this purpose.

Although the base of the additional 2% facility access fee is not stated, it is important to note that it constitutes an additional pecuniary burden on the taxpayer, which may be a disincentive to certain taxpayers. Although it is reported that the VOARS is expected to fund the Nigeria Infrastructure Fund in Switzerland, taxpayers who do not own properties in Switzerland and other European countries may not have the required convenience in accessing the Scheme.

Nevertheless, the provisions of the Order suggest that certain Regulations would be issued pursuant to this Order. Hopefully, the expected Regulations would provide additional clarity on the modality for accessing the VOARS facility in Switzerland.

Consequences for failure to comply

In addition to the withdrawal of reliefs, the consequences for failure to take advantage of the Scheme are largely the same measures that the relevant authorities will impose on defaulters under the relevant laws. In effect, taxpayers who are not in default of their tax obligations do not need to participate in the VOARS as it is targeted at tax defaulters.

However, given that the rate of tax compliance in Nigeria is still low, the success of the VOARS cannot be predetermined.


It is expected that the government will issue further clarifications in form of guidelines or regulations to address certain grey areas in the Executive Order.

Given the peculiar nature of this Order, it is important for taxpayers to engage their tax consultants regularly to ascertain how they would be impacted by the Order and to evaluate the benefits of taking advantage of VOARS.

We will continue to monitor developments and provide necessary updates in this regard.

Culled from Andersen Tax (Tax Alert)




The National Pension Commission (PenCom), on 25th of October 2018, released guidelines to provide clarification on Voluntary contributions under the contributory pension scheme (CPS), as enshrined in the Pension Reforms Act, 2014.

The key objective of the guidelines is to create a uniform set of rules for the running and operation of voluntary contribution, as well as define the eligibility criteria for participation in the scheme.

The guidelines apply to all voluntary contributions and from all indications, will have a retrospective effect.


The following are the key highlights of the Guidelines;

  • Contributors who are eligible to make a voluntary contribution and wish to make same are required by the Guidelines to notify their employers in writing, of their intentions to make a voluntary contribution and the amount to be deducted from their emoluments. Also, the guideline stipulates that the voluntary contributions are to be made from an employee’s legitimate income, and shall be restricted to one third of the employee’s monthly salary.
  • The amounts deducted as voluntary contribution are required to be remitted through an employer into a registered RSA. The contribution shall only be made once in a month and it shall be in Naira.
  • Pension Fund Custodians are expected and mandated by the Guidelines to report any voluntary contribution above five million naira, in line with the money laundering Act, 2011.
  • Penalty for failure to deduct or remit voluntary contributions within the stipulated timeframe is as stated for normal contributions in the Pension Reforms Act, i.e. a minimum of 2% of the total unremitted contribution for each month or part of each month the default continues.
  • Mandatory contributors shall have 50% of their voluntary contributions available for withdrawal, provided the voluntary contributions are retained in the RSA for a minimum of 2 years before access. This means a voluntary contributor is entitled to withdraw 50% of his/her voluntary contribution once every 2 years from the date of last withdrawal.  The balance of 50% shall be fixed and will only be available for withdrawal either in a lump sum or programmed withdrawal, at retirement. For the purpose of determining the portion of contributions that qualify for withdrawal, the first date of pension contributions into the RSA shall be the date for the counting period for the two year’s maturity period.


According to the guidelines the following categories of persons are eligible to make a voluntary contribution;

  1. Any employee in an organization with three or more employees.
  2. Any employee or retiree in an organization that operates a closed pension fund administration and employed prior to June 2014, and employees or retirees in an organization with the approved existing scheme.
  3. Any person who retired or disengaged, or whose employment was terminated and is currently receiving a pension under the CPS, but secures another employment on a contract basis.
  4. Any retiree under the defunct defined benefit scheme, who secures another contract employment.
  5. Judicial officers, members of the Armed Forces and the intelligence and the secret services of Nigeria.
  6. Persons appointed by the president, State Government and elected officers to hold office for a stipulated tenure and who are not career civil servants.


Unlike the mandatory contribution and in line with the provisions of section 10(4) of the Pension Reforms Act, 2014, income accruing on voluntary contributions are taxable , where the withdrawals is made before the end of five (5) years, from the date the voluntary contribution was made.

Pension Fund Custodians are expected to remit all tax deducted to the relevant tax authorities within 21 days, following the end of the month of deduction. Pension fund custodians are equally expected or required to render returns of such remittances to PenCom twice a year.

Although the Guidelines provides uniformity and additional clarity on the administration of Voluntary Contributions, the issue of tax treatment of Voluntary Contributions still raises some concern, particularly the tax treatment of Voluntary Contributions of retirees and exempted contributors. A strict reading of the Pension Reform Act 2014, suggests that only the income earned on Voluntary Contributions should be subject to tax where withdrawals are made in less than five years. However, the released Guidelines provides that, in the case of retirees and foreign employees, the principal amount together with the income earned should be subject to tax, where withdrawals are made in less than five years. Also, although there have been several contentions regarding the withdrawal of Voluntary Contributions and related income from a Retirement Savings Account before retirement, the introduction of a 50% restriction on withdrawal is nowhere contained in the Pension Reform Act 2014. It is important to note that the Regulatory bodies should not issue Regulations that contradict the provisions of the Principal Act.

Thus, It is hoped that upon full implementation of the Guidelines, the country will have a pension system that is sustainable and with the capacity to achieve the ultimate goal of providing a stable and adequate source of income for retired employees in Nigeria. It is equally hoped, that the objective of the voluntary contribution are not abused and will be adequately achieved.


With the release of the guidelines, Businesses should endeavour that the provisions of the guidelines are properly communicated to their employees. The communication is expected to be clear on the role of the employer and the employees, withdrawals, taxation and other grey areas that may not be easily understood by employees.




James Francis Etim vs. Ikeja Electricity Distribution Plc, Unreported Suit No.NICN/LA/12/2017


The claimant had filed the action on 12th January 2017, praying for the following reliefs –

(a)   A declaration that the claimant is still validly and contractually within the employment of the defendant and is, therefore, entitled to all his salaries, entitlements, allowances, pension and other benefits from November 2013 until it is properly and lawfully determined.

(b)  An order for the defendant to reinstate the claimant to its services and to pay the claimant his full salaries, entitlements, allowances, pension and other benefits from November 2013 up to the date of judgment.

(c)   An order directing the defendants to pay the claimant the sum of N5 Million as general damages for the years of inconvenience caused the claimant.

(d)  An order directing the defendants to pay interest on the judgment sum at the rate of 10% from the date judgment is delivered until the date when the sum is finally liquidated.


The claimant was a staff of the Power Holding Company of Nigeria before its privatization.

  • Just before the privatization exercise, the claimant was transferred from the Eko Electricity branch of Power Holding Company of Nigeria (PHCN) to Ikeja Electricity Branch where he continued to work prior to and after the privatization exercise.
  • Upon privatization, the claimant was assured by the defendant to continue his work under the defendant’s employment pending when the defendant will finish compiling records of the defunct PHCN employees under its employment.
  • Even though the claimant was invited for job placement by Eko Electricity (now privatized), the defendant misled the claimant into carrying on with his work under the defendant’s employment on the assurance that it was compiling its records and the claimant was going to be confirmed as its employee.
  • It was based on the defendant’s assurances that the claimant applied for leave and was granted by the defendant. Furthermore, the defendant instructed the claimant to retrieve the document verifying his status as a staff of PHCN from Eko Electricity and submit to the defendant for the processing of his confirmation by the defendant.
  • The claimant retrieved the said document and submitted to the defendant. The defendant, however, turned round to deny the claimant the opportunity to continue to resume under the defendant’s employment at a period when it was too late for the claimant to resume at Eko Electricity, hence this case.


  • The Defendant admitted that the claimant was an employee of Power Holding Company of Nigeria (PHCN) Eko Zone before he was transferred to Ikeja Zone sometime in 2013 and that the claimant remained an employee of PHCN in the Eko Zone despite the transfer to Ikeja Electricity Distribution Company.
  • The defendant averred that the claimant was never documented as their staff and that they never paid any salary and allowance to the claimant as he remained a staff of PHCN, Eko Electricity Distribution Company.
  • The defendant’s case was that upon conclusion of the privatization process in November 2013, all the contracts of employment of PHCN staff were terminated; and to provide soft landing for the PHCN staff, the Bureau of Public Enterprises in conjunction with PHCN brokered a 6 months fixed contract for PHCN staff based on their last known staff records.
  • The defendant averred that since the claimant did not receive a fixed contract employment from them he was advised on his resumption from leave to proceed to Eko Electricity Distribution Company to verify the status of his employment since that was the place of his last official posting.
  • To the defendant, the claimant was never in its employment; and that the claimant’s salaries were paid by PHCN, Eko Zone, and the place of his last posting from PHCN HQ.
  • That by design of the privatization exercise, the employment of all staff of PHCN was terminated, and severance and compensation packages were paid to all staff.
  • That the claimant was paid the sum of N8,293,968.07 as his severance payment and the sum of N4,679,531.10 representing his accrued retirement savings amount (RSA).
  • That this suit is frivolous and should be dismissed with substantial cost.


(a)   Whether the claimant had a contract of employment with the defendant.

(b)  Whether the claimant is entitled to his claim for salaries, entitlement, allowance, pension and other benefit from November 2013 up till the date of judgment.

(c)   Whether the claimant is entitled to general damages of N5 Million


The court after considering the various arguments of the parties and relying on the case of Mr Olalekan Kehinde & anor v. Airtel Nigeria Limited & anor unreported Suit No. NICN/LA/453/2012, the judgment of which was delivered on 13th December 2016 held as follows:

  • The transfer of the claimant to the defendant in the instant case did not mean that PHCN, Eko Zone, ceased to be the employer of the claimant.
  • The claimant did not show any sufficient proof that his employment relationship was transferred to the defendant as to make the defendant his employer.
  • The reliance of the claimant on Exhibit C6 (the approval of annual leave by the defendant), was insufficient to prove that the defendant was his employer.
  • The argument of the claimant that contractual relations can emanate from the conduct of the parties since a contract may be implied did not help his case since sufficient facts have not been placed before the Court to enable the Court come to that conclusion.
  • The claimant, himself, acknowledged that his salary was paid by other than the defendant; indeed, that he never received any salary from the defendant.
  • There was no sufficient proof that the claimant was an employee of the defendant.
  • The claims of the claimant were all hinged on being an employee of the defendant. Since this has not been shown, the claims fail and was dismissed.


It is important for employers to always make Rules guiding activities of the organization, including transfer and secondment. These could be in the employees’ contract of employment or the handbook.

Employers should be careful to avoid situations or loopholes which could be interpreted to mean or infer that a person is on the employment of the organization.


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