Debate over the overbearing attitude of regulators as it concerns doing business in Nigeria has never been as contentious as it is today.
What the majority of the stifling policies have done is hinder innovation and investment and foist a static economy where bureaucrats become dictators.
A country that prioritises the ease of doing business is almost on a sacred quest for the solution that will create growth, and open a new era of prosperity and well-being.
Unfortunately, like many things called holy, the concept of innovation is invoked ritually and ceremonially more than embraced in practice.
Rhetoric vs reality
Amid all the rhetoric of allowing organisations the enabling environment to thrive and in return grow the economy, regulatory authorities knowingly and unknowingly stifle it.
They say they want more growth and innovation but at the same time seem to operate by a set of hidden principles designed to prevent innovation from surfacing or succeeding.
“The Consumer Protection Council (CPC), in its bid to survive in a dispensation of tight fiscal policy and diminishing budgetary funding, has resorted to sleazy and untoward methods that are inimical to the sustenance of the real sector,” the Nigerian Employers Consultative Association (NECA) lamented in a statement.
NECA is the umbrella organisation of employers in the organised private sector (OPS).
The lament comes on the heels of Coca-Cola Nigeria being slammed with a N100 million fine (including the N60 million cost of investigation), based on the indictment of the company by the CPC indicted after investigation of a consumer complaint about two half-empty cans of Sprite.
Sprite is manufactured by Nigerian Bottling Company (NBC) under the licence and authority of Coca Cola.
According to the CPC, N60 million is for investigating the matter and the balance N40 million is penalty. The consumer will be paid N50,000.
The CPC Act shows that a N50,000 fine is the highest penalty such an infraction should attract.
Challenges remain
While the regulatory environment for Nigerian entrepreneurs is improving, considerable challenges remain.
According to the World Bank, Nigerian businesses spend valuable time and resources trying to comply with a myriad of local regulations.
“Removing burdensome regulations is an essential step toward a stronger private sector,” said Rita Ramalho, 2015 Doing Business report lead author, World Bank Group.
“Although Nigerian enterprises face regulatory obstacles, implementing business-friendly reforms will allow local entrepreneurs use their time and resources more efficiently and thus become more competitive.”
Entrepreneurs and executives say businesses are being squeezed by multiple taxes and increasing red tape as many state governments struggle to shore up internally generated revenue (IGR).
Oil revenues account for up to 90 per cent of the federal budget. However, in some states, it is as high as 97 per cent.
The government faces an economy that needs all the investment it can attract as the 35 per cent slump in crude oil price in 2014 leads to investor exodus from the financial markets and austerity measures.
Analysts say Nigeria’s economic managers must recognise that as oil prices fall, the need to do the right things as regards reforming the economy and easing burdens on businesses become more imperative.
“Things are different now. The government has to respond and know that fiscal buffers are gone. It is not a temporary thing as the minister of state for finance alluded,” said Bismarck Rewane, Chief Executive OffCEO of Financial Derivatives Company, at the Business Day energy summit.
“This mental adjustment is more difficult for Nigeria than fiscal or monetary adjustments.”
The Lagos Chamber of Commerce and Industry (LCCI) reckons that regulators have the capacity to overburden the growth of companies critical to job creation.
“Regulatory agencies and government bureaucracy now operate as toll roads and view businesses as cash cows to be milked,” moaned the CEO of a company whose application for a licence is stuck in Abuja.
“The problem is that these regulators go to conferences and mouth-off about trying to create jobs and grow businesses, without having a clue of how to do so.”
Encourage, not hinder
An economist, Emeka Ohanyere, lent his voice on the need for the government to support and encourage companies with huge investment outlay rather than stifle them with overbearing policies.
His words: “It cannot be over emphasised that Nigeria needs as much foreign direct investment (FDI) as it can get, particularly with the recent transformation agenda set in motion by the federal government intended to ensure rapid growth and far-reaching economic prosperity.
“Often than not, regulatory rascality, a situation where regulation takes the law in its own hands rather than follow due process, is the key factor that negatively affects the inflow of FDIs.
“Many a time, regulators unknowingly hinder investment inflows for fear of losing domestic management control.
“The current Coca-Cola/CPC, issue which has raged on for a while occupying the centre stage in media discourse, is one that is giving investors course for concern.
“The Nigerian government needs to do more to make its economy attractive to foreign investors and catch up with other developing countries, despite the improvement recorded.
“In ease of obtaining credit, Nigeria jumped 73 places up to number 52, while in ease of starting a business it improved nine places to number 125.
“The World Bank report went further to say that Nigeria has implemented 10 regulatory reforms, starting from 2005, making it easier to do business.
Ohanyere said with the negative effect of this situation on the economy, caution should be taken so as not to send the wrong signal to consumers the CPC intends to protect.
One other worrisome policy is in the insurance sector, where FDIs are permitted up to certain levels with restrictions on voting rights to ensure that the management control of an insurance firm does not shift to a foreign entity.
Lesson from India
In Ohanyere’s view, concern about loss of management control is less important than economic growth.
“Another case in point that easily comes to mind is that of India, losing huge FDIs due to stifling policies that can best be described as regulatory rascality.
“To put India’s record in attracting FDIs in an international context, it’s been at best a trickle compared to FDIs into countries like Mexico and China. In the past 10 years, Mexico has attracted $247 billion of FDI net inflows and China $2 trillion, compared to India’s $229 billion.
“Case studies like these are what we should take cognizance of, so as not to do more harm than good to our economy.”
Back to the Coca Cola case, the Nigerian judiciary has been urged to stick to the finest principles of adjudication. The judiciary, said Ikenna Agu of the Society for Social Development and Good Leadership, has established its reputation as an impartial arbiter and should not resort to extra-judicial to produce judgment.
Agu spoke in reaction to Femi Falana’s letter to Coca Cola global CEO in which he raised several issues which are not related to the case.
“Falana went on to pronounce Coca Cola guilty even when he is fully aware that there is a subsisting case in court,” Agu argued.
“Making such statements is tantamount to attempting to sway the judiciary and make the CPC’s case better than it is. Falana should allow the parties that are already in court continue with the judicial process without seeking to unduly influence its outcome.
Agu stressed that rather than hound companies operating in Nigeria, government agencies such as the CPC should ensure that businesses meet their obligations while protecting the interest of the consumer.
He said this can be done without going overboard, “as it is with CPC requiring Coca Cola to pay N100 million for a manufacturing defect on filling of two cans of Sprite out of a massive production batch.”
