Moshood Isah
Last August, Economic Confidential reported the story of how Lagos- based confectionaries and food outlet, Chocolate Royale was given a VIP treatment just a few months ago despite serving poison to customers. As a matter of fact, NAFDAC’s director of Special Duties, Mr Abubakar Jimoh confirmed that indeed the confectionary was caught in the act of serving poison to Nigerians. The Lebanese owned company was rather shut down for barely two weeks before it re-opened for business without fine or other penalty imposed. Jimoh told Economic Confidential that, the agency did not want to hurt the business of Chocolate Royale as it contributes to the economy.
Over time, there have been several allegations and complains against products and service providers in the country but with no decisive response from regulatory agencies. At a time, most consumers gave up on the rights to complain or seek redress against unsatisfactory services. It became generally agreed that regulatory authorities were established only to protect the interest of service providers and not consumers. As a result, Nigeria consistently appeared toward the bottom of the Doing Business Index and also on the Corruption Perception Index.
On May 29, 2015, President Muhammadu Buhari was sworn into office. Buhari was swept to the helm of Africa’s biggest oil producer, after a campaign in which he promised tougher regulation and a fight against corruption. And then like a tide out of the blues, news came that Nigeria Communications Commission (NCC) has woken up to its regulatory obligations by wielding the big stick against some telecom companies over infractions. As that was being digested, there was another statement that National Agency for Food, Drug Administration and Control (NAFDAC) has also slammed Guinness Nigeria with a heavy fine for foul practices. NAFDAC ordered Guinness Nigeria Plc to pay N1bn “as administrative charges for various secret violations of the agency rules, regulations and enactments over a long period of time.” It was also reported that Guinness was revalidating expired products without authorization and supervision by NAFDAC. Another disturbing part of this report is that, investigations found out that the raw materials used in the production of beer and non-alcoholic beverages by the firm were permanently opened to intrusion and exposure to the elements and rodents, which invariably affect the integrity of the raw materials. The brewer was also alleged to maintain poor documentation and not complying with conditions contained in the certificate of validation of the revalidated malt extract, which required the storage of the items in cool and dry place, and elimination of exposure to sunlight.
The era of negligence and apathy to responsibilities may be on the way out as recent actions by some regulatory agencies seem to be turning the tide against the latitude of with which many multinational companies operate.
Four of Nigeria’s leading telecom operators were sanctioned by the NCC, for condoning pre-registered subscriber identification modules (SIM) cards in their systems beyond deadline. The affected GSM network providers are MTN Nigeria, Airtel Nigeria, Globacom Nigeria and Etisalat Nigeria. They were sanctioned and asked to variously pay N120.4 million for failing to fully comply with the directive of the Commission to deactivate pre-registered and defective customer SIM cards. The head of Enforcement and Monitoring Department of NCC, Mr. Idehen Efosa explained that out of the 37.79 million lines, Etisalat had 19.46 million improperly registered lines followed by MTN with 18.6 million lines. Airtel had 7.4 million lines while Glo had 2.33 million lines only. The order to deactivate the lines followed a meeting between Office of the National Security Adviser (NSA), Department of State Service (DSS), the network operators and the NCC to examine the security threats posed by unregistered SIMs. Thereafter, NCC handed down a seven day ultimatum starting from August 4, 2015 to GSM operators to deactivate unregistered SIMs with invalidity status.
Long after the deadline however, and believing it was business as usual, MTN still failed to comply with the joint agreement and therefore incurred the largest fine in the history of telecommunications in Nigeria as it were slammed with N1.04 trillion ($5.2bn) for undermining efforts by the Nigerian government to tackle security challenges, war on terror and allied crimes. A security report suggested that many active but unregistered MTN lines were discovered at the camp of the dreaded Boko Haram sect. Again, the company was accused of failing to cooperate with security agencies during investigations into some kidnapping and terrorism cases. A reliable NCC source also said that the regulatory body was obligated to ensure strict compliance with its rules of engagement and will not bend its resolutions to ensure that the incessant occurrences of threats, kidnappings and other security related issues via telecommunication networks are brought to a halt.
Another confidential document revealed that the Commission had consistently engaged telecom operators on the need to strictly adhere to regulations and business rules in the registration of subscribers, but MTN has consistently flouted such instructions. The heavy sanction on MTN was in accordance with Regulations 19 and 20 of the Telephone Subscribers Registration Regulations 2011, to pay the sum of N200, 000 for each improperly registered SIM cards found on a network. After the deadline, a total of 5.2 million lines were found in the MTN network.
In what would seem a radical change of attitude, the Nigerian Electricity Regulatory Commission (NERC) also slammed a fine of N18 million on the Abuja Electricity Distribution Company (AEDC) for what it termed negligence which led to the electrocution of an eight -year-old girl in Anguwan Dodo, Gwagwalada Area Council of the Federal Capital Territory (FCT). According to NERC, the accident occurred when a staff of AEDC disconnected a wire feeding the residence over an allegation of accumulated bills and left the wire lying on the ground. The Disco staff equally failed to disconnect the wire from getting supply from the transformer.
Apart from the N18 million fines, AEDC was also ordered to ensure that the surviving four month old child during the incident undergoes medical check-up in a recognised hospital and evidence presented to the Commission for further directives. The NERC explained that a regulatory resolution reached by it had upheld the recommendations of the report of a panel it set up to investigate the electricity accident. According to the Commission, the panel found Abuja Disco liable of operational negligence in the death of Faith Yakubu.
The Electricity Regulatory Commission further advised that AEDC should adequately train its staff on market regulations as well as ensure that its marketing units are provided with competent technical staff with the sole responsibility of carrying out the function of connection and disconnection of customers when all conditions for disconnections in line with NERC’s regulations have been met.
For many, it was a surprise that NERC could bring itself to sanctioning a service provider. In the past, the regulator had pointedly told Nigerians that the interest of the companies were more paramount as they had invested heavily and all its efforts would be geared to ensuring that they recoup their investments. Even when it is apparent that most of the distribution companies have not improved or increased the infrastructure they met upon acquisition, NERC has regularly approved price increases. Consumers complain of lack of decent services, no new distribution transformers are being added and customers continue to be subjected to arbitrary and exorbitant estimated billing in the absence of pre-paid metres.
Over the years, there were allegations that government was being short-changed by income generating ministries, departments, agencies and parastatals (MDAs&P). These bodies operate multiple accounts into which revenues were deposited. The effect was that funds meant for the treasury were either hidden or diverted. The new administration then opened a Treasury Single Account (TSA) ordering all its MDAs&Ps to transfer every fund into it. Government said the measure was specifically to promote transparency and facilitate compliance with sections 80 and 162 of the 1999 Constitution. A statement by Senior Special assistant to the Vice President on Media and Publicity also demanded that, all receipts due to the Federal Government or any of its agencies must be paid into TSA or designated accounts maintained and operated in the Central Bank of Nigeria (CBN), except otherwise expressly approved.
It then set a deadline of 15th September 2015 for the fulfillment of the TSA. Central Bank of Nigeria (CBN) also warned that commercial banks that failed to comply with the September 15 deadline will face severe sanctions. According to the Accountant General of the Federation, Alhaji Ahmed Idris, about 600 out of the over 900 government MDAs were able to comply with the TSA directive. To ensure there was no ambiguity, CBN convened a meeting with the banks where all relevant questions were asked and thrashed. Despite the extra efforts, many banks still continue to hide some big accounts.
By the second week of November 2015, three banks namely First Bank, UBA and Skye Bank had been heavily sanctioned for hiding accounts holding billions. First Bank and United Bank for Africa (UBA) Plc a combined sum of N4.819 billion. While the CBN imposed a penalty of N1, 877, 409,905.12 on First Bank, UBA was fined N2, 942,189,651.45. In the case of Skye Bank, the penalty was N4 billion. To be sure, CBN’s penalty is five percent of the unremitted amount.
Similarly, unlike in the past when huge income generating parastatals were used as avenues for slush funds by senior government officials to fund party activities, personal responsibilities and service their cronies, the Federal Government has commenced investigations into the activities of some ministries, departments and agencies (MDAs), including the Nigeria National Petroleum Corporation (NNPC), Nigerian Maritime Administration and Safety Agency (NIMASA) and the Nigerian Ports Authority (NPA), who collect revenues in dollars only to remit same in naira into government coffers. CBN Governor, Godwin Emefiele told the National Economic Council (NEC) during a recent monthly meeting chaired by the Vice President, Prof. Yemi Osinbajo, at the Presidential Villa of the sharp practices by the revenue generating agencies, saying that the practice was not limited to those mentioned. He said,
Just as these parastatals were being investigated, government investigators have decided to use the sledge-hammer on defaulting agencies starting with the Independence National Electoral Commission (INEC). CBN froze all bank accounts operated by INEC following the commission’s failure to comply with the TSA directive. Informed sources at the commission tried tom justify the failure to comply by citing peculiar activities of the body. It was further gathered that the decision of the government to freeze all accounts operated by INEC thrown the body into a serious dilemma because it was not able to even pay salaries of workers. Furthermore, agencies like NIMASA, CBN, DPR, FIRS, SEC, NCS, OAGF, amongst others, took turns to appear before the probe panel to present their financial activities. It is expected that the Federal Government will continue to use its sledge-hammer on any agency found wanting in any form of economic inconsistency of the other.
The emerging tough regulatory regime has met with strong reactions from those who believe it portents danger to investments in the country and those who think that on the contrary, it will make Nigeria competitive. Some analysts have said the size of the fine risked damaging Nigeria’s efforts to shake off its image as a risky frontier market for international investors, though others said it showed Nigerian regulators were keen to enforce the law.
Bismarck Rewane, CEO of Lagos-based Financial Derivatives Company Ltd, said the fine was based on outdated average revenue per user (ARPU) of $50 a month, dating from 15 years ago. “Now ARPU is around $8. The country cannot tolerate corporate arrogance, but this may also deter other investors because of the size of the fine,” Rewane said. (Additional reporting by Chijioke Ohuocha and Felix Onuah in Lagos; Editing by James Macharia and David Holmes)
The aggrieved stakeholders who are of the aegis of the body of subscribers, known as National Association of Telecommunications Subscribers, (NATCOMS) are wearied about the myriad of monetary sanctions, which has in no way benefitted them. Besides, NATCOM, it was learnt that groups in the industry like the Association of Licensed Telecommunications Companies of Nigeria, (ALTON), and Association of Telecommunications Companies of Nigeria, (ATCON) both of which MTN is a member is taking the news with a peach of salt. According to the Chairman, Association of Licensed Telecommunication Operators of Nigeria, ALTON, Engr. Gbenga Adebayo, the fine could cripple the entire industry saying that fines have never been able to address or removed the problems being encountered in the industry. He expressed further that the imposition of such a huge fine of N1.04 trillion for non-compliance with the SIM card registration procedures needed further clarification.
SENATOR Ben Murray- Bruce, PDP, Bayelsa East described the imposition of $5.2 billion fine on MTN, Nigeria by the Nigerian Communications Commission, NCC as a bad signal to foreign investors. In a statement, Bruce who noted that the decision will hurt Nigeria and investors coming to the country and urged the Federal Government to as a matter of urgency take steps that would help remedy the situation and restore investor confidence in Nigeria by resolving this impasse with tact with a view to the nation’s long term financial interests rather than our immediate interests.
In the same vein, some financial experts said that spate of regulatory sanctions in capital market would serve as a threat to the quest for foreign investment. Expressing dissatisfaction with the rate of regulatory sanctions in the country, Mr Okechukwu Unegbu, former President, Chartered Institute of Bankers of Nigeria (CIBN), said regulators should not destroy the market and economy in their quest for zero tolerance and advised Securities and Exchange Commission and the Nigerian Stock Exchange (NSE) to be concerned with the developments in the market to boost investor confidence. He said NSE should pay more attention to the market and map out strategies aimed at protecting investors from unwarranted loss like its contemporaries. The exchange he said, should be proactive rather than reactive in its regulatory function to protect investors. He cited the South African example where the Johannesburg Stock Exchange suspended trading on MTN shares to protect the investing public from severe loss due to sanction on the company by Nigeria over SIM registration. Also, Managing Director, APT Securities and Funds Ltd Also, Mallam Garba Kurfi said government’s major concern should be on ways to increase the number of companies that were paying taxes to boost revenue generation. “Government should concentrate on ways to increase revenue generation through tax payment instead of huge sanctions being imposed on companies.” Kurfi said that regulatory sanctions were not good for the market because it would scare foreign investors. He said the action would also affect company’s bottom line and dividend payable to shareholders.
Those who see no wrong in the regulatory resurgence point to tough and rather punitive actions against infractions in developed economies. In 2008 a United States court fined Siemens a record $1.6 billion for bribery and corruption cases involving the company in the US and Germany. Similarly, around November 2014, the Commodity Futures Trading Commission (CFTC), the Office of the Comptroller of the Currency (OCC), the United Kingdom’s Financial Conduct Authority (FCA), and Switzerland’s Financial Market Supervisory Authority (Finma) collectively issued a US$4.3 fines and penalties against six financial services firms for attempted manipulation of, and for aiding and abetting other banks’ attempts to manipulate global foreign exchange (FX) benchmark rates to benefit the positions of certain traders.
Furthermore, Glaxosmithkline, the producers of Panadol Extra and other drugs have also at some point in time fined $3 billion by United States authorities over charges that it marketed drugs for unauthorized uses, held back safety data, and cheated the government’s Medicaid program. These and other defaulters have faced various forms of sanctions in developed nations. As a matter of fact, British Petroleum was once fined of $18.7bn which was said to be the largest environmental fine in United States history of Gulf oil spill.
