industry Insight
BUSINESS DAY Thursday 04 July 2019 www.businessday.ng
Regulatory agencies: Revenue collectors or business facilitators? Odinaka Anudu, Joseph Maurice Ogu & Gbemi Faminu
M
auritius, a tiny African country, deserves all the accolades it gets. According to the 2019 World Bank Doing Business Index, the time needed to register property has decreased more than 12 times since 2005. Similarly, the time needed for business incorporation has decreased almost 10 times as a result of four reforms in starting a business. The Indian Ocean island nation progressed from 25th to 20th in 2019 as a result of radical economic reforms which included introduction of a five-year tax holiday for local companies collaborating with the Mauritius Africa Fund for the development of infrastructure in special economic zones. The report shows that top 20 economies, for example, share few international good practices. In the area of starting a business, 13 of these economies have at least one procedure that can be completed online in 0.5 days. In the areas of construction and land administration, all top 20 economies’ mandatory inspections are always done in practice during the construction of a warehouse, and the majority have comprehensive geographic coverage. Nigeria made positive steps in World Bank Doing Business ranking in 2018, jumping 24 places to 145th as a result of Vice President Yemi Osinbajo-led reforms. The following year, however, the country regressed by one step, meaning that no positive impact was made in real terms. It is almost impossible to take a prominent place in any global doing business index without examining the role of regulatory agencies. The reason is that the buck of registering a business or property, collection of taxes, and trading across borders, among others, stops at the tables of regulators. Without doubt, regulatory agencies are important. The National Agency for Food and Drug Administration and Control (NAFDAC) has made visible efforts to regulate and control the manufacture, importation, exportation, advertisement, distribution, sale and use of food, drugs, cosmetics, medical devices, chemicals and packaged water in Nigeria. Without NAFDAC, unscrupulous Nigerians would have killed millions of citizens with fake drugs and food products, analysts say. The Standards Organisation of Nigeria (SON) has helped to standardise and regulate the quality of all products in the country. Other regulators have proved their relevance in driving the Nigerian economy. However, it is clear that the majority of Nigerian regulators pay more attention to revenue generation than business facilitation. In February this year, the Apapa Area 1 Command of the Nigeria Customs Service said it generated N404bn in 2018 as against N350.9bn generated in 2017. Bashir Abubakar, Customs area controller of the command, said the amount
realised was 95 percent of the 2018 revenue target of N426.1 billion. Just last month, the Customs ran to town with the news that the export value through Apapa and Tin-can, all in Lagos, rose to N258 billion in 2018, which was a 35.5 percent rise from N166 billion recorded in 2017. Also last month, the Nigeria Ports Authority announced revenue of N67.19 billion for three months ended March 31, 2019. For the Customs, the NPA and the federal government, these were all pieces of good news. But are they for businesses in Apapa area that are delayed by lack of functional scanners and poor call-up system? “Is it about generating billions in Apapa to the detriment of industries whose raw materials stay in Apapa and the ports for days before arriving factories?” a manufacturer asked. Cocoa farmers lose revenue due to delays in Apapa and Tin Can, but the business community says the Customs, NPA and federal government pay more attention to getting revenue than realising the vision of earning foreign exchange and broadening the economy. At a recent conference, the Ogun State chapter of Manufacturers Association of Nigerian (MAN) concluded that the gridlock in Apapa has raised production costs, as members often pay unnecessary demurrages due to delays of getting containers out and in of Apapa. “If Nigeria does not want to collapse its economy, then the Apapa gridlock has to be solved urgently,” the association said. Also, the National Environmental Standards and Regulations Enforcement Agency (NESREA) was established in 2007 to ensure compliance with environmental laws.
The agency, which is under the Ministry of Environment, has the power to establish and enforce administrative penalties, seal and close down premises or facilities whose activities pose imminent threat to life and property even while a warrant or court order is being sought from court. At an interactive session between the agency and the Manufacturers Association of Nigeria (MAN) recently, some manufacturers complained that they had to pay almost N2 million on air quality and air toxic clearance, audit report, and N1 million to NESREA-listed consultants to get clearance. Even with the consultants, delays have become inevitable, thereby stalling delivery of raw materials to factories, manufacturers said. Today in Nigeria, the functions of regulatory agencies overlap. For instance, NAFDAC and the SON have similar regulatory roles for food and beverage firms. Neither accepts the tests done by the other. And the processes, including registration, take time and money. “There are some regulatory agencies that are not consistent with the ease of doing business. Some of these bother on high regulatory compliance cost, lack of clarity in regulatory requirements, and overlapping regulatory functions, among others,” Babatunde Paul Ruwase, Lagos Chamber of Commerce and Industry (LCCI)’s president, said at a recent interactive forum with regulators in Lagos. “It is imperative to minimise the burden of regulation on investors if the private sector must play the desired role of wealth and job creation as prescribed in the Economic Recovery and Growth
Plan (ERGP),” he added. Understandably, with dwindling government allocation to regulatory agencies, revenue drive seems to be inevitable. But should that drive come at a cost to businesses that lay the golden eggs? Recently, NAFDAC raised the fees for registration, lab analysis, change of company’s name and package size extension, among others, which it imposed on operators of small and medium scale enterprises (SMEs). Kudos to the agency for suspending them after the outcry of the business community. However, this shows that government regulators still do not appreciate that doing business in Nigeria is tough. Businesses in Nigeria pay 54 taxes across board in Nigeria, according to tax experts. They provide their own power, water, land and infrastructure. Yet, they pay all the levies and fees even when struggling. Analysts say that regulators must begin to put human face to whatever decision that they take. They urge government to seriously harmonise the functions of these regulators and merge the ones that play similar roles. More so, bureaucracy in registering businesses in some of the regulatory agencies needs to end. SMEs trying to register new products sometimes tell tales of woes in the hands of regulators, complaining that they pay a lot of money, yet are forced to wait for months before getting approved numbers. Simple technology can enable regulators to automate their processors and generate numbers within 48 hours. Perhaps, embracing technology can help reduce woes piled on businesses by regulators.
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