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Fines are to serve as deterrent, corrective measures – Odibo

By on December 21, 2015

The recent fine slammed on MTN Nigeria for contravening a directive of the Nigerian Communications Committee has continued to reverberate even beyond the shores of Nigeria. As the telecoms giant continues to struggle to meet the December payment deadline, a business/financial analyst, Mr. Paschal Odibo, in this encounter with Festus Akanbi, calls for caution in view of the far-reaching effects of the crackdown

Members of the Nigerian business community have experienced a raft of corporate sanctions in recent times and concerns are being raised as to what signal the sanctions on multinationals like Guinness Nigeria Plc, MTN  and Stanbic IBTC Holding will send to the international investors.

Of course, the sanctions have their merits. First, there is need to whip all operators into lines since no one is above the law. The directives that forbid the sale of unregistered SIM was to guarantee the nation’s security, so punishing erring firms on this issue is a plus for the Nigerian security. At a period of slowdown in revenue, the fines can also be used to augment governments earnings.

However, analysts believed there is need to implement the sanctions to the affected firms with caution.

Odibo told THISDAY that the sanction could portend danger in terms of what is referred to as the Global Investors Perception; that is how investors view a country, whether real or perceived, is stimulated by a lot of factors.

According to him, such factors include government policies or testimonials from the first movers. The first or second person or company to come to an environment to invest and market their businesses may be able to tell better stories about the environment than the government will, saying there is a difference between marketing and public relations. Marketing, he said, is saying what you think you are while public relations is what people perceive you to be.

“As it is, as analysts, we are really looking at the present situation to understand if it is becoming a trend; if it is a trend, it is better we nip it in the bud because it will be very counterproductive since you may lose what you are trying to save. If these sanctions are being carried out to back up the dwindling oil revenue in order to manage the budget, companies affected by these fines will be forced to retrench and scale down. So, in that respect it might pose a lot of danger.”

Shoring Revenue

He said it doesn’t make sense to see the punishment as a revenue earning opportunity. He said, “Nobody should allude that. Regulators are not revenue or income generating agencies. Whenever you set that kind of tone, you will ‘breed a flop team’ in the agencies. Individuals who work in the agencies will become ‘income set minded’ rather than ‘standard set minded’. Regulators are meant to set standards and ensure that there is no monopoly or opportunity for anyone to get undue advantage while protecting the interest of the state.

“If the Nigerian society must be seen as a free market society that encourages investment, these concerns must be dealt with adequately because we cannot afford to send bad signals to investors; posing our regulatory agencies as income generating agencies.

“Fines are to serve as deterrent and corrective measures for erring organisations. Secondly, the regulators are to ensure that the players in the field are constantly playing for the sake of the economy. The moment the players get off board, the regulator loses the moral right as a regulator because that shows it has not done something right. It is like a football match, the moment a match ends and the players take their leave, the referee goes home.

“As a fact, regulators sometimes should be able to make a case for the practitioners; understanding the peculiarities and concerns. For instance, the Nigeria Electricity Regulatory Commission (NERC), in recent past, made a case for the Electricity Generating Companies (GenCos) and the Electricity Distribution Companies (DisCos) while also making a case for the consuming public for a fair electricity tariff.”

Speaking on the recent fines, Odibo said  there seems to be a disconnect in terms of the duties of the regulators and the expectations of the players. “No one is in support of executive recklessness or impunity because sometimes these large corporations tend to wield their weights in terms of what they control. So, the responsibility falls on the regulators to ensure that no one is above the law. However, you must not kill a fly with a hammer,” he said.

Element of sanity for regulators

“Sanity for regulators is a given because that is why they are regulators. As regulators, they are expected to ensure a level playing field for the practitioners to work and the consumers to enjoy. I recall the days of NAFDAC under the late Prof. Dora Akunyuli, the same set of people who were hitherto indifferent had their mind sets changed under her. She made it clear that NAFDAC was created to aid the safety of Nigerians and not to generate money. That mind set enabled the NAFDAC team go about their duties professionally, ensuring that standards are met. The agency got a lot of accolades for being the people’s advocate,” he said.

Implications of fines on the average Nigerian family

Talking about the implications of fines, he said the issue cuts across every sector not just the NCC. He said, “There is a serious disconnect between government agencies and the operators. To bridge this gap, the Nigeria Economic Summit was set up to create an avenue for interactions and engender an enviable public-private sector partnership. The private sector must understand very well how the public sector works while the public sector should know what drives a typical private sector. Such interactions will help both parties to further appreciate the consequences of whatever action they take.

“For instance, one of the banks was hit with nearly N2 billion naira fine by the Central Bank of Nigeria (CBN) at a time they signed a contract with another corporate body to execute a plan. Immediately the fine was announced, the bank had to cancel the contract because they must simply find a way to pay the fine.

“By the time the affected company contacted their foreign counterpart, a lot of explanation had to be made. That definitely created a negative perception on how one may not necessarily rely on a signed document, working with a Nigerian company because the contract may be cancelled at anytime. For a company that has done an invoice financing for its project based on an existing contract, the cancellation was a huge call. Hence, investors are now compelled to do serious thinking about the future of their businesses in Nigeria or before making an entry into the country due to a perceived volatile business environment.”

He alleged that “Regulators before now did not care about what happens to the companies. But, now they need to care. If the present mantra is to provide employment, then the options must be explored to achieve a resolution.

“Using MTN as an example, to pay the fine, they may have to scale down, retrench, cut their advert budgets, marketing budgets and even some contracts. You may now imagine the spiral effect of these actions on the livelihood of the families that may be affected by MTN’s decisions. Although, not talking as a spokesperson for MTN, I believe if MTN met with the NCC on their challenges in disconnecting the affected unregistered lines, which is about 5 million and all they got was a fine, then there is something missing.

“More so, it is outrageous if before now MTN signed to a law that warrant that they be charged N200, 000.00 for each line not disconnected by the end of the expiration date. I know that sometimes, regulators behave like dictators, compelling the operators to sometimes agree to some stringent conditions. However, on this matter, I believe there should be a rethink so that these fines do not affect future plans and growth of MTN; and the same goes for the other organisations.

“On the other hand, looking at the scenario of the telecommunication industry before MTN, you may remember that when the bidding for the spectrum was on, the major ‘big boys’ did not show up (confirming my initial clamour for Africans to develop Africa). While not holding fort for the South Africans, I believe they were the ones who took the risk to bid for the spectrum, when others were not sure of the environment. They demonstrated belief in the continent with investments like: Game, Shoprite, MTN and MultiChoice. They were the ones building malls in countries across the continent, taking huge risks because the global investors perception for Nigeria  and indeed Africa then was very low, not minding our large population. In view of this, if they have erred, the regulators can temper justice with mercy so we can move forward.”

MTN as a major Contributor to Nigeria’s GDP

On the contributions of MTN    to the Nigeria’s GDP and the implications of a possible withdrawal of service from the country, Odibo said, “I hope they do not pull out, I hope they will find a solution to this. Like I mentioned earlier, NCC is not an income generating agency. Their job is to direct and correct practitioners who challenge the system in which they play.

So there is no reason why this issue cannot be resolved. “We are not saying MTN should not bear some brunt, but not this high. Let me put this in perspective, I alluded earlier to a bank that was charged and they had to cancel a contract that was soon to be executed. Whenever you place such huge fines on corporate organisations they may never recover from it; that is if they do not become insolvent and the nation loses in so many ways.”

On the proposal to make operators pay consumers directly rather than pay huge fines that may not be accounted for, Odibo said “We know what happens to the fines paid. Some government officials are waiting in the wings to share the money. It is unfortunate that we have a ‘sharing mentality’ and not a ‘production mentality’. It is a shame that our system has made us ‘constitutional beggars’ always waiting to share money.

Every month, government officials share proceeds of money they did not directly impact on or contribute to, just by virtue of being a state or an apparatus of government in Nigeria. This attitude has become a moral hazard because there is no incentive for the government to have a rethink on how they can be more creative and generate revenue since there seems to always be some money to share.

“Concerning the states generating income for themselves, I am very sceptical talking about internally generated revenue because to some of these states, it means taxing those who are already down. The economy is headed south even though statistics says it is heading north. There is no ingenuity involved in apportioning huge fines on companies in the name of serving as a deterrent.

“Although the consumer protection agencies have proposed that whenever there is an infraction that deals with the right of the consumers, the operators should pay the consumers whose rights were infringed; however, in this case, it has nothing to do with the consumers.”

 

[ThisDay]