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Regulators, Due Process, Mega-Fines and the National Treasury, By Jibrin Ibrahim

by Premium Times
November 16, 2015
Reading Time: 5 mins read
1

Nigerian-Communications-Commission-NCC-

As Nigerians follow the path of improved regulation and serious sanctions against offending companies, we must ensure that our regulators have the most competent and honest staff possible.

Today, MTN Nigeria is expected to pay a whooping 1.01 trillion Naira, about $5.2 billion fine imposed by the Nigerian Communications Commission. The fine is huge but then the infringement by MTN is massive – they refused to close down the lines of 5.1 million subscribers who had refused to go through the process of biometric registration so that the State can investigate them should they be involved with crimes such as terrorism and kidnapping. By its action, MTN was in active collusion with the criminal underworld of the country from where they had been making stupendous amounts of profit and refusing to even pay appropriate taxes. I understand that they are seeking 60-80 percent reduction to the fine. Should that happen, it would make nonsense of the principle of serious consequences for anti-Nigerian activities by companies that are profiteering from Nigeria and doing real harm to us. I believe that a rebate of 10 percent is enough to show that we are responsive to the concerns of our South African friends that have been doing us so much harm.

It was the American Justice Department that introduced the policy of mega-fines for countries engaged in illegal and harmful activities. The American argument is simple, multinational companies care only about one thing – money, when they realise you will take their money, they will start obeying your laws. The underlying logic here is that obedience to the law, ethics and morality are categories that are unknown to the business world, so engage them in their comfort zone of money and they become sensible. It was in this sprit that the Americans recently fined Alstom S.A. a French power and transportation company a $772,290,000 fine to resolve charges related to a widespread scheme involving tens of millions of dollars in bribes in countries around the world. The American argument is that foreign countries that offer bribes harm the interest of American competitors who seek the same contract with an honest approach. This is not to say that American countries do not offer bribes, they do. Nonetheless, with increased punishment for corruption, including jail term for executives, American companies are becoming less active in the business of bribing corrupt foreign governments so the Justice Department becomes an instrument to seek a level playing ground for home companies.

The change we need therefore is for the regulators to do their job well, not for their pockets but for Nigeria. This would need a situation in which the regulators themselves are competent and are indeed working for the national interest.

A second example is the recent decision by regulators in the United States and Europe to fine seven banks around £6.5 billion for profiteering through the rigging of Libor interest rates. I don’t have a clue what Libor interest rates are but the regulators say the said acts were harmful to the economy and must be punished severely. Barclays bank alone was fined £1.5 billion for its role in conspiring with currency traders to offer clients rates that were higher that what they should have been. Although the bank executives apologised profusely for their action, the decision was to punish them with heavy fines so that their shareholders would make sure that in future, they appoint executives who will obey rules, not because of being honest persons but because they are afraid of punishment that hurts. This is indeed the basic principle that there cannot be impunity in a country with the rule of law.

It is for this reason that I applaud the arrival of hefty fines from Nigerian regulatory agencies to erring companies. It is well known that in Nigeria, companies routinely bribe executives of regulatory agencies to ensure that they do not work in the interest of the country. Mr. Richard Branson of Virgin Airways for example explained he decided to leave Nigeria because regulators in the aviation industry were insisting on massive bribes from Virgin Nigeria for their pockets but did not give a damn whether the aircrafts were air worthy. The change we need therefore is for the regulators to do their job well, not for their pockets but for Nigeria. This would need a situation in which the regulators themselves are competent and are indeed working for the national interest.

As the economic crisis ensures, the least we can do is recover monies that rightfully belongs to the Nigerian treasury.

It is in this context that the message from the apex regulatory body in the nation’s financial sector, the Central Bank of Nigeria (CBN’s) in responding to the controversial sanctions meted out on the leadership of Stanbic IBTC Holdings and two officials of the KPMG, over alleged irregularities in the company’s financial statements is very worrying. The Financial Reporting Council of Nigeria (FRCN) had ordered the company to withdraw its financial statements for years ended December 31, 2013 and 2014 and restate them in accordance with the relevant provisions of the FRC guidelines. FRCN also suspended the bank’s chairman, Mr. Atedo Peterside, and its chief executive, Mrs. Sola David-Botha. The Council also barred them from vouching for the integrity of any financial statements in Nigeria. The bank was also fined 1 billion naira for its alleged infringements. In response to the action, the Central Bank accused the FRCN of taking drastic regulatory action without following due process and giving the accused party an opportunity to defend itself. The Central Bank therefore rejected the decisions of the Council against Stanbic IBTC. From the CBN report, it appears that the Executive Secretary, FRCN is not only incompetent but also reckless, two traits that should never be associated with a regulator. It was the same person that was used by the Jonathan Administration to file a false report to create the excuse for suspending the then Governor of the Central Bank, Sanusi Lamido Sanusi. As Nigerians follow the path of improved regulation and serious sanctions against offending companies, we must ensure that our regulators have the most competent and honest staff possible.

I conclude by going back to our beloved telecommunications company, MTN Nigeria. Following an 11 month-long investigation by Premium Times, it was recently revealed that MTN Nigeria has been running circles around Nigerian revenue authorities using a complex but noxious tax avoidance scheme called Transfer Pricing using MTN Dubai and MTN International in Mauritius – both located in tax havens. In 2013 for example, MTN set aside N11.398 Billion from MTN Nigeria to pay to MTN Dubai. A similar transfer of N11.789 Billion was made by MTN Ghana to the same MTN Dubai, making it a total of N23.187 Billion that was shipped to the Dubai offshore account. After MTN Nigeria pays off its fine today, the next issue if for Mr. Fowler of the Federal Inland Revenue Service to start asking them questions. As the economic crisis ensures, the least we can do is recover monies that rightfully belongs to the Nigerian treasury.

A development consultant and expert, Jibrin Ibrahim is a Fellow of the Centre for Democracy and Development and Chair of the Editorial Board of Premium Times.

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