Chastise MTN, don’t destroy it!

 Nigerian regulators have historically been weak and incompetent. Their ineffectiveness probably stemmed from officials’ preference for receiving personal benefits in cash or kind from regulated entities, at the expense of ensuring firms play by the rules-a regulator who is in the habit of receiving gifts- small, moderate or large, from businesses he or she regulates, is unlikely to be an effective or unbiased regulator. There is an undisputed need to revitalize regulation in the Nigerian business environment in terms of integrity, professionalism, independence and effectiveness. However it now seems Nigeria is swinging from one extreme of regulatory timidity to another extreme of regulatory capriciousness!

In the last few weeks, examples of regulators seeming to run amok are abundant, suggesting a trend, rather than one-off or isolated events. The Financial Reporting Council of Nigeria (FRCN) purported to impose a fine of N1billion on Stanbic IBTC for alleged “misleading” 2013 and 2014 financials of the group’s holding company as well as suspending the FRC numbers of Atedo Peterside and Olusola David-Borha, Chairman and CEO of the holding company. FRCN also sought to suspend two other directors, Arthur Oginga and Daru Owei and the firm’s auditor, Ayodele Othihiwa of KPMG. The Stanbic IBTC/KPMG matters are in court and are therefore sub judice. The Central Bank of Nigeria on its part has imposed significant fines on three major banks-First Bank, UBA and Skye Bank over alleged delays in remitting funds to the Central Bank under the Treasury Single Account (TSA)-N1.877billion, N2.942billion and N4billion respectively! The fines were said to represent 5 per cent of delayed remittances in the cases of First Bank and UBA and 10 percent for Skye Bank. Even though in some cases, the banks may have acted on the basis of communication signed by the Accountant-General of the Federation, the fines have been paid, so the matters may be considered closed!

The National Agency for Food and Drugs Administration and Control (NAFDAC) evidently seeks to join the party! NAFDAC has announced a fine (or in their words “administrative charge”!) of N1billion on Guinness Nigeria Plc, which claims it is not sure exactly what the offences it committed were! It seems from unverified media accounts that the purported fines or charges relate to raw materials and production processes of the global giant manufacturer which NAFDAC feels were either expired and/or unsafe. It is not clear how NAFDAC computed the “administrative charges” and under what statutory authority they were levied! There is a history of the Consumer Protection Council (CPC) moving across industry lines, telecommunications, food and beverages, manufacturing and cable TV seeking to impose hefty fines.

The most notorious and potentially most damaging regulatory action must clearly be the case of MTN Nigeria, which has been fined $5.2billion purportedly by the National Communications Commission (NCC) even though all reports suggest the matter is being handled right up there at the Presidency, by the Chief of Staff to the President and National Security Adviser, evidently because government is said to be treating the matter as a national security issue!!! The facts of the matter do not appear to be in dispute-MTN received a note from NCC in August giving the country’s largest telecommunications company till August 11 2015 to disconnect 18.6million lines; in complying with the order, MTN found that there were cases of multiple SIMs which reduced the number to 5.2 million lines, which the firm finally disconnected by September 9; but for the verification and identification carried out by MTN since NCC’s instruction did not list specific SIMs and subscriber numbers, MTN would have had to disconnect 18.6 million lines!; NCC imposed a fine of $1,000 (about N200,000) for every line on the 5.2million lines amounting to $5.2billion (N1.040Trillion!!!) on September 20, 2015 based admittedly on a pre-existing regulatory stipulation.

There have been abundant media reports on the implication of these measures on MTN-its share value in the Johannesburg Stock Exchange (JSE) has suffered precipitous declines by almost 28% between October 23 and November 18; its group CEO has resigned; MTN has adopted a humble, apologetic tone in appealing to Nigeria’s government for a reprieve; and it is clear payment of $5.2million would erode MTN’s viability! The fine itself has been sufficiently contextualized in the media-it is larger than MTN’s total investment in Nigeria of $1.8billion, entire current assets of $3.54bn and total short term debts of $3.5billion; analysts say the maximum MTN can borrow from the Nigerian banking system is $1.7billion and it is not clear why it will borrow that sum to pay a regulatory fine or why banks should agree to extend loans for that purpose; the fine represents about 200 percent of annual revenues in Nigeria, and about half of total MTN Group revenues from all the countries it operates in worldwide!; in the global telecommunications industry, reports suggest the highest fine ever imposed on a telecommunications operator, before this Nigerian extravagance was $100 million by the US FCC on AT & T which is suing to have the fine reversed!!! Some Nigerians have noted that BP paid $18.7bn fines in 2012, but that was only 6% of BP’s revenues that year!

In this context, a fine of even $500million will be excessive, capricious and unreasonable; $5.2billion will simply destroy the company! It will also achieve the collateral of damaging any sensible prospects of foreign investment in Nigeria. Nigeria should avoid signalling to the world that we are anti-business or that we will resort to fines to bridge revenue shortfalls from oil.