Buhari’s body language has been credited with all the promising signs in the government: we are told that electricity supply has improved, not because of any new investment in the sector but because people understand from the president’s body language that there will be consequences for unacceptable behaviour. We are also told that civil servants, including those who routinely manufactured sundry excuses for not being at work for months now come to work regularly and on time too because of Buhari’s body language. Sleepy government entities like the Code of Conduct Tribunal suddenly woke up, rubbed off any form of sleep from their eyes and began baying their fangs to whomever they can lay their hands on – all because of President Buhari’s body language. Put differently, the body language of the new sheriff in town is seen in some quarters as a policy thrust that silently but unmistakeably tells you that there will be stiff sanctions for unacceptable behaviour.
Every policy has unintended consequences. And every body language, since it is merely a cue, could be read wrongly or over-reacted to by previously drowsy officials, who now compete for the attention of the new sheriff in town. Consider these: Former Governor of Imo State Ihedi Ohakim was prosecuted for N270m fraud allegedly perpetrated in 2008 and was granted bail for N270m. In July 2015, a High Court judge initially placed former Jigawa State Governor, Sule Lamido and his two sons in what would have been over two months detention in prison for an offence that is clearly bailable.
In October the Financial Reporting Council (FRC) slammed Stanbic IBTC Holdings Plc. with a N1 billion penalty for alleged misstatements in the bank’s 2013 and 2014 financial reports. The FRC, among other rulings, also banned Mr. Atedo Peterside and Mrs. Sola David-Borha, chairman and chief executive officer of the bank respectively, from vouching for the integrity of any financial statements in Nigeria. Stanbic not only denied the charges but also dragged the FRC to court. The bank is asking the court to determine, among other prayers, whether the FRC has the power to impose a fine of N1 billion on it.
In October the Nigerian Communications Commission (NCC) issued a landmark fine of N1.04 trillion ($5.2bn) against MTN, Africa’s biggest phone operator, for failing to disconnect subscribers with unregistered and incomplete subscriber identification modules (SIM) cards within the stipulated time.
In November, the Central Bank of Nigeria (CBN) slammed a fine of N4 billion on Skye Bank Plc allegedly for its inability to render appropriate returns on accounts of some government institutions and agencies. Skye Bank denied the charge saying the fine imposed by the apex bank was misdirected since it did not conceal any information of the accounts from the CBN.
The point of the above is not whether the actions taken were right or wrong but whether there has been an overkill or disproportionality between the alleged crimes committed and the punishments meted as every government agency tries to mimic the tough man image of the President. Even disregarding the question of proportionality between alleged crime and punishment, sanctions can also be assessed based on whether they were delivered at the right time and in the right manner.
Let us look more closely at the MTN case.
MTN, Africa’s biggest phone operator, derives the bulk of its revenue – about one-third of its total revenues- from Nigeria. NCC, the telecoms regulator had in August directed mobile telecoms companies to deactivate all unregistered SIM cards or face severe sanctions. MTN reportedly missed the deadline to deactivate its 5.1 million unregistered subscribers. The regulator consequently slammed a 200,000-naira ($1,000) fine for each unregistered SIM and set a deadline of November 16 2015 for MTN to pay the fine or face further sanctions.
At the Johannesburg stock exchange MTN’s shares went on a tailspin, shaving off over 25 per cent off the company’s market value of over $25bn. The company’s shares were temporarily suspended to protect the share prices from crumbling.
The fine, if paid at one-go, can easily wipe off over two years of MTN’s annual profit. Apart from the heavy losses by investors from the sharp fall in its share price, the company can even go down, and with it the thousands of Nigerians that depend on it – either as staff- or retailers of its products.
The issue here is not whether MTN should obey the regulator or not. It should and must. MTN has not done itself any favours by not offering any counter narrative to the charges preferred against it. Yes, the deterrence effect of the severe punishment against the telecoms company could force other companies to sit up. But there are broader issues that should be considered in matters like this. There are also questions that beg for answers: Why did MTN fail to respect the sector regulator’s policy directive? Was there a commercial or revenue advantage that accrued from the omission of over five million active lines from biometric verification of their owners? Put differently was there an intention to defraud government of revenue on the part of MTN? What steps were taken by the regulator before the heavy fine to resolve the issue with MTN? And what was the point of giving the company up to November 16 to pay up – apparently without the option of staggering the payment to ease the burden?
To put the fine imposed on the company in proper perspective, the $5.2bn fine is about 60% of Nigeria’s expected non-oil revenue for the year and about 30 per cent of the country’s entire expected revenue for 2015. Bloomberg Business of November 2 2015 remarked that the fine imposed on MTN “would exceed the revenue the Nigerian government made from oil in the second-quarter [of 2015], and would be more than double the state’s non-crude proceeds.”
Those who justify the fine solely on the basis of the revenue it can generate for the country, are in my own opinion short-sighted. The greater concern is on its impact on investor confidence in the country. And the investor confidence cannot be decoupled from the fact that the country has quickly moved from being a choice investment destination for foreign capital to one where investor confidence is quickly evaporating. Consider these facts:
In October 2015, JP Morgan, the US-based investment bank de-listed Nigeria from its Emerging Market Government Bond Index (GBI-EM) due to alleged lack of liquidity and transparency in the nation’s foreign exchange market. JP Morgan had earlier in January this year, placed Nigeria on a negative index watch on its Government Bond Market Index. By taking Nigeria off the index, there will be little or no demand for our bonds from foreign investors. A few days ago, Barclays Bank announced it would remove Nigeria’s sovereign debt from its emerging markets local currency government bond benchmark from February 1, 2016. Now, if portfolio investors are running away from Nigeria, you should not expect long term investors to come in.
To give a better idea of the investment climate in the country, consider the recent earnings reports from some multinational companies in the country:
Honeywell Flour Mills PLC reported 66.27% decline in full year profit in its audited full year financial results for the period ended March 31, 2015. In October 2015, Guinness Nigeria PLC reported a 76 per cent year-on-year drop in the three months ended September 30, 2015. The cement maker Lafarge Africa PLC reported a 12 per cent drop in pre-tax profit. Unilever Nigeria PLC also reported an 8.5 per cent drop in half-year pre-tax profit.
Given the above, and considering our extremely low ranking in the World Bank’s Ease of Doing Business Index ( we are currently ranked 170th among 189 countries) policies that give erroneous impressions that the country is hostile to foreign investments, must be eschewed. What we need now are friends, not muscle flexing, especially flexing the muscles in an inflexible manner.