How breach of rules tests regulatory strengths, investments

THE assessed serial breaches of rules by major corporate establishments have put to the test the nation’s regulatory strengths and aggravating the already tensed investor confidence, with doubts over the integrity of Nigerian companies.

The development, coming amid unsettling macroeconomic issues besetting the economy and capital market, is already raising concerns in the investment community whether foreign investors should stay clear of the Nigerian environment.

Some analysts, while describing the series of regulatory sanctions dished out on the culprits as positive for regulations and corporate governance in the country, said it is also an affirmation that governance challenges are still very much alive.

Besides, there is also concerns over the role of the Financial Reporting Council of Nigeria (FRC) and its powers to punish the management of a company, but made worse by the denial and reproof given to it by the Central Bank of Nigeria over Stanbic IBTC’s feud.
Specifically, Oando Plc had failed to submit its financial results in accordance with the guidelines of the Nigerian Stock Exchange for over seven months, which bothers corporate governance questions.

By the NSE rule, contravention of the rule on timely rendition of accounts attracts a fine of N100,000 per week from the due date until the date of submission.

“By our estimation, Oando’s 206 days, 176 days and 85 days delays of the three reports (full year 2014; first and second quarters 2015) would have implied a paltry cumulative fine of N6.7 million.

“The cost in terms of investors’ confidence in regulators and corporate governance of quoted companies poses a greater challenge to the capital market performance,” the Head of Investment Research at Afrinvest Securities Limited, Ayodeji Eboh, said.
Stanbic IBTC Holdings’ was indicted by FRC, after the council concluded its investigation, alleging regulatory breaches involving concealment, accounting irregularities and poor disclosures.

It therefore, ordered the company to withdraw its financial statements for years ended 31st December 2013 and 2014 and restate them in accordance with relevant provisions of the FRC guidelines.

The Council also suspended the four directors of the company for alleged negligence and further reported the company to the CBN and the Economic and Financial Crimes Commission.

Already, a High Court in Lagos has ordered FRC not to interfere with the bank, but the question that still lingers is: “who is right between the bank and FRC?

CBN, in line with its earlier notification to sanction banks that failed to fully comply with the directive of the Federal Government to remit all deposits belonging to its agencies by September 15 into the Treasury Single Account, fined FBN Holdings and United Bank for Africa Plc.

But in a swift reaction, investors dumped the shares of both banks, causing a heavy slide in the prices till date.

MTN Nigeria, the Nigerian subsidiary of MTN Group, was slammed a $5.2 billion fine by the Nigeria Communications Commission for failing to disconnect about 5.1 million unregistered SIM cards, after a deadline.

The number of unregistered SIM cards represents 8.5 per cent of its 59.9 million subscribers in Nigeria in 2014, while the fine represents 37.5 per cent and 48.1 per cent of the Group’s 2014 revenue of $13.6 billion and 2015 estimate of $10.6 billion.

Although MTN is still in negotiations over the sanctions, investors have already reacted to the news with its shares listed on the Johannesburg Exchange recording a 16.8 per cent loss.

Meanwhile, a social crusader and Lead Director of Centre for Social Justice, Eze Onyekpere, said the regulatory breaches have been a product of corporate governance erosion, which have been under cover.

He noted that there are many other ones that are yet to be exposed and commended the respective authorities for the steps taken so far, adding that they should pursue the cases transparently to logical conclusion.

The Executive Director of Abuja-based OJA Development Consult and Public Affairs Analyst, Jide Ojo, said the breaches are indicative of weak oversights, either from the angle of the regulatory agencies or the relevant National Assembly committees.

He noted that over the years impunity has become the order of the day, as many of the regulatory agencies demonstrate lack of political will to wield the powers that either the Nigerian Constitution or the Acts of Parliament setting them up vested in them.