Private sector regulation in era of economic diversification
A major option being touted to save Nigeria from the danger of over-reliance on proceeds from oil and gas is diversification of the economy to lift other sectors to serve as other avenues for economic growth.
A practical discourse to help the government achieve the goal of diversification recently engaged the attention of policy experts, lawmakers, lawyers, technocrats and academics at a breakfast dialogue organized by the Initiative for Public Policy Analysis (IPPA) at Ikeja, Lagos.
At the forum with the theme, “Moving from Regulation to Policy Action: the challenge”, the experts essentially examined the nation’s business environment, focusing on how some factors, especially regulation of the private sector, undermine efforts at successful diversification of the country’s revenue base. They urged government at all levels to encourage investment in the economy by not regulating businesses out of existence.
The event was attended by the Chairman of the House of Representatives Committee on Information, Odebunmi Dokun, represented by Yinka Ajibolu; Executive Director of IPPA, Mr. Ayodele Thompson, among others.
In his presentation titled ‘Regulations Undoing Diversification of Economy”, the Director of Research and Advocacy, Lagos Chamber of Commerce and Industry, Dr. Vincent Nwani rolled out data indicating that the nation’s business environment scores low in global ranking: 169 of 189 in ease of doing business; 149 of 163 in security; 181 of 191 in stability of laws and policies; 177 of 190 in infrastructure index; and 124 of 140 in economic competitiveness index.
On the elements that earn the nation’s business environment such poor ranking, Nwani listed multiplicity of regulations, taxes and reforms; insecurity; inefficient and ineffective regulatory bodies; and lack of sanctity of contracts. He explained how multiplicity of taxes, levies and fees; overlapping and conflicting regulations and prolonged industry reform process, like the Petroleum Industry Bill (PIB), increase the cost of doing business in Nigeria, create uncertainty in some sectors and reduce Nigeria’s attractiveness as an investment destination.
Specifically, he identified rampant wave of kidnapping, attack on innocent residents and their property by terrorists, herdsmen and other criminals as well as activities of militants in the Niger Delta as some of the factors that make Nigeria insecure and unattractive to foreigners in terms of investment.
“Nigeria’s security situation contributes to its difficult business environment, compared to other countries in the region. Many private sector operators incur additional cost for security due to convoy operations to secure movement of supplies and personnel with the services of military and police protection. Also, the resort to more air transport instead of land or marine as well as hiring of security experts to help protect facilities lead to higher costs for private sector operators.”
The economist also took the gathering through the current realities at the nation’s ports, decrying the number of government agencies (14) and departments (28) operating at the gateway; the cargo clearance timeline (5 to 14 day); the delay in transactions due to the number of paper work (23 signatures) and agencies (18) to interface with for cargo clearance; illegal fees and levies; infrastructure breakdown; and the additional costs incurred by ports users owing to delays and illegalities by officials.
To Nwani, if Nigeria’s must diversify its economy to successfully generate more revenues, the business environment must be made attractive through reduction of administration burden by streamlining taxes, levies and fees; harmonising and simplifying regulations; and increasing collaboration amongst stakeholders to support industry reform timelines.
A United Kingdom-based health economist, Dr. Damilola Olajide who spoke on “Balancing Regulations Vs Product Health Hazards; case for tobacco use in Nigeria”, painted a picture of an industry being overregulated with the consequence of impeding the expected role of the operators in national economic development and social wellbeing of the people.
Olajide admitted that a product like tobacco needs to be regulated because the consumption imposes some externalities or health hazards, but argued that available data on tobacco use in Nigeria do not support an overly regulated industry.
Quoting Tobacco Atlas, Third Edition, he told the gathering that with Nigeria recording one of the world’s lowest prevalent rates of less than 20 percent, the current level of regulations in the country seems more of doing the dictates of the World Health Organisation (WHO) than what is required locally.
Among his concerns is that overly regulation will deprive manufacturers of their responsibility to the society, such as funding cancer research in health institutions and other schemes designed to check excessive smoking.
Olajide, who argued that the Nigerian tobacco industry is already comprehensively regulated, craved policies that will pay attention to balancing regulations with health hazards. “Effectiveness of tobacco regulation is largely dependent on addressing complementary health behaviour, including consumption of alcohol,” he said.
To this end, he stressed the need to address the crucial level and potency of nicotine by way of minimising the content in cigarettes to check addiction. Noting that consumption of tobacco and alcohol are complementary, and that one is no worse than the other, the health economist canvassed heavy regulation of alcohol to achieve effectiveness.
He urged policy makers to make effective use of the tobacco tax revenues for more interventions to check excessive smoking such as ‘smoking national cessation services’ being provided in other countries, and funding of researches towards mitigating the effects of tobacco use.
The Executive Director of IPPA, Mr. Ayodele Thompson, in his remarks, expressed reservations about a recent report that the tobacco companies are flouting the regulations, particularly by luring youth to smoke through erection of kiosk less than 100 meters away from schools.
“Stakeholders in tobacco industry are committed to adhering to the provisions of the National Tobacco Control Act 2015 because it forbids promotion of the products in Nigeria. As such, industry leaders prevent youth access and smoking at point of sale, and discourage the sale of tobacco products near schools. They also strongly discourage the use of child labour at tobacco retail points to prevent minors from selling and promoting the use of the products and do not partner with anyone who engages under-aged persons to sell the products.”
Flaying the report, Thompson said: “Available facts do not support the key arguments in the report. Facts show that tobacco is a declining product globally and smoking prevalence rate in Nigeria is the lowest. This is why the argument of child smoking and selling to school children is flawed. The law clearly forbids selling to minor and legal producers will always obey the law in both production and distribution of their products. Should any infringement be noticed, they should be able to report to the regulators.”
The Chairman, House of Representatives Committee on Information, Odebunmi Dokun said: Globally, regulations are important as a way to forestall possible externalities. The recognition of the important role that regulations could play in bringing about a sustainable society is a key reason legislative processes usually involves many stakeholders in order to ensure that the outcomes consider all shades of opinion. Without this, the law may not be balanced which will likely lead to lots of unintended consequences.”
According to him, the National Assembly has passed the National Tobacco Control Act (NTCA) which has since been signed into a law since May 2015, but there are still some concerns with NTCA in many quarters. “As a member of the National Assembly, I am of the view that other members will be interested in addressing whatever concerns that each group has without compromising public interests. One of the challenges now is that the law is not being implemented. This worsens the operating environment for private sector actors who are government allies in job creation.
“It is not just accidental, therefore, that the food, beverage and tobacco industry contracted at the end of 2016 by -2.7 percent from 5.8 percent in the third quarter in 2016, according to the National Bureau of Statistics. In the absence of effective implementation of the provisions as contained in the Act, reforming the Act may not be the appropriate way to go because lack of implementation has not provided a fertile ground to know what are actually wrong in the present provisions.
“They have to be tested, evaluated, gaps identified and addressed before new laws are introduced.”
In his presentation, Mr. Jiti Ogunye, urged business owners to be interested in governance with a view to ensuring that bad laws do not exist.
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