Policy Briefs

Regulatory Agencies Failing Nigerians

Nigeria’s much coveted political and governance change will be greatly enhanced; if the nation’s regulatory agencies can be pressed to carry out their mandates in unfettered ways. Carrying forward President Muhammadu Buhari change agenda and delivering on his campaign promises requires an intrusive evaluation of oversight performances and service delivery by the regulatory agencies. The president will certainly be confronted with challenges. A focused review will also unearth some surprises, pointing to the conduct of some regulatory agencies as not reflecting international best practices. It will also be adduced that whilst regulatory mandates are clear, regulatory officials skirt diligent enforcement and certainly, are lifting below their statutory weight. Hence, Nigeria’s regulatory sector, despite perceptible proactivity, remains turbulent and uncharted waters.  Nigeria is worse off with such a disposition.

Governance works best when there is inclusivity and when consumer rights and public interests are duly protected.  The absence of such protection by the regulatory agencies creates immense challenges. Presently, matters in the realm of the regulatory agencies are increasingly tense and conflictual. Nigerian regulatory agencies are by law independent, but official meddling and vested interests continue to undermine their efficiency and mandates. As such, consumer protection remains another area where public policy and governance have not provided Nigerians their entitled protection. Despite their tortured excuses, those regulatory agencies charged with communications, electricity, banking, and petroleum matters, have largely failed to protect Nigerian consumers fully, in keeping with their various mandate and Buhari’s change mantra. As with the old order and the contagion of past wrongs, Nigerians suffer immeasurably when their regulatory agencies underperform or fail.

A regulatory agency is statutorily an independent body, “with the authority to exercise authority over some area of human activity in a supervisory capacity…[t]hese agencies are within the purview of the executive branch of government, but are internally regulated rather than subject to the direct control of the President.” Nigeria’s extant and prospective consumer protection regulations seek to “protect and promote the interests and welfare of consumers by providing consumers with competitive prices and product choices; prohibit restrictive business practices which prevent, restrict or distort competition or constitute an abuse of a dominant position of market power in Nigeria.”  A draft bill now before the National Assembly, seeks to redress prevailing and future shortcomings.  Still, the strength and limitations of consumer regulations isn’t in the prescriptions, but in ensuring full compliance and enforcement.

Globally, independent regulatory commissions create and enforce regulations to protect the public at large. Commission mandates are adapted to national imperatives, sectoral niche, peculiarities and challenges. Nigeria is not bereft of niche sector regulators, and critical segments of the economy have in place, regulations and regulators. These include the Bureau of Public Enterprise (BPE), Fiscal Responsibility Commission (FRC), Securities and Exchange Commission (SEC), Nigerian Communication Commission (NCC), Central Bank of Nigeria (CBN), Nigerian Insurance Deposit Corporation (NIDC), Nigerian Electricity Regulatory Commission (NERC), National Agency Food and Drug Administration and Control (NAFDAC) and Standard Organization of Nigeria (SON), and several others. These agencies lay claim to optimizing their mission. Yet, in reality their collective presence and impact, where felt, is often below par, considering the din of public agitations and protestations related to their respective sectors. In fairness, most agencies also contend with the dichotomy between the Executive and Legislative arms of government in seeking to influence the agencies, while failing to hold them accountable, when they underachieve or fail in their mandates.

Regulatory failings in Nigeria are best viewed from the prism of Nigeria’s debt profile. Nigeria’s national debt which stands at N12 trillion ($65 billion), remains troubling. Eighty-six percentage of Nigeria’s domestic debt, owed by states and the federal government, comprise 13 percent of the nation’s Gross Domestic Product (GDP). Nigeria’s indebtedness to international and domestic financial institutions, a whopping N1.63trn, if aggregated, is over 35 percent of the 2016 national budget. How does a nation wrack up such debt, when there is a Fiscal Responsibility Commission (FRC), with oversight responsibilities for such matters? If this question seems rhetorical, what is the exact role of the FRC, when in the context of the 2016 Budget, it’s envisaged the Federal Government will borrow N900 billion externally and N984 billion internally? Most Nigerian States are trapped in a debt peonage. States recently bailed out, are still hobbled by debt. In blaming the political leadership for fiscal profligacy, commensurate blame must be assigned to the FRC, for failing to hold States to established borrowing thresholds. Without doubt, regulatory failure abet states spending more than their earnings can sustain; and states not adhering to the three percent borrowing ceiling in relation to their total annual revenue. Still, it must be accepted that the work of FRC in this regard, is compounded by the conduct of State Assemblies that acquiesce to State Governors taking out loans without due diligence and public debate.

It’s known that Nigerians GSM users, consumers of electricity, petroleum products and bank customers are routinely subjected to arbitrary charges and inexplicable tariffs.  For them, the choice is to either accept such high tariffs or do without the services.  So, Nigerians are continuously subjected to price-fixing, conspiracies, false disclosure of price of goods or services and misleading or deceptive representations. The successful deregulation of Nigeria’s aviation sector and the GSM telephony system and the proactive role of NAFDAC attest to what is possible, despite residual challenges in these three sectors. But challenges persist across board. The negative impact of government’s meddling was highlighted recently, during the regulatory impasse between Nigerian Communications Commission (NCC) and MTN over 5.1 million unregistered Subscriber Identity Module (SIM) scheduled for disconnection from its network.  Although NCC as the oversight agency, imposed a N1.04 trillion ($5.4 billion) fine on MTN for non-compliance with Regulations 19 and 20, Section 15(2) of the Registration of Subscription Regulations, Act 2011, the Federal government unilaterally intervened, accepting a lesser payment of N50 billion that it deemed a “good faith deposit”. President Buhari would consequently blame MTN as “complicit in the country’s fight against the deadly Boko Haram sect by not dealing decisively with unregistered sim cards which were thought to have been utilized by terrorists.” NCC also fined Globacom and MTN N22million and N12million respectively, in the 4th Quarter of 2015 for corporate and individual porting breaches.

The regulatory performance challenges confronting the Buhari administration are inherited.  Most of the challenges have lingered. What’s pertinent, is that change seems to be eluding these niche sectors, even as the proponent of Buhari’s ‘change’ mantra become more vociferous and the ‘change’ campaign more concerted. Clearly, certain regulatory obligations are not being met in Nigeria.  They include, intrusive review of certain mergers and acquisitions; corporate transactions by electricity distribution companies; arbitrary billing issues across all sectors; mutually competitive rate systems; mandatory public hearings and public representation; transparency in agencies’ in being subject and accountable to public oversight and legal review and the agencies conducting above-board investigations and audits aimed at ensuring that industries and organizations do not constitute public nuisance, occupational hazard and threats to public safety.

Ample evidence exist that Nigerian regulatory commissions continue to underserve Nigerians.  Prevailing shortcomings in just three key sectors, electricity, petroleum and banking, attest to the underperformance of our regulatory agencies. Nigeria’s electricity supply remains largely epileptic.  Electricity tariff pricing and the cost of meters to consumers remains outrageous and contentious.  Previously made investments in this sector counts for naught as the Nigerian Electricity Regulatory Commission (NERC) dithers on its mandate and attribute its shortcomings to funding and bureaucratic challenges. It’s noteworthy, that 2013, Nigeria’s eleven Discos entered a pact with the NERC and Bureau of Public Enterprises, aimed at bridging the three-million metering supply gap.  Three years later, the Discos have barely managed an incremental installation of 152,000 meters, a paltry 4.5% increase out of the projected 3.356 million unmetered Nigerian customers. It’s also on record that the balance of 251,531 yet to be supplied meters was already financed by Nigerian consumers, through the Credited Advance Payment for Metering Initiative (CAPMI). Though growing consumer intransigence and violent attitude toward Disco staff and tempering with meters is unacceptable, they are understandable, since they reflect long festering public frustration.  As things stand, Nigerians seem to have forgotten that “about $12billion was squandered on electricity for which we have nothing to show for it and for which Fashola can also attest.”  The confused state of our regulatory commissions is best attested to by response to the public outcry, which led the National Assembly wading in on 16 February, 2016 and directing NERC to rescind the 45% increase in electricity tariffs that was to take effect from that month.

Petroleum processing, distribution, pricing and management comprise another failed remit of our regulatory agencies. Nigeria was recently embarrassed as its acute fuel shortage gained international attention. Despite the best efforts by Minister of State for Petroleum, Dr. Ibe Kachikwu, Nigerians are presently being gouged with PMS selling anywhere between N200 and N400 per liter, instead of the prescribed N87 per liter. This is despite the huge investments made in this sector.  Besides enforcement failure, what is most appalling is the policy deficit that translates to the absence of national strategic petroleum reserve. Still the present challenges reflect a throwback to warped public policies, including huge sectoral leakages like Petroleum Trust Development Fund, (PTDF) scandal where PTDF public funds totaling N250 million were allegedly used to “pay a lawyer to register Galaxy Backbone” a private company.

Nigerians have also not benefitted from the banking sector regulators as they should. Combined, CBN, NDIC, and FRC regulations and even the CBN establishing a Consumer Protection Department in 2012, have done little to stem corporate non-compliance and excessive bank charges passed on to unsuspecting consumers as Cost of Transaction (COT). Having investigated over 6,000 public complaints of unauthorized bank charges in 2015 alone, CBN compelled Deposit Money Banks (DBMs) to refund N6.2 billion to consumer. Inexplicably, after CBN abolished COT charges, it introduced Monthly Current Account Maintenance Fee and a Stamp Duty charge of N50 on every credit over N1000.  Nigerian banks by arbitrarily scheming off unfathomable bank charges from poor Nigerians diminish their disposable income and purchasing power. Likewise, despite the Securities and Exchange Commission (SEC) expressed willingness to assist Nigerians cash in on their N90 billion unclaimed dividends via e-dividend registration, most banks, in the bid to shore up their capital base are frustrating the process. Some banks charge as much as N2,000 to stamp validate and sign the e-dividend forms. Such conduct are the inverse of regulatory objectives and hamper investors’ migration and government’s overall fiscal, securities and banking regulations.  Ironically, regulatory bodies and banks operate is such manner without ever taking responsibility for advantages they gain by frustrating government’s cashless policy.

Why are Nigerian regulatory agencies not performing optimally?  First, the regulatory agencies are increasingly are self-serving and self-administering. While most agencies tout due diligence and unalloyed commitment to promoting and protecting public interest, most still do not fulfill their statutory mandate.  For its part, the Government is not respecting fully the statutory independence of agencies. Vested and conflicting interests, mostly from the appointment of political cronies and minions into the agencies, further compound the diligence of the agencies. Given the vast and vested interest of those in officialdom in various corporations that the agencies oversee, government bureaucrats often let regulators slither out of their regulatory responsibilities. Secondly, Nigerian citizens are not asserting rights; a fact further compounded by the low threshold of public awareness. Check and balances prohibit the removal of statutory agency appointees, unless if found criminally liable.  This means, that officials of most statutory commissions will remain in place until their tenure runs out.  Sad as that may seem, it offers President Buhari ample time to scout for those who can efficiently fill these positions.  He must resolve, also, not to use the vacant positions for political patronage.



Oseloka Obaze, MD & CEO

Oseloka Obaze, MD & CEO

Mr. Obaze is the former Secretary to the State Government of Anambra State, Nigeria from 2012 to 2015 - MD & CEO, Oseloka H. Obaze. Mr. Obaze also served as a former United Nations official, from 1991-2012, and as a former member of the Nigerian Diplomatic Service, from 1982-1991.

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