Month: December 2015

REGULATORY COMPLIANCE ENFORCEMENT – IS IMPOSITION OF FINE HARMFUL?

 

The current government of President Muhammad Buhari rode into power on the mantra of change. Given the record of the president when he was a military head of state, many indeed anticipated change immediately APC was declared the winner of the last presidential election. Right before the new government set any policy direction or appointed new ministers, change was being felt all over the country; in anticipation of what actions the government would take. For example, there were sudden improvements in the performance and accountability in some sectors such as power, Petroleum, among others in what was attributed to the reading of the President’s body language. It was not therefore totally unexpected that there would be improvement in enforcement of regulatory compliance by various regulating agencies and their personnel. What came as a surprise is the gusto with which these agencies are now performing their roles and the extent of penalties they are willing to impose on violators? This is especially so, given the era of impunity that was the hallmark of the immediate past administration.

Recently, Telecom giant MTN Nigeria was fined a record $5.2bn (approximately N1.04 trillion) by Nigerian Communications Commission (NCC). According to NCC, MTN was fined for non-compliance with a deadline set by the NCC for all GSM operators to disconnect all non-registered sim cards. Also recently, a fine of US$5million was imposed on Guinness by National Agency for Food and Drug Administration and Control (NAFDAC) over expired raw materials allegedly found in its warehouse. Also, in line with its threat to sanction commercial banks that failed to comply with the federal government’s directive on the remittance of government revenue to the treasury single account (TSA), the Central Bank of Nigeria (CBN) fined some of the county’s first generation banks – First Bank of Nigeria Limited and United Bank for Africa Plc. reportedly in the sum of about N4.8billion in total.

This new mood of regulatory compliance enforcement has somewhat become controversial and subject for debate on its desirability or otherwise.

MTN’s $5.2 billion fine adds up to nearly a quarter of Nigeria’s national budget for 2015 and it has come at a time when the country needs it most, thanks to the fall in oil prices. Therefore some have argued that the motive for imposition of fines, especially such huge fine imposed on MTN, is more about fund-raising rather than to sanitise the sectors concerned. There were therefore calls on government to reduce the fines or cancel them outrightly. The counter-argument is that the imposition of fines are necessary to send the message that laws and regulations are meant to be obeyed and complied with. Regulators should demonstrate that they could also bite.

Some are also concerned that imposition of huge fines may discourage foreign investors thereby reducing Foreign Direct Investment (FDI). They argue that it will increase the cost of doing business in the country. Some even argue that such imposition casts Nigeria as being desperate. One of those opposed to huge fine is a popular Senator, Ben Murray- Bruce. According to him “ the extent of the fine by the Nigerian Communications Commission is such that it sends a very wrong signal to foreign investors and gives them the impression that Nigeria is in a desperate financial situation due to the sudden drop in crude oil prices and wants to get alternative revenue by any means necessary”.

To my mind, imposition of fines and any other sanction prescribed by any enactment are logical consequences of non-compliance with the law. What is important is for the regulation to be clear on what an infringement is and the consequence of that infringement. Where a fine is to be imposed, the regulation should be sufficiently clear on how the fine is to be computed. Once, the regulation is clear on these aspects, it will be manifestly fair on all concerned when a fine is imposed, even if huge. What is imposed should therefore be paid, unless reversed in line with the law. Everyone should be seen as equal before the law, the weak and the strong, the big multinational and the artisan.

However, despite the availability of clear and fair justification for fine imposition, other overriding factors may compel a second look at what is being imposed. For example, issues such as national security, economic impact, sectorial distabilisation, national interest may warrant a need to outrightly cancel or reduce fine imposed. Indeed, the NCC went on to reduce the fine imposed on MTN by 25%.

Some were aggrieved about the NCC’s decision to reduce the fine and have described it as a violation of a fundamental human right and a breach of some sections of the Nigerian constitution. However, the NCC has defended itself by stating it had had cases in the past where organisations pleaded for leniency on their sanctions and the commission took this into consideration. In the case of reducing MTN’s fine, the commission stated it weighed the pros and cons, focusing heavily on the need to ensure stability in the telecommunication sector. “After considering the operator’s admission of guilt, noting their huge investment in the country, the large subscriber base it holds and Nigeria being its largest market, the decision to arrive at the reduction was not too difficult”, said the Director of Public Affairs for the NCC, Mr Tony Ojobo.

To avert a situation where such cancellation or reduction could be seen as being against the law, the relevant enactment should have a provision that gives the regulator discretionary power to reduce or cancel fines. This will allay the suspicion of arbitrariness on the part regulators and those in power.