Improve regulator-industry engagement, experts urge govt

Government agencies had multiple clashes with the private sector in 2024, some of which remain unresolved and could further detract from or present a growth opportunity, depending on how both parties approach them, writes ARINZE NWAFOR

Economic experts have called on regulatory agencies and industry operators to address the tensions that plagued the business landscape in 2024, including tariff disagreements, urging better collaboration to foster growth in 2025.

In 2024, there were disagreements between the Manufacturers Association of Nigeria and the Nigerian Electricity Regulatory Commission, the Advertisers Association of Nigeria and the Advertising Regulatory Council of Nigeria, and sustained calls for intervention on key issues between the Pharmaceutical Manufacturers Group of MAN and the bureaucracy, including the Federal Ministry of Health, as between the MAN Export Promotion Group and the Federal Inland Revenue Service.

These groups form a bulk of the organised private sector, representative of hundreds of thousands of businesses, including Small and Medium Enterprises. Their clashes have indirectly hurt productivity and groups that have tension simmering between them and government apparatuses reflect a discontent, which is yet to be resolved or has been addressed albeit unsatisfactorily.

The calls for improved engagement suggests an examination of the significant tensions between regulators and industry players in 2024.

MAN vs NERC

In 2024, MAN and NERC were embroiled in a dispute over a 230 per cent electricity tariff hike. Earlier, NERC approved an increase in tariffs for Band A customers from N68/kWh to approximately N224–N225/kWh. MAN contended that such a steep increase would severely impact manufacturers, proposing instead a more manageable 100 per cent hike.

The Director-General of MAN, Segun Ajayi-Kadir, told The PUNCH, “We have indicated that a 100 per cent increase will have been tolerable. And this is for power that is inefficiently generated and run.”

MAN argued that the regulatory procedures for tariff reviews were not properly followed before NERC issued the Supplementary Order on April 3, 2024, and the revised rate on May 6, 2024.

In response, MAN filed a lawsuit against NERC and the electricity distribution companies, challenging the implementation of the new tariffs and alleging discriminatory practices, as the increase applied solely to Band A feeders. However, on October 7, 2024, a Federal High Court in Lagos dismissed MAN’s case, ruling it premature and an abuse of the court process, citing MAN’s failure to exhaust the dispute resolution mechanisms outlined in the Electricity Act 2023.

Despite the legal setback, MAN maintained its opposition on the tariff hike, expressing concerns about the sustainability of manufacturing operations under the new rates.

The association emphasised that no manufacturer could competitively produce under such conditions and called for government intervention, including financial relief and incentives, to support the sector. MAN’s Director-General, Segun Ajayi-Kadir, stated that the battle against the tariff increase was far from over, indicating the association’s intent to continue advocating a more reasonable adjustment.

PMG-MAN vs FG

The Pharmaceutical Manufacturers Group of the Manufacturers Association of Nigeria expressed significant concerns over the delayed implementation of the Federal Government’s zero-value-added tax policy on pharmaceutical inputs, which appears to be unresolved as 2024 gives way to the new year.

Despite President Bola Tinubu’s executive order on June 28, 2024, to eliminate tariffs, excise duties, and VAT on imported pharmaceutical raw materials and equipment, the policy had not been actualised due to bureaucratic delays.

The PUNCH had reported in October that the executive order has yet to be adopted by the Nigerian Customs Service due to bureaucratic delays, which the PMG-MAN’s Chairman, Oluwatosin Jolayemi, explained would require coordination among government ministries, departments, agencies, and the NCS to take effect.

Jolayemi told The PUNCH that this postponement resulted in revenue losses of up to 8 per cent for manufacturers, as they were compelled to reduce product prices in anticipation of the tax relief that had yet to materialise.

Jolayemi lamented this delay, stressing, “How long is it going to take for the implementation guidelines to come out? And even after the implementation guideline comes out, for the letter to go from the Ministry of Finance to the Comptroller-General of Customs? And for the Comptroller-General of Customs to write a letter to his commands. Now, that is one question.”

The delay in implementing the zero-VAT policy exacerbated current challenges within Nigeria’s pharmaceutical sector, including foreign exchange scarcity and rising operational costs. These issues have led to the exit of multinational pharmaceutical companies like GlaxoSmithKline and Sanofi Nigeria Ltd from the Nigerian market.

PMG-MAN emphasised that without the anticipated reductions in import costs, local manufacturers struggled to maintain profitability and competitiveness. The association called for prompt government action to establish and communicate clear implementation protocols to relevant agencies, ensuring the policy’s benefits reach the industry without further delay.

Further, PMG-MAN underscored the broader implications of the delay on Nigeria’s healthcare system. The postponement hindered the availability and affordability of essential medicines, adversely affecting patient care nationwide. The association urged the government to prioritise the pharmaceutical industry, recognising its critical role in safeguarding public health. They advocated open dialogue between government bodies and industry stakeholders to address challenges and implement effective solutions, thereby enhancing the sector’s contribution to national health and economic development.

MANEG vs FIRS

By the fourth quarter of 2024, The PUNCH reported the Manufacturers Association of Nigeria Export Group was raising concerns over the Federal Inland Revenue Service’s taxation of the Export Expansion Grant money exporters received to boost their businesses.

The EEG, administered by the Nigerian Export Promotion Council, is a post-shipment incentive designed to bolster the competitiveness of exporters by providing grants ranging from 5 per cent to 15 per cent of annual export value, depending on the product category. These grants are issued as export credit certificates, which can be utilised to settle federal taxes, purchase government bonds, or repay government credit facilities.

MANEG Chairperson, Odiri Erewa-Meggison, raised the alarm, contending that the FIRS’s decision to tax the EEG contradicted the scheme’s objective of promoting non-oil exports. The group argued that subjecting these incentives to taxation diminishes their value and effectiveness, thereby undermining the government’s efforts to diversify the economy through export promotion.

“FIRS wants to tax the grants that exporters receive,” Erewa-Meggison told The PUNCH in an interview. “This reduces the value of the money exporters get because the credit certificates or promissory notes are already issued in arrears, often discounted. To now add an additional level of tax defeats the purpose of having an incentive in the first place.”

MANEG called for a review of the FIRS’ taxation policy regarding EEG benefits. They urged the Federal Minister of Industry, Trade and Investment, Dr. Jumoke Oduwole, to help provide clarity on the tax-exempt status of the grants to ensure that exporters can fully benefit from the scheme without additional tax burdens.

ADVAN vs ARCON

Much earlier in the year, the Advertising Regulatory Council of Nigeria intensified its regulatory measures within the advertising industry, leading to significant friction with key stakeholders, notably the Advertisers Association of Nigeria.

ARCON’s initiatives included enforcing the Advertising Industry Standard of Practice, which introduced stringent guidelines on payment terms, engagement protocols, and copyright protections. ADVAN and other industry players perceived these measures as overreaching and detrimental to the flexibility required for effective business operations.

Following a National Assembly assent to its transition in status in 2022 from the Advertising Practitioners Council of Nigeria to ARCON, the regulatory council morphed into a “powerful apex regulator for the industry.”

ARCON embarked on rewriting the law guiding advertising practice in Nigeria. The PUNCH reported thus, “The new law seeks to comprehensively upend the ecosystem and rid it of certain practices the council considers sharp and potentially injurious to the industry. It also prescribes jarring penalties for offenders, including jail terms.”

ADVAN did not receive ARCON’s new laws well. It expressed concerns that ARCON’s regulatory approach was excessively restrictive, potentially stifling creativity and innovation within the sector. The association reckoned that certain mandates, such as the prohibition of foreign models in advertisements, could limit advertisers’ creative choices and adversely affect the industry’s global competitiveness.

The President of ADVAN denounced ARCON’s new powers, insisting, “A regulatory body for advertising cannot set up a tribunal with powers to hear, try, deliver judgement, and sentence, as such is clearly a violation of the Constitution of the nation.”

ADVAN advocated a more collaborative regulatory framework that balances oversight with the operational realities of advertisers, emphasising the need for regulations that support, rather than hinder, industry growth. It had earlier accused ARCON of not carrying it along in its deliberations before coming up with the new advertising laws.

The PUNCH reported that ARCON Director-General, Olalekan Fadolapo, denied not carrying ADVAN along, maintaining, “There are two levels of consultation. There is legislation that we do in our own office, which is a sub-law. What the National Assembly does is the enabling Act. When we wanted to do the ISOP, we set up a committee of all the sectoral groups, including ADVAN.

“The committee met several times and concluded its report. They brought their report to us; we reviewed it and sent it out. The Director of Legal Services of the Ministry (of Information) made some alterations to the report. After a series of meetings, we came back and made a pronouncement.

“They (ADVAN) claimed that they made submissions that were not captured. Other times, they had said they were not engaged. There was no time that we had an industry pronouncement that ADVAN was not part of it. We had a code review meeting, and they were part of that meeting. So, at what point did we not involve them?”

Economists react

These elements of industry friction present an opportunity to drive growth if operators and regulators engage more with themselves to settle disputes and create a more enabling business environment, according to experts who spoke with The PUNCH in separate interviews over the phone.

A former president of the Chartered Institute of Bankers of Nigeria, Prof. Segun Ajibola, harped on the need for regulators to quit taking an authoritarian approach that undermines industry operators’ input and urged operators to shun distrust of the government agencies.

He called for more mutually respectable meetings between both parties instead of what he described as “a master-servant relationship,” which typifies the current regulator-operator relationship, which eventually leads to coercion or punitive actions by regulators upon disagreements.

“One major requirement is to forge an understanding and a meeting of the minds between regulators and operators across all the industries. Most of the time what we have is like that of a master-servant relationship,” Ajibola said. “When regulators speak, however right or wrong, operators are not in a position to counter whatever they say.

“And it has degenerated into a situation where when operators openly disagree with regulators, it could even lead to witch-hunting, if not knocking heads to show who has the power. At times, the power of coercion is deployed to deal with any operators that disagree with regulators.

“However sound or reasonable the points of disagreement may be. So that is why I say that at times it is the relationship of master-servant. But we all know that cannot deliver the best dividend for the bigger picture, which is the economy as a whole.”

The former CIBN president urged regulators to engage operators, who he described as “the foot soldiers closer to the people and users of services,” to craft more effective policies: “There is need for that understanding, a need for regulators in particular, to create platforms to hear operators out. Operators are the ones who know where the shoes pinch.

“They are on the pitch; they are the foot soldiers; they are closer to the people and the users of their services. They know the complaints, gaps, and areas of weakness, so they should be able to carry the message of the masses representing the economy to the regulators for a better regulator-operator relationship and a better resource for the economy as a whole.”

Ajibola further advised industry actors on growth in the new year, stating, “What will come first in 2025 is a better working relationship between operators and regulators where regulators will competently, carefully look at issues and roll out regulations that will help protect all the stakeholders in each of the industries that you have mentioned.

“We will also expect operators to play the game according to the rules. Not operators who will be looking for opportunities to cut corners. Not operators who will be disrespectful and lawless in carrying out their activities. Regulators should have their ears on the ground to listen to what the people are saying. And use that as a basis for forming regulations across the board.

“Operators (need) to also shun what we can call a sort of mutual suspicion, distrust, and mistrust all over. If we can eliminate some of this, we will be able to deliver more on the mandate of each of the industries that you’ve mentioned to be able to move better in each of the industries that you have identified.”

The Director of the Centre for Promotion of Private Enterprise, Dr. Muda Yusuf, shared similar sentiments with Ajibola as he submitted that operators need better engagement with the relevant authorities.

However, Yusuf called for more caution on the regulators’ part, stressing that the country’s regulatory environment imposes significant risks and burdens on businesses that exacerbate existing economic challenges.

He said, “The government should encourage government agencies, especially regulatory agencies, to engage better in 2025 with their respective constituencies. The whole objective of government is to create an enabling environment for businesses. The macroeconomic challenges and headwinds are enough trouble for many of these investors. We don’t want to add regulatory challenges to it.

“I’m not saying that there should be no regulation, but there should be a minimum regulatory burden. Regulators should not be predatory in their approach.”

Yusuf reiterated his calls for regulatory agencies to lay less emphasis on revenue generation, noting businesses are not obligated to fund regulators but the government.

“(Regulators) need to also minimise the pressure on regulators to go and be generating revenue because these companies are already paying taxes, the CPPE director remarked. “We don’t want the regulators to become another source of taxation in a way, because many of the regulators claim that they need to generate revenue, claiming they are not being properly funded from the budget. All that needs to be reviewed in 2025. It is not the duty of the businesses to be funding the regulators.

“The regulators are supposed to be funded from the budget. Whatever they are charging, the business should be maybe an administrative fee and not something that should be burdensome on them because many of the regulators are too revenue-focused, and it is not good for the development of business.”

Also, Yusuf called for a review of regulatory practices in ARCON to address the tension with ADVAN, adding, “As for the Advertising Council, I think that it is good to ensure checks and balances to ensure that you do not have absolute power in the advertising environment. I think that argument is valid so that there can be a fair regulatory environment.

“I hope the Federal Ministry of Industry, Trade and Investment will look into that. One of the major issues we have in business is the quality of the regulatory environment and what you call regulatory risk. It is very high in Nigeria, and we need to reduce regulatory risk.”

Looking ahead to 2025

Experts have clarified that the industry needs both regulators and operators to function optimally, emphasising dialogue, fairness, and mutual respect. Nigeria’s economy faces multiple challenges, and stakeholders agree that fostering a more harmonious regulatory environment will be crucial for achieving sustainable growth in the coming year.