Finance Minister Zainab Ahmed clawed back some respectability for Nigeria recently at the Nigerian Economic Summit when she admitted the error in the government’s approach to dealing with MTN Communications Limited. She promised that Nigeria would change its ways and assured foreign investors that it would not happen again. About time, indeed, that someone puts on a thinking cap to see longer term rather than the short-term lenses most have worn.
Mrs Ahmed correctly described the sanctions placed on MTN Nigeria by the Central Bank of Nigeria asking it to refund $8.1b exported out of the country as a “very damaging one” for the country. The apex bank is now in talks with the investor and dominant player in Nigerian telecommunications to resolve the issue. This happened after the CBN went to court not only to ask for return of the money but also to demand a 15% surcharge.
As the Minister further observed, there are more internal issues of lax regulation and supervision. “The MTN incident was a very damaging one for us and that was one of the reasons why we have been out trying to engage our investors. But you see there is a tendency for big businesses to take regulation and government for granted.
“Only after that incident happened, all of the information that the CBN had been trying to get for months actually came out. Now, I think they are up to a point where they have almost solved the problem,” she said.
Lax regulation led MTN to contravene the rules on SIM card registration. The Nigerian Communications Commission then insisted on following the books leading to imposition of a fine of $3.9b on the firm. It ranked as the largest regulatory fine in the world at the time. The fine also equated to more than twice MTN’s annual average capital spending over the previous five years. Nigeria later cut it down to $1.7b and arranged a payment schedule for the firm.
The Central Bank of Nigeria also imposed and collected fines of N5.8billion against four banks for working with MTN on the matter. Three of the banks are foreign investors in the country.
The MTN sanction is one of several steps taken by the Federal Government that leaves local and foreign observers wondering. Why does this government score own goals or are there fifth columnists working against the government?
Only last week, two global banks closed their representative offices in Nigeria. UBS is a United States-based bank while HSBC operated out of the United Kingdom. While the banks had very small operations in Nigeria, their exit sends a negative signal. In the case of HSBC, it is even more complex as various Federal authorities and spokespersons mounted a negative campaign against it for speaking against the economic policies of the Buhari administration.
At about the same time as the CBN sanction on MTN, the Attorney General and Minister of Justice usurped the functions of the Federal Inland Revenue Service and began issuing tax demand notices to companies. It was strange. The affected firms as well as other players in the economy wondered what it was supposed to achieve.
Well, one of the unintended goals of the actions has been some confusion as to the policy direction of the federal government. There is also trepidation about the locus of power. Then a summation that there is evident lack of coordination of policy and action in the federal government.
These actions come at a time when the Federal Government desperately seeks to grow the economy and provide jobs for the people. All indicators on the economy are down. One of the secure routes to funding of an economy and job creation is to lure and bring in foreign direct investments. According to CBN records, FDI to Nigeria declined by 29 percent to N379.84billion ($1b) in the first half of the year from N52.63b in the same period in 2017.
Perceptions drive economic actions even more than the cold hard facts. A perception of uncoordinated and even irascible actions does not promote the cause of our quest. It disturbs existing investors and frightens those looking in. Someone should take charge of the business of coordinating messaging and action on the economy. It falls on the president through the ministers. Take up the challenge, dear Mr President.
Tags: Central Bank of Nigeria