By Chinwendu Obienyi
The global corporate environment is regulated by policies to be met for the effective operation of its business in advanced or developing countries.
When necessary corporate compliances are adhered to by companies, they bring sustainable development to organisations within the environment. This is not different from the Nigerian business environment in which major statute that imposes various compliances on companies is the Companies and Allied Matters Act 2020 (CAMA).
Before the commencement of business operations, to incorporate a company in Nigeria, companies are to comply with the requirements of the Corporate Affairs Commission (CAC). Some of these compliances include statutory meetings of the companies, filing of company resolutions with the CAC among others.
Other several statutory compliances imposed by the virtue of CAMA and Companies Regulations. They include Taxation, Employee Compensation scheme, Industrial Training fund, Nigerian Immigration Service, Financial Reporting Council and the Special Control Unit against Money Laundering registration.
Companies that fail to comply with the various requirements (of the aforementioned regulatory bodies) that regulate a company in Nigeria face the risk of being sanctioned by the relevant authorities regulating it.
These sanctions could be in form of fines and penalties which could, in turn, affect the revenue made by the defaulting company, have a negative impact on the cash flow of the company and disrupt the business activities of the company.
The SEC&NSE’s efforts
The Securities and Exchange Commission (SEC) and the Nigerian Stock Exchange (NSE), in their quest to achieve a world-class capital market, reiterated that they will continue to maintain zero tolerance posture on dealing member firms and quoted companies on violations of rules and regulations.
Daily Sun investigations reveal that 11 quoted companies on the NSE were asked to pay fines to the tune of N48 million in the first eight months of 2020 while the exchange also boosted its revenue as it made N143.6 million from sanctioning defaulting companies between January and November of 2019. Most of the infractions committed by the affected firms were on the late submission of their financial statements to the exchange for the use of the investing public.
While it is important to note that regulatory sanctions and compliance is the key to developing the Nigerian Capital Market (NCM) by instilling the culture of good corporate governance practices among companies as well as attract investors, excess of it could result in breakdown of law and order, unclear objectives, financial loss, capital flight and in some cases bankruptcy.
Capital market stakeholders at the recent 2021 Issuers & Investors Clinic, an annual symposium organised by Issuers and Investors Alternative Dispute Resolution (IIADRI), called for a periodic review of laws and regulations across federal, state and local levels to enhance ease of doing business in Nigeria.
According to them, the excessive pieces and cost of legislation being borne by companies is hurting their revenue generation while adding that regulations should be more about the business environment than sources of income.
Delivering a keynote address titled “The burden of regulatory compliance on businesses in Nigeria:, the Company Secretary, Julius Berger Plc, Cecilia Madueke, noted that the purpose of regulation was to drive the economy, create a standard setting, effective information and limiting the downside risk of any business innovation/initiative.
Madueke stated that Nigeria is ranked 131st in the World Bank’s Ease of Doing Business report, 2020 and for a self-proclaimed giant, the situation is abysmal considering that other African countries who are way ahead of Nigeria (Mauritius, Rwanda and Kenya) are nowhere near the size and producing power of the Nigerian economy.
She said that the nation’s economy is buffeted by capital flight as a result of dwindling revenues as result of excessive regulation while adding that there is an increasing need for the government to commit to providing an enabling environment for businesses to succeed in Nigeria.
“The burden of regulatory enforcement and compliance results in breakdown of law and order, unclear objectives, financial loss and costs. Operators should thus see regulation and compliance as a front burner for governance bodies, mitigate their expectations and advocate for law reforms.
“For the government, they have to invest in capacity building in the public sector and the National Assembly should make laws rather than being more focused on its investigative functions. The process of regulation making must be more inclusive with a workable transition period as this will engender buy-in”, Madueke said.
For his part, the Managing Partner, Crowe Dafinone, Igho Dafinone, said the power of legislation usually favours regulators without recourse to the company while suggesting that new businesses can register at one point and the document can be circulated to all other agencies to save time and cost.
“Companies have to file their financial reports with different regulatory bodies. Why can we not file these accounts at one place and all parties who want a copy of the reports access it from there? There are way too many audits, exorbitant penalties and multiple taxation on financial reporting, this is really hampering wealth generation and job creation in the nation’s economy.
Earlier in his welcome address, the Chairman, IIADRI, Moses Igbrude, said the symposium is timely enough to re-examine the onerous compliance obligations placed on companies and how it affects, enhance or undermine the much appreciated concept of ease of doing businesses as a global best practice.
“We are convinced that this platform will provide the needed opportunity for the regulators and regulated to articulate ways and means to foster not only a mutual understanding of the purpose of these regulations but also cheaper processes of compliance for the ultimate aim of engendering good working relationships for the benefit of all”, he said.