Regulators and economic growth

The role of regulators as catalysts for economic growth cannot be overstressed. Indeed, regulators play a very critical role in creating an enabling business and investment environment as a necessary precondition for economic growth.

Sadly, the regulatory environment in Nigeria in the recent past cannot be said to have been very good. Far from encouraging businesses, some regulatory agencies in the country have rather constituted themselves, perhaps inadvertently, into a burden on investors.

We are not in doubt that businesses need to be regulated to avoid anarchy which could arise when business operators wield power without control. Our concern, however, is that in carrying out their regulatory roles, some agencies become too overbearing that they end up creating a hostile rather than a friendly environment, stifling businesses in the process.

Cases in point are the recent ones between the Nigeria Communications Commission (NCC) and MTN on one hand, and between the Financial Reporting Council of Nigeria (FRCN) and Stanbic IBTC Bank on the other.

Without going into the details of these cases, we must state that coming at a time many investors are on wait-and-see mode regarding Nigeria, the manner these two cases have been handled is capable of sending wrong signals to both local and international business communities.

For instance, shortly after the news of the regulatory sanctions on the two companies became public, investor sentiment on the companies involved ebbed, resulting in major sell-offs on both the Nigeria and South African bourses.

In their reaction to the sanctions, which they regarded as “a string of bad news” for the Nigerian capital market and business community, analysts at Afrinvest said the actions and reactions that trailed those events raised concerns – rightly or wrongly – on the business friendliness of Nigerian regulators to foreign investors.

“Putting all this together, should foreign investors steer well clear of the Nigerian investment environment?” the analysts asked, adding that the timing of the above unsettling news flow was rather bad for the market given the mammoth macroeconomic headaches besetting the capital market at the moment.

It is in view of the foregoing that we call on government and the different stakeholders to step in quickly and look into the activities of all regulatory agencies in the country. The time is now to institute a properly regulated environment to boost the country’s ease of doing business.

We believe that Nigeria, Africa’s largest economy by GDP, remains a desired investment destination. However, for Nigeria to attract and sustain the needed investments, the regulatory environment must first be sorted out.

On this note, we align with Asue Ighodalo, chairman of the NBA Section on Business Law, who said at this year’s NBA business law conference held in June, that “a country where its regulators are inconsistent, heavy-handed, unfair and under-capacitated cannot attract high quality internal or foreign investment or sustain meaningful growth”.