The excesses of regulatory agencies
The role of an effective regulatory regime in promoting economic growth and development has generated considerable interest among researchers and practitioners in recent years. According to experts, the ability of the state to provide effective regulatory institutions can be expected to be a determinant of how well markets and the economy perform; and the impact of regulatory institutions on economic growth will depend on both the efficiency of the regulatory policies and instruments that are used and the quality of the governance processes that are practised by the regulatory authorities.
It is against this background that the revelation that the activities of some regulatory agencies in Nigeria is impacting negatively on businesses gives cause for apprehension.
A recent study conducted by the Centre of International Private Enterprise (CIPE) in collaboration with the Lagos State Chamber of Commerce and Industry (LCCI) on the “Impact of Regulatory Agencies on Businesses.” revealed that regulatory challenges and their attendant costs have been the major factors stifling healthy growth of businesses across several sectors of the Nigerian economy.
The study report revealed that beyond infrastructure shortcomings, infractions by most of the regulatory agencies including Standards Organisation of Nigeria (SON) and National Agency for Food and Drugs Administration Control (NAFDAC), have forced some businesses to close shop, relocate to other countries, or move into the informal sector. It noted that regulatory agencies in Nigeria continued to be riddled with red tapism and bureaucracy, resulting in a complex web of unclear and frequently-changing regulations, adding that such an environment not only makes it difficult for entrepreneurs to do business but also allows for arbitrary and inconsistent enforcement of laws and regulations by government agencies. In a bid to avoid the red tapism, private sector operators often find themselves compromising on standards forcing most companies to suffer higher and unnecessary costs, inefficiency and unfriendly business climate. For small and medium-sized enterprises, the effects of arbitrary regulatory policies are more profound because of their inherent vulnerability.
Some of the problems identified by the study include high rate of human interface between the agencies officials and businesses in the process of registration; arbitrary charges, fees and fines, and evidences of repetitive inspection exercise by the agencies on claims of test, whereas such claims are mostly unverified. The report also identified overlapping of functions and fight for supremacy among the agencies and high frequency of factory visit, stating that the study found that number of inspection visits range from four to 10 times a year depending on the company’s production capacity and other factors. The disturbing aspect of the repeat/regular visits is that the same quantity of product samples is collected by the agencies during each visit. The companies are compelled to pay inspection fee for each visit and take care of transportation of the agency officials on each factory visit among others.
Other faults identified by the study included the collection of excessive product samples; approval delays and absence of national standards, which make genuine importers and those with contraband goods to “cut corners” with the officials. It added further that, “some companies induce the agency officials because they don’t want to pass through the rigour associated with processing documents. This is mostly fuelled by the need for quick approval of papers/permits to meet certain commercial deadlines or to circumvent inherent/artificial bottlenecks in the system.
Against the background of poor competitiveness ranking in the recent World Economic Forum GCI report, we believe that the provision of a regulatory regime that promotes rather than constrains economic growth is an important part of good governance. Hence, Government should streamline functions of the regulatory agencies to prevent overlap and also ensure that regulators function independent from any other public or private entity when carrying out their functions. The payment of transportation expenses of the agency officials on each factory visit by the companies being inspected is unacceptable; there is no need for supremacy struggle amongst regulators; and there is a need to remove all bottlenecks in the regulatory agencies that are creating rooms for infractions.