Business operators, particularly operators of Small and Medium Enterprises (SMEs), are crying over the multiplicity of agencies with over-lapping regulatory and supervisory functions. They grumble that it is strangulating their business, reducing their productivity and competiveness. Assist. Editors Chikodi Okereocha and Okwy Iroegbu-Chikezie write that if operators’ recommendations are implemented, respite may be on the way for industrialists.
As the leading voice of private sector operators in Nigeria, the Lagos Chamber of Commerce and Industry (LCCI) understands why the industrial sector is encumbered despite the avalanche of programmes to fast-track industrialisation, accelerate inclusive economic growth, create jobs, and transform the business environment.
The LCCI said beyond the nation’s huge infrastructure gap, regulatory challenges and its attendant costs are factors stifling the growth of businesses.
Specifically, the LCCI said the multiplicity of agencies with over-lapping regulatory and supervisory functions at both the federal and state levels is hampering the smooth operation of many businesses. Noting however, that the effects of regulatory infractions on private sector operators are more profound for Small and Medium-sized Enterprises (SMEs) because of their inherent vulnerability, the LCCI raised the alarm that this has forced many businesses to close shop, relocate to other countries or move into the informal sector.
The LCCI’s findings were contained in a study aimed at examining and reporting the lingering regulatory challenges in the industrial sector and provide viable engagement platforms for solutions. In carrying out the study titled: ‘Regulatory infractions on Nigeria’s industrial sector,’ the LCCI, according to its Director-General, Muda Yusuf, believes that without an enabling business environment with clear, consistent laws, regulations, and enforcement, Nigeria’s private sector and democratic development will be inhibited.
The body noted that a vibrant private sector, especially the SMEs is crucial to any economy in providing job opportunities, developing innovations, and meaningful participation of the citizens in the democratic process.
The study, supported by the Centre of International Private Enterprise (CIPE),said most of the regulatory anomalies were evident in the high rate of human interface, arbitrary charges, fees and fines, overlap of functions and fight for supremacy among the agencies as well as high frequency of factory visits and collection of excessive product samples, among others. To most private sector operators, for instance, the high frequency of factory visits by various agencies, as the study found out, is an overkill.
“There is no defined number of inspection visits to companies by the agencies in a year. The 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, take care of transportation etc of the agency officials on each factory visit,” the study said.
As if the repeat/regular factory visits are not enough to raise the bile of business operators, such visits are accompanied by collection of excessive product samples. The Nation learnt that officials of the agencies collect samples of all the products they meet in the production line or store on each occasion they visit the companies. Stocks of products are collected excessively under the guise of ‘test sample’ in cartons, rolls, and dozens. ‘’Edibles, home use and ‘easy sale products’ suffer most from regular collection of huge amount of samples,” the LCCI study revealed.
The frustration does not stop there. The LCCI said even after samples were collected, there were delays in approvals because of absence of national standards. The group said registration/certification of products took six months to one year, noting that in most cases, the companies never get to receive the test results from the agencies after due payments and regular follow ups with the relevant departments in the agencies.
“This slows down business activities and leads to loss of opportunities especially the ones that are time bound,” the study said, adding that there is no standard for most chemicals and industrial products, yet the firms are compelled to pay levies for the products standards.
The study further said some firms which do not want to pass through the rigour of processing documents, induce the agency officials. “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. Sometimes, companies’ representatives go out of their way to tip the officials in order to save their jobs because if a major regulatory query is issued against the company, the manager in charge will be blamed or fired by the management for mishandling relationship with the regulator,” it said.
The LCCI said the study also found that some importers may bring in many products, but would lobby regulatory officials to pay inspection fee for only few of the products. Those that import contraband goods also do the same thing by ‘cutting their ways’ with the officials. In all of these, the LCCI study found an overlap of functions and fight for supremacy among the agencies. For instance, it cited pronounced overlapping regulatory activities of Standards Organisation of Nigeria (SON) and National Agency for Food, Drug Administration and Control (NAFDAC) in sectors like cosmetics, food, drinks, beverages, health and confectionary to mention a few.
“It is frustrating to businesses that a product inspection report produced by SON will be rejected by NAFDAC and vice versa. Each of the agencies prefers to carry out an independent analysis for the same product. This leads to waste of management time, unnecessary fees, fine, charges and high operational cost,” the study said. However, the result of the study only confirmed observations earlier made by LCCI and other industry associations on the issue.
Earlier, during a visit to the Minister of Industry, Trade and Investment, Olusegun Aganga, in Abuja to table some requests aimed at ensuring seamless business operations, LCCI’s President, Mr. Remi Bello, noted the overlapping functions of the regulators. He said apart from compliance with SON guidelines, industrialists were worried by the demand for compulsory product listing by the Consumer Protection Council (CPC). He said this was in addition to the yearly charges on each product, which is an additional burden.
This was why the latest report by LCCI projected that industrial activities will grow by about 25 per cent over two years if a more service-oriented and accommodative regulatory and monitoring environment is put in place. LCCI said: “This will impact directly on the number of new jobs, emergence of small scale agricultural processing ventures, higher tax revenue for government at all levels, and ultimately douse the growing insecurity conditions fuelled by youth unemployment.”
LCCI said frameworks that will enhance the collaboration between SON and NAFDAC’s regulatory and monitoring functions will be helpful to build trust and respect among the two agencies. The operators argued that more enhanced collaborations between the two agencies would certainly reduce unnecessary pressure on businesses suffering from the age long silent battle for supremacy between the two agencies.
They also noted that continuous streamlining of processes aimed at reducing internal bottlenecks and bureaucracy was essential for the growth of the sector. “There is need for steady communication and enlightenment of businesses on trends of regulatory provisions. Also, the management of the agencies must now take the enforcement of rules against human interface by their officials very seriously. High degree of human interface for registration and obtaining permits remains even after the leadership of SON and NAFDAC has instituted reliable processes that eliminate/reduce human interface in their operations,” the operators advised.
That is not all. LCCI members said they wanted to see a clear pronouncement specifying the number of times and for what purposes SON and NAFDAC were expected to visit the companies in a year. They argued that the frequency of the visits to firms was still high, even after the leadership of the agencies assured at vrious forums on the measures being put in place to rework the system.
Operators also said to move forward, the standard for granting waivers and concessions to firms by the agencies should be defined and institutionalised. This, they noted, should be communicated to stakeholders. In addition, SON and NAFDAC should define the maximum quantity/size of product sample that should be collected by their field officers from the companies, he said. “This will assist the companies to comply and also guide them in cases of over collection of samples by the agency officials,” the study added.
LCCI called on the Federal Government to develop a framework for oversight and control of regulatory institutions to curb probable excesses. According to the group, the measure is in line with best practices in many emerging markets. On the immediate, the government, the group said, should adequately fund the agencies and provide them with the necessary working facilities. The poor funding of agencies create room for extortion.
The Manufacturers Association of Nigeria (MAN) is also seeking the harmonisation of regulatory functions of agencies. Since last year, its members said the agencies have made it difficult for stakeholders to address challenges relating to standardisation and quality control of made-in-Nigeria products as well as imported items.
