The Nation Newspaper

Tag: Multinationals

  • Adeosun to multinationals: evading tax is foreign corrupt practices

    Adeosun to multinationals: evading tax is foreign corrupt practices

    Nigeria’s Minister of Finance, Mrs. Kemi Adeosun, has called for the designation of tax malpractices by multinational corporations in Nigeria and other developing countries as ‘foreign corrupt practices’.

    A statement signed by Oluyinka Akintunde, Special Adviser Media and Communications to the Finance Minister explained that she spoke during a Platform for Collaboration on Tax (PCT) Conference in New York, United States (U.S).

    She lamented that Nigeria was doubly affected by illicit financial flows as a result of corruption and tax evasion.

    She requested global organisations such as the  World Bank, IMF and United Nations to see the tax avoidance actions of multinational companies as corrupt practices.

    “There is absolute need for a complete understanding of how these multinational corporations (MNCs) behave in Nigeria and developing countries, many operate a completely different standard in Africa to what obtains globally,” Adeosun said.

    She decried the capability of defaulting MNCs to hide behind slow legislative processes to avoid doing what was right in the nations from which they derived significant income.

    The minister, who disclosed that options to sue such companies in their own countries were being explored, said the designation of tax crime as foreign corrupt practices would support such efforts.

    On the wider issue of Illicit Financial Flows, she emphasised that Nigeria, under President Muhammadu Buhari, was ‘taking strong action and was determined to reverse their impact’.

    The government, according to Adeosun, is taking a number of measures internally and also taking full advantage of international initiatives to tackle the problem.

    Mrs Adeosun said: “Internal measures include tightening financial controls and surveillance, adoption of the National Tax Policy with its commitment to regular revisions of tax laws and the ongoing tax amnesty programme, the Voluntary Assets and Income Declaration Scheme (VAIDS).”

     

  • Ijaw youths: we’ll protest ‘injustice’ by multinationals

    Ijaw youths in Bayelsa State have threatened to protest alleged injustice by oil multinationals.

    Speaking under the aegis of the Eastern Zone’s chapter of the Ijaw Youth Council (IYC) Worldwide, they said they would disrupt oil production if their demands were not met.

    Executives of the IYC made the threat during their inauguration at the Ijaw House, Yenagoa. The zone Chairman, Mr. Tare Porri, said they would only suspend their agitation if the companies met their demands.

    The Police, Department of State Security (DSS), Nigeria Security and Civil Defence Corps (NSCDC) and other security agencies sent a detachment of men and officers to protect Ijaw House and forestall a breakdown of law and order.

    IYC pioneer President Dr. Felix Tuodolor led other past leaders to attend the event.

    Also present were Ijaw leaders, a member of the House of Assembly, Tonye Isenah, aides of Governor Seriake Dickson, women and youths.

    Porri told a cheering crowd that oil companies operating in the zone should relocate their headquarters to Yenagoa. He said it was unfortunate that the firms refused to relocate their head offices to Niger Delta despite the directive by Acting President Yemi Osinbajo.

    “We want to state here that the multinationals operating in the Central Zone of the Ijaw nation, if they are willing to do business in our communities, must relocate their headquarters to the zone.

    “We will stop at nothing to ensure the multinationals relocate their head offices to the zone.”

    The chairman said the firms should change the old pipes with new ones, explaining that they are responsible for explosions.

    “The pipes have been in use since oil was discovered in large quantity in 1956 at Oloibiri.”

    He urged the management of oil companies to either create jobs for youths or face unrest.

     

  • Multinationals to inject N300b in subsidiaries

    Global manufacturing giants have indicated interest in injecting about N300 billion into their operations to consolidate their market share in the key sectors of the economy.

    The Nation’s check at the weekend showed a pipeline of about six major equity investments by foreign majority core investors in six quoted companies, with nearly half of the transactions already undergoing issuance.

    LafargeHolcim, world’s leading building material company, plans to inject N102 billion in its Nigeria-based pan-African operations, Lafarge Africa Plc. Unilever Plc, United Kingdom, will inject N38 billion in Unilever Nigeria Plc. Diageo Plc, United Kingdom, plans to take up additional N21 billion in Guinness Nigeria. Heineken BV was said to be considering injecting more than N15 billion in Nigerian Breweries while world’s largest brewer, Anheuser-Busch InBev plans to invest some N125 billion in its Nigerian operations.

    Most of the recapitalisations are expected to be done through supplementary share issuance to existing shareholders, otherwise known as rights issue. With this, the shares will be pre-allotted to existing shareholders on the basis of their existing shareholdings. Three of the companies-Guinness Nigeria, Lafarge Africa and Unilever Nigeria have already secured the crucial shareholders’ approval to undertake the rights issue.

    LafargeHolcim, which holds the majority equity stake of 72.59 per cent in Lafarge Africa, has already formally indicated it will subscribe fully to its rights under the N140 billion rights issue approved by shareholders for the Nigerian subsidiary. The Lafarge Africa’s rights issue is the largest so far in the Nigerian capital market and LafargeHolcim’s N102 billion investment is reported to be the largest investment in a listed company by an investor.

    With the approval by shareholders, the N140 billion Lafarge Africa’s rights issue is expected to be launched in late September and finalised by the fourth quarter. LafargeHolcim will pick up its rights under a debt-for-equities deal that will see conversion of LafargeHolcim’s dollar-based loan to equities.

    Diageo, which holds the majority equity stake in Guinness Nigeria, is expected to inject more than N21 billion into the Nigerian company under a N39.7 billion rights issue. Already, Guinness Nigeria has secured the approval of the Nigerian Stock Exchange (NSE) to undertake the rights issue, after it had received unanimous endorsement of the shareholders at an extraordinary general meeting held earlier this year.

    Under the plan, Guinness Nigeria will be offering 684.495 million ordinary shares of 50 kobo each to shareholders at a price of N58 per share. The rights’ shares will be pre-allotted on the basis of five new ordinary shares for every 11 ordinary shares held as at March 15, 2017.

    Diageo had earlier indicated interest in acquiring additional shares of up to 15.7 per cent in Guinness Nigeria through its wholly owned subsidiary, Guinness Overseas Limited. It however backed down from the direct acquisition. An investment analyst in the know said the foreign core investor might have considered rights issue as a less expensive option to achieving the same objective.

    Unilever UK, which holds 60.06 per cent majority equity stake in Unilever Nigeria through its Unilever Overseas Holdings BV, is expected to inject about N38 billion into the Nigerian subsidiary under a new capital raising programme already approved by the shareholders of the fast moving consumer goods company.

    Shareholders of Unilever Nigeria recently approved a proposal by the board of the company to raise up to N63 billion in new equity funds by selling new shares to existing shareholders. In preparation for the rights issue, shareholders also increased the authorised share capital of the company to N5 billion or 10 billion shares through the creation of additional 3.95 billion ordinary shares of 50 kobo each.

    Unilever UK has shown sustained interest in increasing its majority shareholding in the Nigerian subsidiary. It mopped up additional shares through open market purchases at the NSE to increase its majority stake by 1.53 per cent from 58.53 per cent in 2015 to 60.06 per cent in 2016. It had also made open market purchases in 2015.

    Unilever UK will be required to contribute at least N37.84 billion to the rights issue to retain its current shareholding and the multinational may increase its stake by applying for additional shares from renounced rights.

    Unilever UK had earlier indicated it intended to acquire up to 75 per cent controlling equity stake in the Nigerian subsidiary. Unilever UK had in first half of 2015 sought to increase its majority equity stake in the Nigerian subsidiary from 50 per cent to 75 per cent, citing long-term strategic importance of Unilever Nigeria to its global business.

    In a transaction initially valued at about N43 billion or £144.5 million, Unilever Overseas Holdings sought to increase its equity stake in the Nigerian company from 50.04 per cent up to a maximum of 75 per cent by buying additional shares from minority shareholders. The tender offer sought to acquire about 942.42 million ordinary shares in Unilever Nigeria at a price of N45.50 per share in cash.

    In a statement signed by Richard Hazell, Director, Unilever Overseas Holdings B.V, Unilever had said it was making the additional share acquisition as part of long-term strategic plan by the conglomerate as it believes that Nigeria offers significant growth potential.

    “The Unilever Group has had a major presence in Nigeria for many years and continues to believe that the country offers significant growth potential. This makes Nigeria a strategic long term investment priority for Unilever Overseas. Globally, the Unilever Group is focused on investing in the foods, household and personal care categories and the long heritage and great brands of Unilever Nigeria in these categories in Nigeria make it attractive for Unilever Overseas to increase its holding in Unilever Nigeria, whilst maintaining its stock exchange listing,” Unilever stated in the statement enclosed in the tender offer.

    Nigerian shareholders however largely shunned the N43 billion share-acquisition bid as it recorded less than a third of its target. At the conclusion of the tender offer, Unilever UK’s total shareholdings in Unilever Nigeria only increased by 8.49 per cent from 50.04 per cent to 58.53 per cent. The increase also included open market purchases.

    World largest brewer, Anheuser-Busch InBev has unveiled plan to merge its Nigerian businesses and invest some $400 million, about N122 billion, in Nigeria in a major strategic move to consolidate its Nigerian base for further expansion into the Sub-Saharan Africa (SSA).

    Under the arrangement, three indirect Nigerian subsidiaries of Anheuser-Busch InBev-International Breweries Plc, Intafact Beverages Limited and Pabod Breweries Limited, will be merged through a scheme of merger. International Breweries is expected to be the subsisting post-merger company. The proposed merger has been approved by the board of International Breweries.

    A regulatory notice on the merger has already been filed at the NSE, kick-starting the merger process after the approval of the business combination by directors of the companies.

    The merger is believed to be a major competitive move by Anheuser-Busch InBev to give its operations a major nationwide push to increase its market share. International Breweries is located in Ilesa, Osun State in the South West region. Intafact Beverages’ brewery is ssituated in Onitsha, Anambra State in the South-East region while Pabod Breweries is located in Oginigba, Port Harcourt, Rivers Sate in the South-South region.

    Anheuser-Busch InBev has also publicly indicated its plans to spend $400 million in establishing a major brewery in Nigeria as it moves to take on the two main Nigerian beer market leaders- Nigerian Breweries and Guinness Nigeria.

    In a bid that was pushed through by voting through poll, shareholders of Nigerian Breweries (NB) have also approved a share-for-dividend option that will see qualifying shareholders receiving new ordinary shares in the company instead of the final cash dividend, on terms and conditions as the board may determine based on prevailing market conditions. Nigerian Breweries earmarked N28.4 billion as cash dividend for the 2016 business. In poll voting, shareholders vote on the basis of shareholdings rather than the voice vote or “show of hands” voting in non-contentious issues. A poll-voting thus can only succeed with the support of the majority core shareholder.

    Head, equity capital market, PanAfrican Capital, Mr. Babatunde Oyekunle, said the new investments by the foreign investors are part of proactive plans to consolidate their Nigerian businesses and position them for expected growth in the Nigerian economy.

    According to him, the new capital injections reflect the beliefs of the foreign major investors in the prospects of the Nigerian economy in the long-term.

    He pointed out that such major investments by multinationals are usually proposed after exhaustive mid-to-long-term research and consideration of all variables including macroeconomic outlook, political risks and market size.

    “These investment proposals show they believe in Nigeria; the growth and potential of the economy. Most pundits agreed on the enormous potential of the Nigerian economy, the market is here and the headroom for growth is huge,” Oyekunle said.

     

  • Govt owes multinationals $10b in crude oil over-lift

    Govt owes multinationals $10b in crude oil over-lift

    • ‘Debt major investment disincentive’

    The Federal Government through the Nigerian National Petroleum Corporation (NNPC), is owing International Oil Companies (IOCs) about $10 billion in unpaid crude oil over-lift bills, The Nation has learnt.

    The huge debts build-up in the last few years, were as a result of  over-lifting of crude oil due to the government as royalty from the oil fields. It was learnt that the NNPC that superintends government’s interests in these oil acreages, often comes to these facilities with vessels to lift crude with a promise to reconcile the transactions with the operating companies, but in most cases, it never did.

    A source who spoke on condition of anonymity, said the oil majors in Nigeria have been battling this problem over the years, saying the worrisome aspect of the issue is that the crude oil being lifted comes from oil fields developed under the Production Sharing Contracts (PSCs) arrangement.

    Under this arrangement, the oil firms bear the total risk of exploration and development. When the field begins production the oil firm, depending on agreed terms, pays royalty to the government with oil. The royalty oil is the quantum of oil allocated to the NNPC that will generate proceeds equal to the actual royalty payable each month and the concession rent payable each year.

    The source stated that in the PSC arrangement, government and operating companies committed to settling any issue that may arise through an arbitration panel where three lawyers would be present each representing the government or NNPC, the oil firm and, the remaining, an independent lawyer.

    He said the government always abandons the decision of the arbitration panel and goes to a local high court to get judgment in its favour. “This is bare-faced bullying. How can the government flagrantly disregard contractual agreements, send a vessel to lift oil without considering the operator of the asset. They (government) will ask you to go to arbitration and will refuse to abide by the judgment of the arbitration panel.

    “This attitude of the government is a major disincentive to investment in the oil and gas industry. Imagine where a company sources funds, takes the entire risk of exploration and if eventually oil is found, takes the entire risk of developing the field in challenging environments such as deepwater. This happens only in this country and I must let you know it is a major constraint to attracting global investible funds into this country.

    “We all know other existing challenges in operating in this environment such as militancy, joint venture funding issues and the current state of the global oil industry. We hope this administration will address this issue of crude over-lift, among other problems,” the source said.

    When The Nation contacted the Group General Manager, Group Public Affairs Division of NNPC, Mr Ndu Ughamadu, for comments, he said the issue was channelled to the appropriate department of NNPC for response and the division said it is untrue. He said: “The appropriate unit said it is not true.”

  • ‘Multinationals failing to prevent third party bribery, corruption’

    ‘Multinationals failing to prevent third party bribery, corruption’

    A report by global law firm, Hogan Lovells, has identified the use of third parties as the second biggest bribery and corruption risk in most countries. The report which focused on countries in Europe, Asia and the United States showed that nearly half (49 per cent) of multinationals are fail to carry out basic bribery and corruption checks on third party contractors before start working with them.

    It was further discovered that 47 per cent of respondents fail to carry out desktop due diligence; 44 per cent don’t ask third parties to complete a questionnaire, and the same proportion fail to conduct face-to-face interviews with third parties.

    Titled: “Steering the Course: Navigating third party bribery and corruption risk,” the report found that the use of third parties is on the rise with 82 per cent of survey respondents noting an increase in the past three years and 78 per cent anticipating an increase in the coming year.

    The results of the 2016 report follow interviews with 604 chief compliance officers, heads of legal, based in the UK, U.S., Asia, France and Germany, at many of the world’s largest multinational companies in four sectors – energy, minerals and resources; life sciences and healthcare; transport (including automotive and aviation); and technology, media and telecommunications, with a minimum of 2,000 employees and at least £250m turnover, and operated in four sectors: life sciences and pharmaceuticals (124); energy, minerals and resources (138); transport, including aviation and automotive (152); and technology, media and telecoms (190), Crispin Rapinet, Global Head of Investigations, White Collar and Fraud at Hogan Lovells, said: “As companies expand overseas, there are good reasons to engage third parties – local know-how, connections to potential customers, and familiarity with the bureaucratic hurdles.

    “But it’s a fine line to balance the commercial advantages against the risk that third parties pose to your organisation, when they are acting in your name.

    “If you don’t have the right checks in place your company can be held liable if your third party bribes for your benefit. Regulators and enforcement agencies are sharpening their focus and corporates are increasingly facing enforcement actions such as criminal exposure for individuals and the company, and reputational damage.

    The report said the UK is the weakest region on risk assessment with 50 per cent failing to regularly risk assessing all third parties. On the other hand, the U.S. was strong on several measures, for example in ensuring that third parties undertake training (61 per cent), and in conducting face-to-face interviews.

  • Money motive and multinationals….From Enron to MTN

    Beyond the hard façade of law and economics, good (corporate) governance ultimately comes down to the soft but “real” issues”.

     

    “When beggars die, there are no comets seen” according to Shakespeare, but then added, “heavens themselves blaze forth the death of a prince”. Suffice that there are beggar businesses in town and there are the princes. By their clout they define what corporate governance is. For when a member of the Fortune 500 drops out of the business skyline definitely there must be some buzz in the media and a telling reverberation in the business community. Exactly what definescorporate governance from “company management.”

    After the earth-shaking news about MTN’s $5.2billion sanction on tax remittance fraud hit Nigeria’s news stand last week, there was firsta shrill that felt like many hearts sinking and then a sigh, before the little whimpers began and the comments that definitely jolted the businesscircuit back to institutional memory… yes, to Enron!Does anyone still remember? And that underlines the mammoth baggage of disappointments that rang through the Nigerian socio-political and economic spheres. It is unprecedented, second only to the global impact once of Enron and the domino effects that followed in the 1990s.

    Icons and crashes

    Enron (U.S.) of the 1990s and MTN (Africa) in the 2000s were the big “mascot” companies of their times respectively. Both reigned and raked-in accolades for global best practices. Both were/are savvy, the defining culture for the term “corporate”, they were involved in CSR that showed great human/earth considerations. They provided ideal trajectory for corporate profiles both for HR and company, became practically the swear word in growth industry, they represented the icon and hope and raised the bar of aspiration for the next generation. So the thought of crash for them was not just undesirable it was unconscionable.

    But Enron crashed into the exacting hands of corporate governance and now MTN is teetering from its foundation that is terribly undermined. Ironically one goodof their mutual fate is thatnow either canplay the role of the corporate goon to illustrate many of the winding issues under Ownership and Control for the remaining “Fortune 500” companies still in the market. Moreover the Nigerian polity is still totting on the steps of an emerging economy trying to grapple with the waves of micro-macro market interlocks, the MTN debacle will come as a timely beau to explain how corporate governance works.

    Premium Times, the online news channel claimed to have followed the investigation for 11 years and wrote, “In a rare disclosure in 2013, MTN admitted it made unauthorized payments of N37.6 Billion to MTN Dubai between 2010 and 2013. The transfers were then “on-paid” to Mauritius, a shell company with zero number of staff and which physical presence in the capital Port Louis is nothing more than a post office letter box. The disclosure amounted to a confession given that MTN made the dodgy transfers without seeking approval from the National Office for Technology Acquisition and Promotion (NOTAP), the body mandated to oversight such transfers.”

    Corporate scandals don’t just happen like accidents, they are “planned”. They begin like seeds in the mind of men, sometimes from the gestation of the company. But most often they are sheened in some assemblage of words that encode the agreements as men sit down to conceive the end of that matter from the beginning. That is why as the structure progresses in a system there is naturally a differential of growth which no one can perfectly predict, hence the need of a progressive interpretation, but while in transit the motives of men dilute the process and the end-result is affected. The issue of Motive is very crucial at every level in corporates set-up.And the motives of a venture-capitalist minded corporate can be so dangerously tilted in carrying out even great policies.

    We are reminded about the case study on Enron, “In October 2001the company admitted there had been a number of accounting irregularities over the period 1997 to 2000. It became clear that a number of complex partnership structures had not been recognised in the balance sheet. In effect these structures had been used to keep debt off the balance sheet. Although the accounting treatment complied with the accounting rules in the US at the time they were clearly intended to mislead investors.”

    Last week as the regulator’s hammer went up in Nigeria against MTN, there were more comparisons flooding back from those archives, “In 2000 Enron was an energy trading, natural gas and utilities ….top ten largest companies in the US.. a market capitalization of over $70 million; revenues of over $100 billion and for five consecutive years had been named “America’s Most Innovative Company” by Fortune Magazine. It had over 20,000 employees around the world”

    Locally in Nigeria, the Premium Times went on: “MTN has consistently prided itself as the foremost telephone company that is getting Nigerians talking the most. Now….it has routinely been shipping billions of naira overseas to avoid paying its fair share of tax in Nigeria… MTN has been running circles around Nigerian revenue authorities using a complex but noxious tax avoidance scheme called Transfer Pricing.”

    Competence or diligence is no respite, Enron was serviced “by one of the top five professional firms in the world”, Arthur Andersen, with revenues in excess of $9 billion and notably “a reputation for outstanding auditing integrity and competence”. They were imperiled along with Enron, losing reputation, clients and business. Princely corporations don’t ever fall alone they carry collateral damages that are most often transferred onto friendly companies and collaborators.

    Before their scandal corporates do often start with the rule but soon step aside for a ruse that could yield a crude advantage. What MTN devised as Transfer Pricing was a creative genius, “For any economy, it is a slow death.” Just like it was for Enron which Chief Financial Officer, Andrew Fastow devised “a series of complex partnership structures known as special purpose vehicles (SPVs) through which the assets of Enron were sold out variously for cash, borrowed from a third party bank, but those partnerships were not reflected on the balance sheet.

    In the end, “although the partnerships generally met the strict legal requirements they were outside the ‘spirit’ of the regulations and were clearly designed to mislead shareholders. As for MTN Premium Times informs, “The red flag was raised the moment it was revealed that MTN Nigeria has been making payments to two overseas companies – MTN Dubai and MTN International in Mauritius – both located in tax havens….. In 2013 for example, MTN set aside N11.398billion from MTN Nigeria to pay to MTN Dubai. A similar transfer of N11.789billion was made by MTN Ghana to the same MTN Dubai, making it a total of N23.187 billion that was shipped to the Dubai offshore account.

    The reach and spread of corporations across nations which is an element of globalisation, and now terribly enhanced by ICT is probably more terrible in the hands of a communications trader. “In a rare disclosure in 2013, MTN admitted it made unauthorised payments of N37.6 billion to MTN Dubai between 2010 and 2013. The transfers were then “on-paid” to Mauritius, a shell company with zero number of staff and which physical presence in the capital Port Louis is nothing more than a post office letter box.”

    Growth must come else the economy die.But there is a price to pay for the differential of growth. Strategy of traction is therefore very important to the works of a  Regulator especially in a knowledge economy as the world is right now, but the undoing of a young emerging economy as Nigeria’s and most of Africa mentioned in the MTN network, is the start-up structure. Callous macro-economic players take undue advantage to introduce out-large instruments from that environment, often in collusion with unpatriotic local player to defraud the local economy and create more gaps in growth.

    MTN made those dodgy transfers without seeking approval from the stakeholder involved which is the ”National Office for Technology Acquisition and Promotion (NOTAP), the body mandated to oversee such transfers.The disclosure amounted to a confession” unwittingly.

    As it is often said, “Beyond the hard façade of law and economics good (corporate) governance ultimately comes down to the soft but “real” issues”. Evidently the two corporates, Enron and MTN ran/run  a good structure on paper and the system was celebrated as world best practices, however their strategy or devices of achieving their strategic goal was tinctured to provide what was unseen outside of the system. Hence the so-called “core concepts” as is preached about Corporate Governance for now, stressing “the codes of corporate governance” often brought together by players themselves in tacit approval of public departments, will only serve as per what is concealed in the structure and system but not what is hidden in the heart of the managers. This returns the unraveling of motives beyond the commitment of crimes of corporate governance to much higher ways of ethics, the philosophical teaching of morality in the academia.

    However pecuniary benefit may be the commonest motive for malfeasance in the marketplace for in the expanded horizon where transaction now takes place in the 21st Century there could be sundry other motives leading to capital not directly cash-money. Power, relationships and many other kinds of kicks have come in, and so are the varying means of meeting them some of which are now the subject of neurotic analytics. Meeting these avenues has expanded the ambit of information seeking, gathering and re-use, and ultimately how man plans to react to maximise their benefits.

    All above is the latest preoccupation of curriculum developers in seeking to integrate vistas of knowledge in other to prepare a programme of education that will be fit for would-be professional/practitioner of corporate governance.

     

    • Ogunsakin can be reached on: 08037250343                                           greenhavenfoundation@gmail.com
  • Multinationals, franchise fees and other “irritants”

    Multinationals, franchise fees and other “irritants”

    last week, the Nigeria headquartered Dangote Group, opened a massive cement plant in Tanzania. Entailing an investment of US$600 million, the three million metric-tonne per annum capacity cement plant is reputed to be the largest in all of East and Central Africa.

    Registered in Tanzania as Dangote Industries, the plant will primarily serve the domestic market. It will also be able to serve local export markets by sea.

    With a population of about 45 million and annual GDP growth of about seven percent, Tanzania like Nigeria, portends considerable growth opportunity to many a legitimate business. For instance, a fall-out of the country’s impressive economic performance in recent years is the strong demand in the real estate sector that has in turn reflected in growing cement consumption.

    It is that need, among others, that Dangote Industries will help to meet in Tanzania, supplying the life-blood of the real estate resurgence in the country, cement. In so doing, Dangote will be providing a livelihood for tens of thousands of Tanzanians both directly as employees and indirectly as trade distributors, resellers and sundry other partners. It will also provide considerable taxation and other revenue to government. In a nutshell, even though its origin is Nigeria, Dangote will be oiling the wheels of economic growth and development of Tanzania.

    The multinational corporation, to a large extent, epitomizes the nexus between risk, profit and opportunity in a capitalist world. Having reasoned that a certain country somewhere might portend an opportunity, it does the requisite diligence and where it determines that the odds are reasonably in its favour, proceeds to commit resources – capital, manpower, time – towards investing in such a country. It invests in the country in the expectation of reward, namely, profit.

    Indeed, the concept of economic growth driver becomes even more empirically valid for instance when one examines recent media reports that indicate that MTN which is primarily a provider of cellular telecommunication services, has become Nigeria’s biggest distributor of music. While this is no doubt, a big plus for the liberalization and efficient regulation of the telecom industry, it speaks to the sundry economic spin-offs that the South-Africa headquartered MTN, continues to unleash in Nigeria. Having spotted the opportunity in the entertainment industry, it creatively provided its network as a platform for music distribution and one by which musical artistes could earn prompt and legitimate payment for their creative works. In so doing, these artistes are able to evade the scourge of piracy. Today, the MTN platform powers an enormous music industry value chain with immense positive economic implications.

    Ironically, it would seem that once these multinational corporations have confronted the risks that one must face in investing in Nigeria and thereafter made the requisite investment, the country appears to seek every means by which to deprive them as much as possible, of the profits that are the legitimate reward for investment.

    One widespread approach is spurious and multiple taxation, where different levels of government – Federal, State and Local – seek the payment of the same taxes from a single multinational corporation. One example is Right of Way, which is supposed to be under the purview of the Federal Government but which state governments and even the occasional local government have been known to demand payment for. In a most notorious situation, the Federal Inland Waterways Authority has demanded Right of Way payment to the tune of hundreds of millions of naira from telecom companies for laying fibre optic cables on bridges on Federal Highways. Next time you visit many states in Nigeria, do not be surprised to hear of such taxes as “pest/vector control”, “fumigation tax” and sundry other spurious taxes and levies that specifically target multinational corporations in the short-term quest for revenues by government at different levels.

    The recent case of Stanbic IBTC Bank is yet another manifestation of short-term thinking on the part of government functionaries charged with making and implementing policy. In the sequel to the banking consolidation Tsunami that began some years ago, what used to be IBTC, Chartered Bank and Regent Bank, respectively, had merged and come to be known as IBTC Chartered. Thereafter, a bigger multinational bank, South Africa-headquartered Standard Bank, came calling. It apparently offered the then local bank the advantage of an opportunity to play in the big league, with access to a bigger chunk of international capital. Then it backed this up with capital injection. News reports at the time indicated that Standard Bank may have injected more than US$500million into the country in the process of acquiring majority shareholding in the firm which now came to be known as Stanbic IBTC.

    Accordingly, the erstwhile local bank assumes a new identity and gradually consolidates its presence locally. In addition, using its expanded international connections, by courtesy of its new multinational status, it taps into sundry big dollar deals in different sectors of the economy. It also begins to play big in the retail banking space among others.

    Then the moment of reckoning comes. It needs to pay “franchise fees” to its parent company for the use of the collective resources, both tangible and intangible, of the entire multinational organization. Lo and behold, government functionaries in Nigeria say it cannot do that. What right does it have to pay foreigners for a service, banking, that Nigerians can provide, our enraged government functionaries ask?

    The shocking turn of events again brings to the fore, the question of whether key functionaries in government including those who bear responsibility to draw up and implement key economic policies are in tune with the overall big picture and purpose of government. Franchise fees are standard practice among multinationals. There is no doubt that Dangote Industries in Tanzania will have to remit franchise fees or management fees to the Dangote Group back home in Nigeria, in due course.

    In an increasingly connected world, organizations are realizing that to play in the big league, it is imperative to go beyond the home front and explore the international space. Government operatives with oversight for the economy, especially in developing countries, have an urgent need to better understand the dynamics of this vibrant new world. There is an urgent imperative to look beyond the short term and instead employ a more holistic approach in their assessment of relationships between multinationals and their local subsidiaries. Extracting long-term value, ensuring that the relationships impact optimally on the economic value chain should be the ultimate objective of government.

    Government functionaries including state governments must also awaken to the fact that Nigerian-headquartered multinationals are making strong incursions into other parts of the world as well. They do this because it is profitable, and in the knowledge that they can repatriate their profits, from time-to-time. In the process of making profits abroad, however, like other multinational corporations, Nigerian multinationals also catalyse economic growth and development. Government functionaries, therefore, need to better understand and appreciate the profit imperative especially as it pertains to widespread economic growth and development. Doing this should mean that a lot of the artificial road blocks that are put in the way of multinational corporations operating in Nigeria will be dismantled.

    • Ajibola a post-doctoral research fellow in Economics is based in Wales, UK

     

  • Multinationals create awareness on hand washing

    A multinational, Unigloves Medical, in collaboration with other European partners, is set to carry hygiene campaign to schools and hospitals in Nigeria as its own contribution towards the celebration of the yearly Global Handwashing Day which comes up today.

    The multinationals will do this by installing dispensing machines in selected schools and hospitals nationwide, giving students and workers the opportunity to wash their hands with disinfectants and quality solutions produced by the company.

    “This is a way of promoting hygiene among Nigerian children, thereby preventing infections and other diseases,” said Mr. Kevin Onah, managing director, Unigloves Medical.

    Global Handwashing Day (GHD) is a campaign to motivate and mobilise people around the world to improve their handwashing habits by washing their hands with soap at critical moments.

    The campaign was initiated to reduce childhood mortality rates, related respiratory and diarrheal diseases by introducing simple behavioral changes, such as handwashing with soap. This simple, accessible action can, according to research, reduce the rate of mortality from these diseases by between 25 and 50 per cent.

     

  • ‘Multinationals must have HQ in Delta’

    The Delta State Government has said it will ensure that multinationals operating in the state no longer take their headquarters to other states.

    The government said it premised its plan on the need for such big companies to create more jobs for youths and ensure that the residents and the government reap full economic benefits from such companies.

    The Special Adviser to the Governor on Youth and Community Development, Eric Omare, spoke yesterday in Bomadi, Bomadi Local Government Area, on the government’s plan to empower youths.

    The governor’s aide said the Ifeanyi Okowa administration would encourage entrepreneurship among the residents, especially the youth.

    Omare, who is also the spokesman of the Ijaw Youths Council (IYC), noted that although past administrations might not have examined how companies operating the state ran their offices, it would no longer be business as usual for those with headquarters outside their areas of operation.

    He said the new government’s policy is aimed at fostering a bond between the companies and their host communities.

    Omare urged the youth in the host communities to key into the empowerment programmes of the Okowa administration.

    He said: “The state government is embarking on raising entrepreneurs and ensuring a conducive environment for companies to operate. I urge you to key into the empowerment programmes of the state government.”

    A former militant leader, Mr. Francis Muturu (aka General Aboy) and the chairman of Bomadi community, Stephen Muturu, described Okowa as a lover of the Ijaw.

    They pledged their support for his administration.

     

  • FRC, multinationals fight over corporate governance code

    Multinational companies have picked holes  with the Financial Reporting Council of Nigeria (FRCN) over certain sections of the proposed National Code of Corporate Governance (NCCG) under review.

    The Managing Director, FRC, Jim Obazee, said the firms are kicking against some sections of the proposed code, especially the provision of joint auditors proposal by the Council. The Council has inserted a proviso that where one auditor is a foreigner, there must be a Nigerian auditor working alongside with him.

    The draft code also stipulates that if your turnover is not less than N10 billion, or your market capitalisation is not less than N5 billion, you should have joint auditors.

    But from what we received so far, some interest group that have written, especially the multinational firms, are asking: Why do you want joint audit?

    “For the auditors, if one of them is an international firm, where one is an alien, the other firm must be a Nigerian company. And, we said, and we said the Nigerian firm must not have a partner that is an alien. Our agenda is not only to generate employment for Nigerians, but to also ensure that Nigerians are also trained. Every government agency must pursue an agenda that says that Nigerians are training and gainfully employed. They should have technical support,” Obazee said.

    Obazee said the NCCG is also stipulating a five-year mandatory rotation for external auditors posted to oversee companies’ accounts.

    He said the new rule on auditors, which is contained in the NCCG document, is meant to ensure that the auditors do not become used to the company.

    “The NCCG code contains a five-year mandatory rotation for external auditors. This is because we discovered that after five years as an external auditor to a company, many of the auditors become part of the company and may not achieve the desired result,” he said.

    Obazee said Nigeria boasts of six different persuasive codes issued by six different regulators to meet the need of the entities they regulate.

    He said the codes were being applied by the Central Bank of Nigeria, Nigeria Deposit Insurance Corporation, he National Insurance Commission (NAICOM), The National Pension Commission (PenCom), Securities and Exchange Commission (SEC), Corporate Affairs Commission and Nigerian Communication Commission.

    He however said modern society believes that the era of very weak and persuasive corporate governance codes was long gone due to stiff competing environment for foreign direct investment; of which binding regulation is a major factor being considered by investors and stakeholders, hence the need for new code.

    He said provisions had been made for the development and enforcement of a National Code of Corporate Governance in the Financial Reporting Council of Nigeria Act No. 6, 2011.

    He said Section 50 of the FRC Act, 2011 provides that the objectives of the Directorate of Corporate Governance shall be to develop principles and practices of corporate governance ; promote the highest standards of corporate governance; promote public awareness about corporate governance principles and practices; on behalf of Council, act as the national coordinating body responsible for all matters pertaining to corporate governance  and promote sound financial reporting and accountability based on true and fair financial statements duly audited by competent independent Auditors.

    Obazee said the Council shall enforce and approve enforcement of compliance with accounting, auditing, corporate governance and financial reporting standards in Nigeria”.

    He said the code will also address socio-economic issues including corruption and lack of corporate independence.

    “It is also an opportunity to raise the bar in the public and private sectors so that directors are personally accountable for their actions and inactions. The committee completed this assignment in the last quarters of 2014. This was the reason the annual Financial Reporting Summit, organised by our Council in December 2014, concentrated on issues of corporate governance,” he said.

    “We are delighted to inform you  that the NCCG has been finalised and has been exposed for comments from stakeholders for 30 days effective from April 15, 2015. The deadline for receiving comments on the Draft NCCG is 14th May, 2015. A public hearing shall hold on the subject on 19th May, 2015,” he said.

    He said the NCCG is in three parts, namely, Private Sector, Public Sector and Not-for-Profit.