With the fall of the naira against the dollar, worsening scarcity of dollar, a rather scary economic forecast by Pwc, the nations economy is jittery in the face of a recession. Senior Partner- Regulatory and Technology, Stransact Partners, Eben Joels, speaks with Mark Itsibor on a few regulatory, compliance, policy and trade issues as they affect Nigeria and Africa……. Excerpts
With recent discoveries of money laundering and corruption at the EFCC and NDDC amongst other public officers, do you think the federal government is winning the war against corruption?
It is a very sad situation but sometimes we have to be honest with ourselves. If we are, then we will all agree that the Federal Government is running a hypocritical war on corruption. Only a fool will not see past the façade of “anti-corruption”. I believe this should actually be described as “aunty corruption” in Nigerian parlance. The events at both EFFC and NDDC confirm my position. For example, Ibrahim Magu the ex-boss of EFCC was reported to have said his case was a “dog eat dog” situation. That is a Freudian slip with Magu admitting that he and his accusers are one and the same. The accusations made by Magu that the attorney general is complicit in corruption cases and is working at cross purposes with the EFCC is more odious than whatever is coming out of NDDC even though that is also bad. The bar is called the bar because they are supposed to set the bar in ethical behaviour. It is not a good sign wherever lawyers are the major enablers of organised fraud. The issue is whether the attorney general engaged an individual standing trial for stealing government property to handle new government property in trust during the pendency of the trial. Agents of the attorney general have not denied that this is the case. Also, in the case of NDDC, the former head of the agency just told the National Assembly that there was no forensic audit going on even though we were told the government had appointed auditors. She said there was no reputable audit firm on the list of “forensic auditors” that were engaged. If the process of selecting the auditor is already rigged, how can we expect any credible outcome? Corruption is the system in Nigeria.
With the recent data breach and destruction of certain vital documents and sensitive data that could aid the investigation of the suspended Chairman, Economic and Financial Crimes Commission (EFCC), Ibrahim Magu, Nigeria might actually be in trouble with the Egmont Group, as this signals portend suspension or expulsion from the group, with attendant effect on international business, importation, domestic and international transactions, foreign trade, and why Nigeria’s Financial Intelligence Unit may be under the sledge hammer again. With far-reaching implications for Nigeria, how does Nigeria avoid expulsion?
If the Egmont Group was made for puritans, then Nigeria had no business being there in the first place. The Egmont Group is only a forum for information sharing by its members or subscribers. It is not a regulator with sanctioning powers. That said, it is important that the rest of the world know that Nigeria is a cooperating sovereign in the fight against money laundering and terrorism. Deliberate withholding of cooperation with the Egmont Group will surely be a red flag but this is not the situation here. In any case, Magu’s personal odyssey may actually serve a good lesson for others to know that one day, the hunter can become the object of the hunt and, therefore, it is important for future anti-corruption leaders to be on the right side of right as much as possible.
As exchange rate falls to N472/$1 at black market, dollar scarcity worsens, yet CBN’s MPC keeps rates unchanged amid rising inflation. What is the impact of this on the Nigerian economy, trade and investment?
The more worrisome issue is that the gap between the various exchange rates operating in Nigeria creates arbitrage opportunities for highly connected individuals. No less a person than Sanusi Lamido Sanusi told us some people do not need to work to make a billion naira because they can simply obtain foreign currency at the official rate and sell on the black market. Some people are cleaning out of this situation. The spread between the black market and the official market is back to about NGN100 on a dollar. It is not that rate that is the issue right now. We need to move to a single unified exchange rates. For all you know, the Naira may be underpriced artificially because of the quest to “defend” the Naira. Using purchasing power parity, I believe the Naira is underpriced and the so-called need to defend the Naira by operating several tiers of official exchange rate is part of the systematic theft of national resources going on as we speak.
What’s your structural and critical assessment of the PWC 2020 Report and H2 2020 economic forecast?
The issues raised and discussed in the version of the report that is freely available appear to me to be only the most obvious. They discussed corona virus and global oil & gas prices and advised government to create policies to attract long term investment for post–Covid 19 recovery. For a big brand such as PWC, that analysis is at best infantile. Firstly, serious thinkers are thinking beyond “post-covid” on how to take advantage of opportunities presented by COVID. For example, we can all benefit immensely if the federal government announces a massive public work of laying optic cables across the entire 774 local governments of Nigeria. That will deepen broadband penetration significantly and help launch proper public national online learning platforms.
Analysts say the Central Bank of Nigeria seems to have abdicated its core functions and the task of ensuring sound monetary and fiscal policies and sound financial regulation, by delving into areas it has no expertise. How do you react to CBN’s seeming lack of focus and its import on the economy?
The Central Bank of Nigeria is unfortunately subject to the political environment in which it operates and as such, the last set of governors including the current one now lend the CBN to intervening directly in social and sometimes populist agenda. I agree with these observations. It is something I discussed with one of my seniors last week as part of the issues bedevilling us. Public officials seem to launch programmes only for the sake of their political survival. Some of the incompetent individuals running our lives generate meaningless ideas that we latch on to helplessly. For example, the word “palliative” was introduced into Nigeria with COVID-19 and it has come to mean a good thing when in actual fact, no palliatives should be prescribed in a system that works. Palliatives exist to make an irredeemable situation bearable. I fear that by giving us palliatives, government is subtly announcing to us that an improved and functional permanent system of social care is impossible to attain. Do you know that if you Google the word “palliative”, the first thing that pops out is ‘Nigeria’? It is little wonder that ‘palliatives’ is now the new password for embezzling public funds.
Do you think the CBN’s Monetary Policy Committee (MPC) expectations and projections are realistic, within the context of the present realities?
The CBN is rightly focusing on inflation, by adjusting lending rates and bank currency ratios. I do not think I am adequately schooled to comment on the technical logic of that decision. However, I am more concerned with the bank’s role in promoting ethical banking in Nigeria and I think they can do better. Today, banks continue to earn more from non-lending activities than they do from lending to genuine businesses. You still need an arm and a leg to get financing. The only objective of the average bank CEO is to own the largest home in Ikoyi. Banks are still led by gods and goddesses. The CBN can do better in ensuring ethical banking, really.
Taking a cursory look at Nigerian state governments’ internally generated revenue (IGR), why do you think there’s been, over the years, emphasis on federal allocation and what do you proffer as solution?
The level of governance in Nigeria is decaying faster than that of an active radioactive element. The basic duty of most people holding government offices continue to be how to corner allocations for themselves and their cronies. It is difficult to increase the size of a pot if you are only focused on stealing the pot. Most states in Nigeria are run by small-minded individuals whose primary purpose is to steal every valuable object, kill unprotected individuals who oppose them and destroy whatever value system remains in the society. They transform themselves into tin-gods demanding worship in exchange for a morsel. It seems this country rewards thieves by giving them increased responsibility in thievery. There are few people who have maintained a prolific career in politics that have ever run genuine businesses in their lives. The other day, a Minister boasted that he thanked God he never found a job after school because he later found a career in politics that have seen him access federal government funds for over 16 years now.
The solution is not far-fetched. Where there is no vision, there can be no leadership. State governments should seek visioning help where necessary. It is difficult to describe certain things to a blind person who is unlettered and is not even ready to use his imagination. Most states can now access funds through the capital market. This means large projects can be easily financed by ambitious state governments. For example, what is stopping Kogi State from wholly acquiring Ajaokuta Steel complex, except a lack of foresight?. It is not so difficult for a state government to acquire or create a major enterprise, take it public and exit the investment in 8 years – the average time a politician is in office.
How do you see the AfCFTA impacting on local, regional and pan-African trade and economic growth?
Eliminating the internal custom barriers to trade in Africa has been an objective of the African Union even when it was called the Organisation of African Unity. It is a no-brainer that importing from Ghana should be faster than importing from China. But I fear that until governance, infrastructure and education is suitably improved on the African continent, free trade within the territory will continue to be only a policy statement and no more than that. For example, it is a sad commentary on the quality of governance in Nigeria when security is excised from the concept of governance anytime you discuss with officials. There is no government anywhere there is no security. The absence of security actually means the absence of government. Mass killings by individuals who continue to work free or are even given incentives is the essential symptom of a territory with no government.
On the ease of doing business in Nigeria, how would you assess oversight functions of the Corporate Affairs Commission’s (CAC) efforts to stabilise the Nigerian business climate?
The CAC is only one agency among the myriad of both necessary and unnecessary government agencies impacting doing business in Nigeria. CAC alone cannot stabilise the business climate. The business climate will only improve if there are intentional acts to improve both public and private sector governance in Nigeria. For example, in Nigeria, any Charlatan can create a business centre, label it a “church”, title himself a prophet or overseer, and then begin collecting donations from the public which he uses to finance an ostentatious lifestyle. There are no governance reporting requirements for non-profits in Nigeria. The last guy that attempted to demand some form of accountability from churches was sacked unceremoniously and many of us were part of the crowd shouting crucify him! We failed to see the common good of the society demanding accountability from everyone.
How do you see the impact of this new reality on the financial landscape/ profession as a whole?
Any step promoting increased transparency and accountability in a government agency is a welcome development and serves the greater good. Nigeria is one of the largest economies in Africa and has a lot of potential. The CAC has a major role to play in enabling business incorporation and other corporate affairs. As the CAC’s regulatory capacity is improved, there is a direct impact on the demand for professional services in Nigeria.
The consequences of the Covid-19 pandemic on financial statement reporting and audit engagements are complex and have resulted in challenges for audit management, those charged with governance (TCWG) and auditors. What are the implications? Do you think this poses practical challenges for audit management and how do you think the industry would meander through this professional curve?
Nigeria’s financial reporting council (FRC) has issued timely guidelines to help auditors navigate the current difficulties. The Council referenced the requirements of the International Standard on Auditing on Terms of a new Audit Engagement and advised strict adherence as much as practicable.There were similarly copious guidance on how auditors should deal with difficulties in completing relevant audit steps during CoVID-19 restrictions. Auditors will do well to adhere to guidance published by both the FRC and the Institute of Chartered Accountants of Nigeria.