Whose agenda is the FRC serving?

The Financial Reporting Council of Nigeria (FRC), a hitherto obscure body that gained fame after it was deployed to hound the erstwhile governor of the Central Bank of Nigeria, Lamido Sanusi, out of office, is again back in the news. This time, it is reported to have suspended the helmsmen of Stanbic IBTC Holdings Plc based on allegations from a group of minority shareholders of the financial institution. When FRC came into the limelight, many people were hard-pressed to place where it sprang from, searching through the archives to convince themselves that it was not hurriedly set up solely for the purpose of achieving a pre-determined end. The manner FRC was used to bring to an abrupt end the tenure of the former CBN governor and the attendant publicity circus did not help its profile as an impartial stakeholder in the country’s financial sector. It was the prosecutor and adjudicator in the Sanusi case.

That infamous episode has not been helped by the penchant of government agencies or regulators assuming prosecutorial and adjudicatory roles when dealing with their stakeholders. Where they are expected to be impartial, above board and be seen to have considered all sides to an issue, they very quickly become enmeshed in the issues and their ability to effectively regulate becomes doubtful. The current case, which the FRC has again used to intrude into the consciousness of Nigerians, will not likely help to shore up its profile.

In pronouncing a guilty verdict in a case that is already in court, the FRC has left itself open to accusations of having more than a partisan interest in the case, or that its executives are in a hurry to redeem the image of the organisation in the face of its recent not-so-flattering past, or worse still, that it lacks the competence, skills and ability to play a meaningful role in the financial services sector.

If it had taken time to read thoroughly the “verdict” of its investigations into Stanbic IBTC’s financial reports, it would have saved itself from the obvious shoddiness that trailed the report. One of the most embarrassing of such faux pas is its statement that the financial institution could not prove that there were branding benefits that the group derives from its parent bank, the Standard Bank Group, and concluded that paying franchise fees to the parent company was not necessary.

Among several other inconsistencies, inaccuracies and errors in the report, this particular conclusion perhaps highlights the fact that the authors of the investigative report could not fathom the obvious benefits of belonging to a globally recognised brand, which is rather shocking. In a globalised world, where mergers and acquisitions, franchising, affiliations among several other strategic alliances are sought after and used as competitive advantages to leapfrog the very difficult and sometimes tortuous journey to building a globally recognised brand, the FRC states on its website that there was no such benefit. Even in Nigeria, many organisations are increasingly becoming affiliated to multinational brands and in some instances, subsuming their brands under the better known brand names. The advantages such affiliations offer are numerous. From gaining access to the network of a global group to reduced expenditure on building brand equity, in addition to easier access to a wider pool of customers, affiliations enhance the potential of smaller brands to grow very quickly.

Examples of indigenous organisations affiliated to global brands abound in the economy, such as advertising, auditing, and media, among many others. Questioning the benefits of Stanbic IBTC’s relationship with its parent bank and upon which basis the FRC based its conclusions may well point to the dearth of thinking in the organisation. In the last one decade, several indigenous brands such as UBA, GTB, Dangote Group and others have grown exponentially and now have major operations in several African countries. In some instances, the Nigerian brands have gone into affiliations with local brands in order to hit the ground running, as it were, in these countries. Now, if these operations are expected to pay franchise fees, management fees in addition to other fees for the advantages that the major Nigerian brand avails, will it be right to claim that the Nigerian brand does not deserve to earn some income from the use of its brand and network? If the regulators in these countries adopt FRC’s model of questioning the rationale for paying such fees, will they be right? Will the organisation have grown beyond the point at which the affiliation was consummated without the impetus given it by the bigger brand?

Beyond franchise fees is the other equally important matter of the best route that a world-class regulator ought to take in resolving issues among stakeholders of an organisation in order to ensure that the ultimate good of the organisation and the country is protected, as well as preserving its own integrity. Circumspection rather than a desire to occupy prime space in the media ought to be a guiding principle. If a regulator is circumspect in its operations and pronouncements, there will not be a rush to judgment; its moderating influence will likely be sought after and respected, and its role as an enabler of growth and development, rather than a cog, will be assured.     

With the new sheriff in town, there has been an understandable striving by government agencies to be perceived as active regulators beyond their hitherto traditional activity of placing congratulatory adverts in the media. The FRC is possibly jumping into the anti-corruption crusade of the current administration in order to redeem a past that cannot be easily forgotten or glossed over. But then, damaging reputations that have been built over several decades, and besmirching an organisation with implications that are far beyond the borders of Nigeria, should not be the best pedestals to achieving such ends. After all, without a viable industry, what will be left to regulate?

Akeem  Ogunlade

Ogunlade is of the Centre for the Promotion of Enterprise and Business Best Practice, Abuja.