• Sunday, July 21, 2024
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Manufacturing under pressure (3) – The regulatory burden

In continuing my review of the pressures facing the manufacturing community, I would like to turn to the regulatory environment.
The Consumer Protection Council (CPC) versus Coca-Cola and Nigeria Bottling Company Limited (NBC) case is a highly dangerous precedent. Protection of consumers is a key role for the regulatory agencies, but it is hard to see a justification for a switch from calling these companies the “Best in Product Excellence” one day to demanding prison sentences for the CEOs and N100 million in fines for “two short-filled cans of Sprite” the next day. (In February 2013, Coca-Cola was given the awards in the non-alcoholic beverage category at the Nigerian Consumer Awards organized by the Consumer Protection Council.) 
Anyone would agree that short-selling requires some sanction, but that has to be in line with the offence. In this case there was no health risk, no threat from poor quality and no evidence of malicious intent. True, it can be argued that Coke can be guilty of arrogance and NBC has recently made the mistake (in this writer’s view) of de-listing, but this does not warrant such aggression from CPC.
Frankly, one wonders at the role of the supervising ministry in all of this, particularly when one considers the dangerous message that would go out to potential investors in the economy. However, as I said, this is just a tip of the iceberg and the highest profile of current, overbearing regulatory activity.
Another example is how the duplication of roles between existing federal agencies such as CPC, SON and NAFDAC is multiplied at state and even LGA level. There is intra-agency competition in an age of “Internally Generated Revenue” and recent examples include who registers new food products, who oversees promotional activity, and who inspects at the ports – all of which become an expensive minefield for producers.
In addition to fees and barriers, many agencies now levy fines and penalties or even close depots and factories without recourse to any rule of law. In a recent interview, the director-general of The Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf, said, “First, the regulators are the accusers and the judges. They are the ones that will give you charges and penalties. Secondly, their charges are too much, sometimes outrageous. There has to be a mechanism to regulate these charges.”
In the last few weeks NAFDAC has virtually doubled its charges, causing yet more complaints with producers. Lagos State under Governor Babtunde Fashola does now publish its charges, but too many agencies, especially at federal level, do not.
Another recent trend has been the insistence by various House committees of the legislature to duplicate what agencies are already doing. In the last year, they have written to various multinational FMCGs with demands including inspection of immigration records, re-audit of accounts going back ten years and review of expatriate salaries. Several of these are subjects of class action supported by NECA. The legislature has oversight over agencies set up to undertake these responsibilities, so why duplicate what is already enshrined in law?
It has been recognised that this duplication and regulatory inefficiencies are a cost and an administrative burden. The Oronsaye report itself recommended abolition of 38 agencies, merger of 52 and reversion of 14 agencies to departments. A breakdown of what could be saved was quoted as N124.8bn from agencies proposed for abolition; N100.6bn from agencies proposed for mergers; N6.6bn from professional bodies; N489.9bn from universities; N50.9bn from polytechnics; N32.3bn from colleges of education, and N616m from boards of federal medical centres. This is in addition to the increased efficiency and savings in the private sector.
The coordinating minister of the economy (CME), Ngozi Okonjo-Iweala, told ThisDay recently that in reference to reducing the nation’s recurrent expenditure, “you are right, we should look at the Oronsaye report”. She, however, cited legislative hurdles for the failure to take action. She went on to say, “We have to bite the bullet…. We have to look at those agencies that are duplicating efforts.” But over two years on from the report, nothing seems to have been done.
I should re-emphasise that all legitimate food and beverage companies would welcome a robust and efficient regulatory framework. Bona fide producers already suffer from those agencies that have employees (often inspectors and mid-level managers, but sometimes reaching to the top) that accept payments to turn ‘a blind eye’ to illegitimate activity. This activity can come in two ways. The first is smuggling of counterfeit or adulterated product, often from the Far East and often produced in Aba or Onitsha. This has long since been recognised as an issue in pharmaceuticals and medicines but is increasing rapidly in branded consumer goods from noodles to soap, from paint to spare parts. For example, some statistics show that 8 percent of seasoning cubes sold here are cheap imports from China usually with no NAFDAC number and of variable quality.
Secondly, some local producers here pay bribes so that their factories can breach immigration and labour laws, defy environmental and health standards and even make unsubstantiated claims on their packaging and in their advertising. This gives them an illegal competitive advantage in keeping down their costs but, far worse, creates a major health and safety risk for workers and consumers. These are so much more serious than NBC’s two cans of Sprite and far more common.
For this reason, I repeat that legitimate food and beverage producers welcome robust and transparent regulators as they too can be protected, not just the Nigerian consumer. This point is often not well understood by those who would have you believe manufacturers are seeking to undermine the agencies that should be helping to protect all of us from the effects of dangerous unregulated products.
Next week, my conclusion.
Keith Richards