Speeches

The Economist Conference Tagged "Renewing Business Confidence In Nigeria - CEO Agenda Nigeria"

Jan 11, 2010 - As I welcome our guests and participants to this Conference, my delight in hosting you in our State is truly indescribable.

Looking at the programme, I have been asked to contribute my views on a host of matters varying from the perception of Nigeria, policy reversals and the impact on business, the tax regime, bribery and corruption, the Nigerian legal framework and of course, the human resoLJrce capital that exist in this country.

But in framing the discussion, I observe that these issues have been subsumed under the broad heading of "Tackling Home-Grown Problems:¬Nigeria's Business Environment".

Distinguished ladies and gentlemen, I think this really is the starting point. In my view, if we continue to ask the wrong questions, it demonstrates a clear mis-diagnosis of the situation and would inevitably result in inappropriate solutions.

I would therefore rather attempt to discuss those issues under another heading which I call "Evolving Home Grown Solutions to Nigeria 's Business Environment.

It is my very firm view that much of the future of our planet will be shaped and determined by what happens on the African continent in about a decade from now and particularly in the next few years.

This is because, Africa, probably more than any other continent has the largest stock of natural resources such as oil, gas, wood, gold, uranium, copper, coffee and so much more that the entire human race requires for its continued sustenance. Nigeria , and by extension, Lagos , will have a large role to play because of their respective sizes and impacts in the transformation of Africa .

Perception of Nigeria at Home and Abroad
In dealing with this issue, I like to state first that the conception of the theme, which I have changed, is itself a product of a perception flaw.

Whereas we have all focused on problems, I have chosen to focus on solutions.

I do this because it is clear to me that whether in Asia, the Middle East, Europe or America, our common humanity and quest for survival will, for as long as this planet exists, create problems for city, state or country managers, by whatever designation they are addressed, whether as Mayors, Local Government Chairmen, Governors, Prefects, Presidents or Prime Ministers.

Their common thread of responsibility is to find solutions that address these problems rather than bemoan the problems as something unique to them.

All nations of the world have corruption, crime, unemployment, healthcare delivery, education service, traffic congestion, pollution and environmental challenges. The complexity from place to place is a measure of development; and progress has being assisted by political stability as the back-bone for rallying the people for change.

The Nigerian situation is therefore not unique; and must never be misunderstood as such.

If anybody was looking for evidence of a perception flaw about Nigeria and her people, it would be found in the recent classification of the country along with countries who have embraced terrorism as a solution to international differences, simply because a young 23 year old Nigerian has been victim of what may at best be an indoctrination in a cause about which he knows very little and from which Nigeria does not stand to profit in any way.

It is tragic that a whole nation therefore suffers from something she would never have benefited from.

Stopping Policy Reversals and Creating Continuity for Businesses
From as early as around the 15th Century, Nigeria has engaged in international business and trade and has sustained these relationships as a demonstration of her commitment to business growth. Large portions of what is now modern Nigeria were major outposts of the trans-saharan trade, and Lagos has been doing business with the Portuguese for almost as long.

Any perception that suggests that Nigeria is not business ready comes from misconception of the difficult political history she has endured and the consequent political instability which certainly cannot be a business friendly environment.

One can only wonder what kind of business, and also what quantity of it went on in Europe during the period of the dark ages, the American civil war, the world war in most of Europe and parts of America or indeed the kind of business that can be expected today in Congo and Darfur .

The key therefore is political stability and the last 10 (ten) years from 1999 to date provide clear evidence, inspite of its imperfections, of what political stability can do to business growth. Recent measured growths in GDP are very clear evidences of this.

I will certainly agree that this has not translated to a full economy recovery, but the real reason that has not happened is that infrastructure decay which set in between 1984-1999 during the period of political struggle has not been overcome in a significant way as is probably possible in ten (10) years, to support businesses and create entrepreneurship that would yield opportunities.

But I assure you that a lot is being done and I can speak for Lagos with some authority about a commitment of not less than 60% of our annual budgets for 2008 and 2009 to capital projects deliberately intended to reduce the infrastructure deficit. This is the reason for the several schools, hospitals, markets, roads, bridges, rail, jetties and other projects you will observe under construction in all parts of Lagos .

Although it is still largely work in progress, the economic impacts are being felt. Jobs are being created by these projects on the various sites, food is reaching the tables of our people, desperate conditions are being mitigated and crime is daily reducing.

I certainly cannot conclude on this aspect about continuity without alluding to political and vision continuity which is what produced me as a Governor.

My experience for four and half years as Chief of Staff in the Government from which I took over, and the commitment of my predecessor during the elections in ensuring that I emerged the party candidate was all about continuity. With every sense of modesty, I think Lagos has been better for it. I have not had to re-invent the wheel, I have simply continued from where he stopped because I shared the vision and I think my predecessor has left a most edifying legacy, in succeeding where Nigeria has tragically been most challenged - the problem of succession.

Reforming an over-complex tax regime - Is the National Tax Policy Working?
The current attempt to produce a National Tax Policy for Nigeria has a very short history. The Federal Government had set up a Technical Committee to evolve the policy document and it was only in 2008 that a draft was exposed to major key stakeholders in all the six (6) geo-political zones.

In fact, the Western Zone deliberated on the draft in Lagos on July 31, 2008. A revised draft was circulated in 2009 for further comments which, we assume, are now being collated towards the finalization of the project. It is therefore difficult to say at this stage whether or not the policy is working.

I will nevertheless attempt a quick overview of two most prominent complexities in our tax system.

First is the prevailing uncertainty as to the taxing powers of the different tiers of government. This has provoked allegations of illegal taxation and multiplicity of levies. In actual fact the problem arose mainly from non-adherence to constitutional provisions. Federal tax jurisdiction is clearly stated to be exclusively a central government affair.

One of our main challenges in tax is a psyche of national control of taxing powers

The second is in the reluctance of a large section of tax payers to utilize professionals such as lawyers, accountants and tax practitioners in dealing with the system. At our recent annual tax summit in Lagos in December 2009 this was a major resolution which everybody committed to and we expect to see changes for the better in Year 2010.

We have also agreed on a list of Local Government levies and an efficient model for their administration. These standards are agreed as model by all the Local Government Authorities and are already being implemented.

Regarding the Personal Income Tax, which is perhaps the most complex of them all, we have found ways of simplifying the administration (tax forms, self-assessment processes, direct bank lodgment, tax clearance certification, etc), such that the administrative procedures, if not the law, are made easier and more taxpayer-friendly.

Vested Interest Kickbacks, Bribery: What are the Solutions?
I would approach the discussion of this subject by separating the issue of "vested interests" on one hand, from the discussion of kickbacks, bribery and corruption on the other hand.

The existence of "interests" whether vested or not, is an age old phenomenon. From time immemorial they have been recognized and protected globally in various forms. Peerages, honours, chieftaincies and the like are recognition and protections of those interests through which human beings constituted themselves into groups of influence to protect common interest and which have resulted in patronages.

The great monarchies and Empires of the West and the many Kingdoms and Empires of ancient Africa had them. What has simply happened in my view, is that with the collapse of those Empires and the emergence common rights and democracy, those spheres of influence have been significantly whittled down by a body of Rules which have sought to treat all men and women equally as far as is possible to maintain social equilibrium.

In Africa and Nigeria , those monarchies and traditional institutions still exist more prominently and do so side by side with modern forms of Government that seeks to achieve equality between men and women.

The result therefore is that although those rules of law exist, their enforcement or lack of it, rather than any peculiar and intrinsic illegal nature or law breaking nature in the psyche of Nigerians, has tended to give the impression that Nigerians are corrupt.

This is far from the truth. The reality is that corruption still exists in the most prosperous economies of the world. The allowances scandal in the British parliament, the misdemeanors in the western financial and banking institutions which have thrown the world into a global financial crisis have common under pinnings of abuse of office, breaches of laws, insider dealings which are tainted with corruption.

What those economies have done is to promptly apply the law and sanction such deviant behaviour, sometimes symbolically in a way that seeks to deter, even if it does not solve the problem.

As a legal practitioner, I am aware that our body of laws are replete with many provisions similar to those of the west. What we must evolve as a solution therefore is a new advocacy to our people that actions have consequences and that those consequences must always be at the foreground of the consciousness of any person who contemplates those actions, because they will be applied.

More importantly on corruption, it is my submission that corruption, wherever it exists is not a problem in itself; on the contrary, I see it as a symptom or manifestation of a more profound problem which is desperation.

As men and women daily pursue the essential survival requirements of food, shelter and clothing, an under-performing economy is certainly not the ideal environment for this to thrive. This is what creates desperation that leads to actions aimed at cutting corners which violate society's moral codes.

In effect, I am asserting that leaders of the Nigeria state, must enunciate and implement policies and programmes which reduce desperation, if corruption is to be curtailed.

Such programmes include, but are not limited to investing in education to provide skills that enable people to fend for themselves, developing infrastructure that make transportation, healthcare, education and businesses accessible and functional, because enforcement of laws by themselves alone will only serve to deter deviant behaviour, but will not mitigate the desperate conditions that triggers deviant behaviours.

Success of Government Commissions in Combatina Corruption
I assert that there are sparks of encouragement here and there. An institution such as the Independent Corrupt Practices Commission has remained independent and corruption free because of the persons who have managed it. The truth is that such commissions are institutions who require people to give effect to their purpose. When institutions therefore succeed or fail, in reality it is men and women who have succeeded or failed.

While the Nigerian Judiciary can stand up to be counted and the Lagos Judiciary is a proud torch bearer here, there will always be room for improvement.

Those Commissions will do better if the people who we entrust them to are not victims of desperate conditions that will lower their threshold to resist compromise.

Strengthening Legal and Institutional Framework for Corporate and Legal Governance in Nigeria
The failure of Enron, other big corporations and the recent Madoff Punzi Scheme has sent a clear message which has reverberated throughout the world that no company can be too big financially or otherwise to fail. A common thread that runs through failures in the corporate world is a weak governance culture, such as poor management, fraud, insider abuse or poor regulation and supervision.

Improving the corporate governance environment and thereby preventing or reducing corporate failures is in the interest of any economy not the least Nigeria . It requires a strong legal and institutional framework and above all advocacy to promote an enduring culture.

We have had challenges with corporate failures and have notably responded to these challenges. The evolution of existing regime of legal and institutional framework to promote an enduring culture of corporate governance can be traced to the bank failures of the early1990s starting with the Banks and Other Financial Institutions Act 1991. Bank failures leading to the recent consolidation of banks also re-echoed the need to continue to improve the corporate governance environment in Nigeria .

It is therefore not surprising that responses to corporate governance issues have tended to focus on the banking sector and public corporations. We have successfully moved away from a situation where father and son are chairman and director of publicly quoted companies entrusted with billions of shareholders/depositors fund.

The 1990s witnessed the enactment of Laws (the Companies and Allied Matters Act, Failed Banks (Recovery of Debt) and Financial Malpractices in Banks Act, the Investment and Securities Act, the Insurance Act etc) and the establishment of regulatory institutions to enforce corporate governance ethics and standards. In addition to the regulatory powers of the• Central Bank of Nigeria, this period saw the emergence of the Corporate Affairs Commission, the Securities and Exchange Commission, and the National Insurance Commission amongst others.

Furthermore the Securities and Exchange Commission adopted a Code Corporate Governance in Nigeria in 2003 for public quoted companies and all other companies with multiple stakeholders registered in Nigeria . The Code addresses three areas of corporate governance: the board of directors, the shareholders and audit committee.

In March 2006 the Central Bank of Nigeria adopted a Code of Corporate Governance titled "Code of Corporate Governance for Banks in Nigeria Post Consolidation". The Code identified: the need for a new Code for Corporate Governance of Banks in Nigeria, weaknesses in corporate Governance of Banks in Nigeria; challenges of Corporate Governance for Banks Post Consolidation and prescribes a Code of Best Practices on Corporate Governance of Banks.

The case for continuity regulations and review of codes of corporate governance for public and private companies and Non-Governmental organizations cannot be strongly made.

In my opinion we can further strengthen the legal and institutional framework for corporate governance by a combination of the following options amongst others:
• building the capacity of existing agencies and institutions to enforce existing regulatory and statutory provisions;

• the agencies and institutions involved in the monitoring and enforcement of corporate governance standards should share information, co-ordinate their activities and ensure that early warning signals of corporate failures are detected to enable authorities to take appropriate remedial actions to prevent corporate failures;

• the Executive arm of Government at the Federal level saddled with constitutional responsibility to enforce these laws should hold the regulatory agencies and institutions accountable for failure to perform their regulatory and statutory functions;

• the Legislative arm Government at the Federal level should discharge its legislative oversight function and exercise its investigative powers to examine cases of failure by regulatory institutions to discharge their statutory regulatory functions and take appropriate actions;

• Some gaps which have been identified in existing statutory framework should be plugged;

• the reforms in the administration of justice should be strengthened to improve the speed and shorten the time it takes to decide judicial proceedings arising out of the statutes that provides standards to promote corporate governance. Judicial remedies provided by the Companies and Allied Matters Act 1990 for members of a company to exercise some control and direct the affairs of accompany possess some potential as an instrument to promote corporate governance.

Tapping into Nigeria 's Human Resources Potential
Our human resource must be seen for what it really is, our greatest asset. Appropriate investments in its quality such as its health, skill level, social protection level will yield bountiful rewards in national development.

A population size of over 140 million people is a vast store, not only of human development capacity, but also of a virile market for the exchange of goods and services. It is no longer debatable that the Nigerian can competently hold his own against the nationals of any other country if given the same opportunity. Millions of Nigerians who refused to compromise themselves in the face of desperate conditions, whether as doctors, nurses, engineers, lawyers, sportsmen have acquitted themselves very creditably in their countries of temporary exile.

At this moment when there is a lot of expectation and anticipation about Africa and Nigeria , the homeward journey back from exile cannot start too soon enough. Indeed, in Lagos where the public work force and the populace have embraced a common vision for good, to change what they do not accept, I can confirm that the homeward journey has started.

Many Nigerians are already returning home, either to join us in the public sector or start their own businesses. I can only add that as they come back, they bring back with them, not only the skills and the exposure they have acquired but also the money they have earned or taken out, back into this economy, to increase its liquidity in order to fund the economy to deliver on all the infrastructure needs that are required to propel it to its true potentials.

Distinguished ladies and gentlemen, I thank you for the attention, but believe me, I have never been more confident that this dream is achievable. I am certain that it is possible and within our reach.

Thank you for listening.

Eko o ni baje o!

Babatunde Raji Fashola, SAN
Governor of Lagos State