MTN, Regulations and Economic development

In October last year MTN Nigeria was slammed with a $5.2 billion fine by the Nigerian Communications Commission (NCC). This was later reduced by 25% to $3.9billion. The matter is in court and yesterday it was postponed to allow for out of court settlement.There have been many commentaries on this issue. Many have voiced their opinions for and against it. I welcome diverse opinions on any issue but was surprised to read some arguments against the fine insinuating that NCC erred on the matter and that it will scare investors from Nigeria away. How laughable.

A bit of history is needed here to help us better understand how we got here. In August 2014 the four GSM operators were hit with a total fine of N120.4 million for not deactivating unregistered SIM cards. Of this fine MTN got N102.2 million, Globacom N7.4 million, Etisalat N7 million and Airtel N3.8million. According to NCC the deadline for a new directive was disobeyed by MTN hence the new fine of $5.2 billion.

Now, it is fair to say this is a very humongous penalty. Some have even suggested that it’s the biggest in the history of telecommunication globally. I cannot confirm that, but what they failed to do was find out what the regulations in those countries says about the violations for which they were fined for.

In MTN’s case, the NCC acted according to law. It acted justly. Section 20(1) of the Registration of Telephone Subscribers Regulation of 2011 states “Any licensee who activates or fails to deactivate a subscription medium in violation of any provision of these regulations is liable to penalty of N200, 000 for each of the unregistered but activated subscription medium”. According to NCC, MTN violated this regulation. Perhaps what the authors of this regulation didn’t foresee was that one of the telecom operators will default on 5.2million unregistered SIM cards. MTN’s problem was with the volume of unregistered SIM cards and not NCC.

Any Nigerian who wishes the country well should agree that a violation of any of our laws or regulation should not go unpunished. We should not stand by and watch our rules and regulations of engagement being flouted by any business or individual.

It is possible that MTN violated or called NCC’s bluff because they know the terrain, they know how to deal with NCC. What they didn’t factor in was that there is a new government in town headed by a sheriff who clearly has no favourite and is acclaimed for his ‘I belong to everybody and belong to nobody’ quote. He has given directive to all regulators to do their job as specified by law.

In far away Toronto, Canada’s foremost business newspaper Globe and the Mail described the fine thus “Seven months after a dramatic election that toppled Nigeria’s government, the world is still waiting for a clear economic policy to emerge in Africa’s most populous country. But its shocking decision to demand a $5.2-billion (U.S.) fine from a cellphone company is offering some early hints of change.” A hint of change indeed and a decisive one if you ask me that lends credence to the President’s acclaimed mission of not having the business as usual episode that muddled the country into a state of pitiful economic crisis.

Prior to this, MTN has also been found not to comply with some of NCC rules. Outside Nigeria MTN was recently slapped with a Ugandan court order to pay $662,000 in damages for anti-competitive behavior.

Regulation is very necessary in a competitive, dynamic economy rooted in the rule of law. Yet it must be smart, balanced and implemented holistically with the health of the economy in mind. A strong, well designed rule sends a signal to the private sector and can be a crucial driver of innovation.

What some of those who argued against the fine probably missed is that regulation of any form is a double edge sword. It protects the rule of law and can protect the public from the negative externalities of private economic activities. However, an excessive or poorly designed regulation can slow economic activity.

One analyst referred to MTN as the golden goose that lays the golden eggs because of its contribution to the country’s tax revenue and so should be left alone. It’s like saying Messi and Ronaldo are good players who attract more spectators and good ratings and so should be left alone after violating a soccer game rule.

If there is anything to be learned from the MTN fine it is that NCC and its stakeholders need to do more collaboration and subject its regulations to more public scrutiny.Last year NAFDAC also imposed a N1 billion fine on Guinness Nigeria Plc for various clandestine violations of NAFDAC rules, regulations and enactments. A month earlier Stanbic IBTC holdings also suffered the same feat from Financial Reporting Council (FRC) when it was fined N1 billion over allegation of material misstatements in its accounts for 2013 and 2014

Regulation serves as an important leverage of state power alongside fiscal and monetary policy, which all plays vital roles in the shaping of any economy. Principally its aim is to guarantee regulations and regulatory structures are in the interest of the public.

Interestingly as evident in the economic activities of  the governments of Indonesia, South Korea, China amongst others, regulatory policies promoted through economic growth and developments leads  to structural reforms, liberalisation of  product market, international market openness and a less constricted business environment for innovation and entrepreneurship.Simultaneously, successful regulations assist in extenuating the challenges facing governments through, closing the loop between regulatory design and evaluation outcomes.

Emerging economies like Nigeria need effective regulations to support growth, investment innovation, market openness and uphold the rule of law. On the other hand a poor regulatory environment will ultimately undermine business competiveness and citizen’s trust in government and encourages corruption in public governance.

After reading the section of the regulations which NCC acted upon and based on the November 2, 2015 letter to NCC by MTN where it admitted infraction and pleaded for leniency I believe MTN acted in order in imposing the fine. It was in the interest of the public which has been at the receiving end of the security challenges that the country has been suffering.

The objective of every regulatory policy is to ensure that regulations are in public interest. The unregistered SIM card was a national security issue and so had to be dealt with in like manner. Earlier in the week, the President sent a strong signal during his visit to UAE asking businesses not to put profits above national interest.

The major argument raised by those who oppose the fine is that it will scare investors away. That’s not true. Rather it may serve as an encourager to future investors that our economic policies are measurable and well-articulated, because policies are not being made up as the economy pushes along.

There is no denying the fact that over bearing regulatory agencies with arbitrary fees can hinder investment. The fine imposed by NCC is not a cost of doing business and does not fall under any category of ease of doing business indicators or market entry cost for investors. It’s a fine for violation.The decision by NCC was not unpredictable, it was not harsh, and they only acted based on what was enshrined in an act drafted four years ago of which MTN was aware of.

Effective regulation can provide a strong support for meeting our economic challenges and social renewal. Conversely, ineffective regulation will slow recovery and inhibit growth. For Nigeria to build a vibrant economy based on rule of law and protection of its citizens all regulatory agencies must live up to their respective responsibilities.


About Olajide Olutuyi

Entrepreneur Social Entrepreneur. Calgary Flames fan. Calgary Stampeders fan. Supports conscious capitalism.Progressive conservative( supports sin taxes, low taxes and laissez-faire economy). Former rap fan. Now listens to gospel and country. Believes in volunteering and community service as agents of developmental change. A lot of my time goes into community service, reading, encouraging people and most importantly God’s business. Loves culture , business start-ups and politics of both my home and adopted countries. This is my blog. The opinions and thoughts in my article are mine and I make no mistakes for having them. You may also find articles, news or opinions of others that I agree with or love to keep. More information about my professional background and interests available on my LinkedIn page.
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