Why we made code of governance mandatory on telcos – NCC

 The Nigerian C o m m u n i c a t i o n s Commission [NCC] has said it made the code of corporate governance mandatory on telecom operating companies in the country to sustain the phenomenal success recorded in the industry and replicate the lessons learnt from other sectors that had gone through the “Boom and Bust Cycle”. The Chairman of NCC board, Senator Olabiyi Durojaiye, disclosed this at the weekend during the south-east zone of code of corporate governance workshop in Enugu, Enugu State. He said the commission transited from voluntary compliance of the code of corporate governance to a mandatory regime to save the industry from sudden collapse and preserve investments and jobs. He said: “After a robust engagement with stakeholders, the Commission formally announced the commencement of a mandatory phase of the corporate governance initiative for the industry with effect from November 1, 2016. In line with its best rule-making tradition, the Commission took into consideration reactions received during and after the stakeholders’ forum before the implementation of the mandatory compliance framework. “The central focus of the forum, which was on how to sustain the phenomenal success recorded in the industry and replicate the lessons learnt from other sectors that had gone through the “Boom and Bust Cycle”, could not have been more appropriate. The theme mirrored the collective aspirations of industry stakeholders to entrench corporate governance and sustainability principles, while promoting inter-generational equity in the conduct of telecoms business. “The mandatory compliance framework was introduced amidst a receding economy triggered off by a combination of factors such as falling oil prices, embarrassing public and private sector corruption, huge internal and external debts, weak income per capita/per head, excess of imports over exports resulting in adverse balance of trade and of international payment, huge expenses in combating and refurbishing Boko Haram damages in the North-East and infrastructural deficit and restiveness in the Niger Delta. By July 2016 inflationary pressures, spiked by successive negative growth in the Gross Domestic Product (GDP), effectively slipped the economy into recession. “ He said at the telecoms industry level, the picture was not any better. On the surface, the industry posted stellar performances and contributed significantly to Gross Domestic Product (GDP) well above N1.4 trillion per quarter in 2016 in the face of a receding economy. He said it also appeared insulated from shocks at the macro-economic level. “However, as Nigeria’s first Minister for Commerce and Industry, Alfred Chuckwu Nwapa, once remarked “You cannot be in a titling boat without being tilted”, a closer examination showed that the industry was dealing with gradual and steady decline in Year-on-Year Gross Earnings, Average Revenue Per User (ARPU), particularly in the voice segment of the market, occasioned by the ubiquitous and predatory new media (Over the Top (OTT) providers), poor Quality of Service indices, as well as rising debt/expenditure profile. All of these combined to foist an oppressive operating environment on industry players”, he said. Over the years, he said, the Commission had made remarkable progress in the technical regulation of the industry, but was also concerned about the absence of a formidable regime to guide the ethical conduct of its licensees across various market segments and value chain. According to him, the events of the recent past in the industry underscore the urgent need for stakeholders to implement the time-tested governance principles in the conduct of their businesses. The NCC chairman said as part of the Commission’s initiatives to assist licensees in this regard, it would commence monitoring activities in relation to the Code. He said: “In line with a carefully developed monitoring and compliance plan, effective last quarter in 2017, the Commission will intensify monitoring activities in relation to the Code. Furthermore, the Commission will periodically conduct stress tests on its licensees in order to ascertain their viability as going concerns under the extant laws of Nigeria. We note the wisdom in the proverb – “once bitten is twice shy”. We would not like to witness the folding up of any of our major telecoms service providers whom we regard as the geese that lay the golden eggs for our country. Also speaking at the workshop, the Executive Vice Chairman of NCC, Prof Umar Garuba Danbatta, said there is no doubt that the communications industry is pivotal to the sustainability of national economy and thus poised to provide the backbone on which our national future growth depend. “That being the case, the industry ought to lead in ways and means that will avail the con¿ dence needed to drive the level and volume of investment and capital that will make the difference in our economic and developmental fortune”, Prof Danbatta said. He said empirical evidence as found in a recent study in Singapore in 2016 (Corporate Governance Report 2016) show that contrary to the notion that good corporate governance could lead to increased operations cost, it was found that countries with good corporate governance culture attract and retain higher quality of investment and capital À ow and that indeed operations cost reduced in the medium to long term. He said adherence to good corporate governance creates a focus on value creation proposition that leads to sustainable growth. He said: “ The recent World Bank Report which disclose that Nigeria moved 24 points in the international ladder on that body’s index on ease of doing business corroborate this point. The deliberate efforts of the Federal Government under an initiative in that regard under the FGN’s Economic Recovery and Growth Plan (ERGP) geared towards creating transparent business investment environment which will be attractive to potential investors led to the initiative on ease of doing business framework released by the FGN Economic Team led by the Vice President. Efforts in that regards has in less than two years brought positive fruits. That positive trend has equally positively impacted FDI in that period. “Under the same ERGP framework, pervasive Broadband deployment along other ICT infrastructure were duly recognized as key elements for the targeted diversification of the economy beyond the current mono focus on oil and gas. “Given the current technological trend tending towards total disruption of the world economic order, Telecommunications and ICT have become key drivers for the attainment of the all the objectives as stated in the ERGP document. There is no sector of the economy for which Telecommunications and ICT have not become dependency, Mention could be made of health, social services, transportation, utilities, agriculture, commerce, education, entertainment, etc.” He said the foregoing speaks to the criticality and pivotal role of our sector to the overall attainment of our national developmental objectives, hence the need for the sector to lead in integrity, transparency, accountability and ethically, which are the values espoused and promoted by the principles of the code. He said in appreciation of the relevance of our sector to the attainment of those objectives, the NCC is committed to deliver regulatory excellence and facilitate operational efficiency, geared towards making the sector attractive to drive the level of investment and capital inflow needed. According to him, evaluation report of the state of the industry suggests that most challenges negatively affecting the health of operators in the sector are attributable to poor governance issues. “Only recently the House of Representatives of Nigeria at a Public Hearing convened to inquire into the health of the sector disclosed that the sector was owing about N143 billion in taxes to government. Without prejudice to the sanctity of the ball pack sum quoted, the fact that such huge sum could be owed say a lot about the standard of corporate governance in our sector. Better disclosure policy would in our opinion not allow such huge debt to accumulate. “Also, the regulator has been having serious issues with operators on the integrity of SIM registration data generated by operators and their agents under the SIM Registration Regulation which portends national security implications. These challenges emanate from the state of our corporate governance practices which this workshop and the code are intended to sensitize us about”, he said. The NCC, he said, through the code seeks strategic collaboration and partnership, as vehicle for building synergy and trust to boost investor con¿ dence through accountability and disclosure policies. Optimal compliance level could ultimately lead to sector players-self-regulation in due course. He said sustaining improvement in standards of international best practices would ensure that the sector is strongly positioned to play the facilitator or enabler role which it has come to represent in the contemporary world economic order. As technology trends emerge to disrupt traditional economic order the sector must leverage its strength to provide the safeguard needed to ride the storm of the disruption in a manner that the disruption is both innovative and creative, according to Prof Danbatta. “We encourage compliance as no serious corporate entity can claim non-adherence to international best practices or non-adherence to ethical practices. Mindful of compliance cost the code in its principles has categorized companies within the sector to which the code is applicable”, he said. He said though not a prime mover for compliance and enforcement of the code, a regime of sanctions has been put in place to facilitate compliance. “A regime of reward and recognition for excellence has equally been developed to recognize full adoption and