Globally, regulations are a veritable tool of economic reform and their roles as drivers and stabilizers of growth came to the fore of global debate in the aftermath of the collapse of giant corporations such as Enron in 2001 and Lehman Brothers in 2008. Before these institutions filed for bankruptcy, they were among such giant entities popularly tagged as “too big to fail”. The global economic meltdown and financial crises which followed these corporate failures had necessitated the onslaught of various forms of policy and system reforms across the globe, and helped elevate regulations and corporate governance to universal norms.
Coming home, Nigeria’s need for functional regulatory frameworks that would safeguard the economy against systemic failure became imperative in the midst of widespread distress in the banking sector, financial reporting irregularities in corporate entities as well as corruption witnessed in government agencies in the past and contemporary times.
But regulations too have been found to be capable of constituting a clog to economic progress, where they are not well-thought-out or when wrongly applied. In these cases, they strangulate rather than support growth of the economy.
This article makes a strong case for effective regulatory regimes in Nigeria and analyses some of the instances where the policies and rules laid down by regulators are impeding the day to day ease of doing business in the country. In order not to kill the economic geese laying the golden eggs for Nigeria, regulations, in addition to safeguarding the economy, should incentivize investments and boost investors’ confidence. In this article, we will seek to examine a few practical challenges and also make recommendations on the policy reforms needed to assuage some of the pains which investors and business owners are facing as a result of inconsistent and overlapping rules, imposed by regulators.
REGISTERING BUSINESS ENTITIES
One of the policy reforms that have often been recommended to government from various quarters, on how to drive healthy economic competitiveness, is the streamlining of the processes for registering or incorporating business entities in Nigeria. Currently, the inconsistency and opaqueness of some of the rules and practices regulating the setting up of businesses, diminish the quality of legal and regulatory advice being proffered by professionals who represent both Nigerian and foreign investors in the formation of such businesses; thereby leading to the unintended and quite disheartening consequence of a decline in the volume of private sector participation in the economy.
The principal law governing the registration of companies and other business entities in Nigeria is the Companies and Allied Matters Act (“CAMA”), (Cap. C20, Laws of the Federation of Nigeria (“LFN”), 2004). Where a lacuna or any substantial insufficiency in the law is occasioned by contingencies or the prevailing circumstances in the business sector of the economy, the Minister of Trade is empowered to make regulations filling the gap; and this informed The Companies Regulation 2012 which was made pursuant to sections 16, 585 and 609 of the CAMA. The Corporate Affairs Commission (“CAC”) is established under section 1 of the CAMA and empowered under section 7 thereof to, among other functions, regulate and supervise the formation, incorporation, registration, management, and winding up of companies under, or in pursuance of, the CAMA and to undertake such other activities as are necessary or expedient for giving full effect to the provisions therein.
