Victor E. Ibharalu is the principal partner of a Lagos-based law firm, V.E. Ibharalu & Co., a firm engaged principally in commercial practice, and an expert in corporate governance. He sits on the Board of a number of multi-national companies in Nigeria and a Trustee of the Duke of Edinburgh Programme in Nigeria. In this interview with NATHANIEL AKHIGBE, he shares his thoughts on ease of doing business in Nigeria, multiple-taxation, casualisation of workers, among other sundry issues. Excerpt:
Sir, there is this rhetoric about ease of doing business in Nigeria. It appears to mean different things to different people. Give us your business and legal perspective of it?
I will talk about it from two perspectives: from the legal point of it, the ease of doing business starts from legal framework. There has to be legal framework, some of which the Federal Government has been trying to put in place. For example, you will find out that there has been reorganisation in the Corporate Affairs Commission (CAC), which is a starting point for any business concern in Nigeria; by simplifying the process of business registration; also simplifying the process of obtaining visa to come into the country to do business. Now, recently, the FG has liberalised the process of obtaining visas for those seeking to come into Nigeria for business purposes. Foreign investors now get visas at the point of entry as against the old practice of applying for same in the country of origin which usually takes weeks. For me, it is a major step in ease of doing business and one can only imagine the number of prospects who may have taken advantage of this new Federal Government initiative. This is commendable and thoughtful of this administration. Having said that, it is also imperative to say that ease of doing business in Nigeria should not just stop at the steps stated above. For me, the best thing the Federal Government should do to actually ease the process of doing business is to fix the power problem. This is central and should be the focal point. I bait you, if we fix the power problem, we would have solved 70-80 percent of the process.
The second part is that to the ordinary man, ease of doing business might mean something different to him. For him, ease of doing business is to just enable someone carry one’s goods from one place to the other. But when you talk of ease of doing business, government is actually focused on direct foreign investors from whom government wants to get a lot of in -flows. This should not be the case. The Federal Government should put in place measures that will make the business environment conducive for both local and foreign investors.
Before the Acting President signed some Executive Orders to ease business process in the country; in what ways, in your views, had the system in place jeopardised Nigeria’s chances in terms of wealth creation?
Quite a lot. For example, the Corporate Affairs Commission (CAC).Yes, let us start from there because that is the foundation of starting a business relationship in Nigeria. Before now, CAC was not even online in the proper sense. Everything was done manually. Applying to confirm a business name was like waiting forever. It could take up to a week or two just to confirm a name. Then the number of documents you are expected to put together just to register a company was quite a burden. This was contrary to what obtains in civilized climes where one can register a business name within 24 hours. Also we need to understand our colonial history where it appears the more the amount of documents the better. In fact, it was a pain in the neck. But today, the story is different. The number of documents required to register a business name have been greatly streamlined. It is not perfect yet as there are still some issues with the process. It is work in progress and I think we will get there someday.
Sincerely, I really wish the Federal Government could in the same vain sign some Executive orders in the area of power that will provide the needed tonic for 24-hour power supply.
The Companies and Allied Matters Act is the major law governing businesses in Nigeria. Can we have an overview of the document. Are there sections you feel are due for amendment?
Well, I think there is no law that is ever promulgated by any parliament that would contain all provisions to take care of all situations and that is why you continue to have amendments to the Acts and not just the Companies and Allied Matters Act. So, if the law itself is adequate there would be no need for amendments. Giving an overview of the law as it is currently, one can only wonder whether it accommodates all that is needed to guide businesses in Nigeria today. I will say no, otherwise, there would not have been any need for the 2004 amendments. As we relate to the business world, new opportunities will be thrown up with new ideas and these will need to be documented by way of amendments to the relevant Act. The Act as it is currently, I will say, is serving its purpose. It remains work in progress.
I understand that the Ministry of Labour and Productivity has a part to play in Nigeria’s business environment in terms of law compliance monitoring. Do you see the ministry actively playing its role in the interest of both the government and the business community?
The Ministry of Labour has a lot to do with monitoring what goes on in the work environment. But there is a problem. Before the recent amendment of the Workers Compensation Act (WCA), I have always advocated that the Act, as it was, worked great injustice to the workers in Nigeria. You look at the law; the clauses guiding compensation for injuries sustained by workmen during the work hours; I have always maintained the position that, that law is the most unfair instrument against the workers in this country. But in 2010, it was reviewed and now called the Employee’s Compensation Act. I think they did some panel-beating but we are not there yet. Now under the said amendment, an attempt was made to accommodate casual workers going by the definition of who is ‘an employee’. Under the old Act, compensation for injuries sustained was hardly extended to employees considered as casuals. Rather, they sought relief under the common law duty of care. However, the evil of casualisation is still staring us in our faces. That is the way the system is run and there is nothing the Ministry can do about it. The Ministry of Labour might be shouting to the high heavens, there is nothing they are doing about it.
Why?
Now you find a situation where for example, banks outsourced workers. You find a lot of bank workers without the bank’s employment letters. The question then is why? But this is the reality. This is true about what is going on today. Jobs are outsourced simply to deny the employees a right to retirement benefits. But meanwhile, you are working for bank A, the employee is holding a letter of employment from ABC Nigeria Limited. So what has the Ministry of Labour done and what do you think the Ministry can really do. It is a general problem. If anyone tells you that the Ministry is on top of the matter, you know this is not true. The Ministry is not on top of anything. I don’t know what their handicap may be; I don’t know how to describe what their problem is either. Today, casualisation is still ongoing and in fact, it is the order of the day.
Are there mechanisms that you are aware of, through which those workers whose rights have been violated by their employers can seek redress?
Well. They have their unions. Most companies, most industrial groups are all unionised and they also have what they call collective agreement with their respective employers. From experience, most of these things are captured under the collective agreement which they have with their employers. So, when something happens, your union should be your first source of help. Whether this is the case is a different thing altogether. Also, some state governors have established the Office of Public Defenders to assist such employees to seek redress. I know as a fact that the Lagos State Office of the Public Defender has been very active in this regard. A lot of matters are being handled by the Lagos office of Public Defender. I must commend the Lagos State government for this initiative.
Another term familiar within the Nigerian business circle is the issue of “multiple-taxation” and for which companies who left Nigeria for neighboring countries blamed their decision on. What has been the experience of your clients’ on this matter?
I do not think any company could have relocated to the neigbouring countries simply because of the issue of multiple taxations. It could be for some other reasons. But this is not to say that multiple-taxation is not an evil that had greatly and negatively imparted the process of doing business in Nigeria. I wish to note that the greatest offenders are the local government councils. The Lagos state government for example, tried to harmonize some of these things, but the evil will not just go away. The local governments collect all sorts under different names. Multiple-taxation is still ongoing. A system where there is no standardisation, this is bound to happen. The taxes the business communities are paying are excessive and are becoming oppressive.
But the Federal Government recently started a campaign to rake in more taxes. The Acting President and Minister of Finance said that corporate Nigerians are not paying enough tax. Do you agree with their position?
I agree with them. Sincerely, we don’t pay taxes in this country and maybe it is also the reason why people cannot ask question when things are going wrong in the system. A lot of companies are not paying taxes. If you don’t pay taxes which are statutory, what moral right would then have to question how money is being spent by the government. Sincerely, a lot of people do not pay taxes. If the Nigerian government can properly managed its tax system and work towards collecting up to 80 percent of actual tax due to the government, oil might just be playing a secondary role.
You just finished speaking about multiple-taxation, now you are saying that government is not getting enough from taxes. Is this not a contradiction?
No. Don’t get me wrong. The issue of multiple-taxation is a different matter. Every tier of government has a particular tax it ought to collect. For example, company tax is collected by the FG by law, while personal income tax is collected by the state. VAT is collected by the FG by law, and shared with the other tiers of government. When you talk about multiple-taxation: if the government is saying company must pay tax properly, is not multiple-taxation. That is a statutory tax a company ought to pay from its operation.
So what then is multiple-taxation?
Multiple-taxation is when there is a tax like VAT for example, where is the value coming from? You paid for an item, the state government creates that same tax with a different name that is where double taxation comes from. Or the state government is collecting a particular tax, and the local government is coming with it in a different name to collect the same tax. But it is obvious to you as a businessman that the taxes are the same; they have a similar character. That is multiple-taxation. You will observe that each time the Joint Tax Board hold their meeting, they talk about harmonising the tax regime between the tiers of government. Why do you think this is so if not the problem re-occurring problem of double taxation. There is a need for continues public enlightenment on what is payable and by who, at all times. But as it is now, it is still a free market. That I can tell you.
In your experience in handling clients, have you found situations where jobs that Nigerians can do are given to expatriates?
Sincerely, I think that is a major problem. If we start discussing that we may not finish today. It is a major problem. The word ‘expert’ presupposes certain skills not immediately available in Nigeria. It is not a case of you coming into Nigeria to do an unskilled job. That was not the whole essence of getting expatriate quota positions for a company. The idea was a transfer of technology. But that is not the case today. They are all here doing all menial jobs which Nigerians ordinarily would have been doing. But again, if you interact with them, you may have cause to also sympathise with them. The question is: having invested millions of dollars in Nigeria, will it be wise to leave such investments in the hands of these strangers? That is probably why they bring in their people and put them in positions that ordinarily would have been occupied by Nigerians. I think they do that on the strength of trust. So, the essence of the expatriate quota is defeated. It has been so for a long time. Again, how the Immigration department is dealing with it is left to be imagined.
By the Companies and Allied Matters Act, the board of every business organisation in Nigeria is supposed to sit for an Annual General Meeting. In your experience, how effective has the CAC been in monitoring this?
Well, I don’t know whether the Corporate affairs Commission has effectively played that role to ensure companies hold their AGMs or not. I think the members of the company do have that greater duty to ensure compliance with the law. The CAC will be concerned with filling your returns after holding such statutory meetings. But you find CAC struggling with a lot of companies that they are not complying with this process.
Should they struggle when there are laws?
They struggle. You see, it is like going into the market to shop. Where do you start from? A lot of companies are portfolio companies. They are not really functional companies. A lot of limited liability companies are registered but are not doing business. That is the truth. But for the standardised companies, the major companies that are actually doing business, they are holding their statutory AGM meetings as required by thelaw.
Shouldn’t the monitoring government agency have a mechanism of knowing what is going on in these companies?
I do not think CAC itself is properly equipped in terms of manpower to carry out these functions. I sincerely think that the CAC is overwhelmed. I must be sincere with you. They recently just returned from a strike called by its workers. We are talking about ease of doing business and the workers of CAC are going on strike. How do you put that together?
So, what does that say about the CAC when it cannot take care of its own workers?
Well, that is the challenge of a developing economy. I would have suggested that a body like the CAC should not be allowed to unionise. Those are essential services to the business environment. Did they go on strike for a whole week or more? Do you know the revenue lost to the government for that period and the embarrassment to the country and the business community? They should be under a different welfare scheme to avoid such a situation in the future. If the company registry of a country is closed down for a whole week, something is obviously wrong with the system.
The Land Use Act places the lands in urban areas in the hands of state governments. How has the country fared with this policy in terms of foreign investors who have interest in Nigeria struggling for land here and there?
I think is both on the positive side and the negative side. I will start with the negative side. The negative side of the Act is that it has disposed of the original settlers of their communal lands. It has now made original landowners lessees in their own communities. But on the positive side, I sincerely believe that it has helped to document the process of land acquisition for both personal and industrial purposes. This I will say has greatly enhanced the ease of doing business at least in the urban areas. If you take a city like Lagos and consider the activities of land grabbers and the recent efforts by the government in this regard, you will appreciate the importance of the Act. The Foreign investors, for example, will prefer to operate under a structured system of land acquisition which provides for certainty like the Act itself. My grouse with the Act is that while it vested all land in the government, it did not make provision for compensating the owners of land so acquired. This is myonly problem with the Land Use Act.
Now you mentioned compensation. You are familiar with the Maroko issue, people who were driven from their homes in 1990 are still crying for compensation as most of them still remain homeless in Ilasan housing estate where they are scattered all over. In your understanding, how has government indeed been sincere in compensating people who are driven away from their ancestral homes?
The government has not really been sincere at all in this regard. The problem of the poor is that the government does not have a place for them in the scheme of things. There is no room to say ‘oh, this is where we have to accommodate the poor’. They just treat them like an instrument of development. The people are allowed to occupy a place say for ten or twenty years, having put in their resources to develop the place, then government wakes up one day and say ‘this is government property, you must vacate with or without notice’ period. Fine, let’s assume that government has the power to do that in the interest of the public, but should those people occupying the land today be thrown into the cold? My answer is no. There should be the system of compensating these people. If they cannot be resettled hundred percent, compensate them monetarily and everyone will find his own level. That’s the truth. The government has not been fair to these communities. In my opinion, the Act should be amended to clearly state how much will be payable by government per square meter of land acquired from original land owners.
