Impact of Arbitrary Regulatory Fees on Nigeria’s Business Environment

Nigeria’s business environment faces increasing challenges due to heightened regulatory fees imposed by the Financial Reporting Council Amendment Act 2023. Smaller enterprises are disproportionately affected while larger corporations are less burdened. The policy exacerbates existing economic conditions, leading to potential business closures and further investor disillusionment. Calls for the suspension of the new hikes and the introduction of supportive measures are paramount for economic resilience.

The business community in Nigeria is facing unprecedented challenges in a climate characterized by rising operational costs, excessive taxation, inconsistent policies, and declining investor confidence. The recent implementation of the Financial Reporting Council Amendment Act 2023 has exacerbated this situation by significantly increasing regulatory fees for private firms, ranging from N1 million to potentially hundreds of millions based on turnover.

In stark contrast, publicly listed companies, which generally possess greater financial resources, have their fees capped at N25 million. This policy appears inequitable, disproportionately impacting smaller businesses while favoring larger corporations, thereby exemplifying regulatory overreach that threatens productivity and economic resilience.

Taiwo Oyedele, chair of the Presidential Tax Reforms Committee, highlighted the existence of over 200 unofficial taxes in Nigeria. Such an environment forces struggling enterprises to confront additional pressures, resulting in potential downsizing or closures. The Manufacturers Association of Nigeria reported that 767 manufacturing companies ceased operations in 2023, with inventory of unsold goods swelling to N1.4 trillion in the latter half of 2024.

Segun Ajayi-Kadir, the Director-General of the Manufacturers Association of Nigeria, expressed concern over the closure of 60 percent of manufacturing enterprises in the North-East, largely due to unfavorable operating conditions. This contrasts sharply with the mandate of the Financial Reporting Council of Nigeria (FRCN), which is intended to promote compliance with accounting and financial reporting standards rather than generate revenue through exorbitant levies.

Adewale Smatt-Oyerinde, Director-General of the Nigeria Employers’ Consultative Association, criticized the policy as contradictory to the Federal Government’s purported “Ease of Doing Business” initiative, which aims to alleviate multiple taxation.

He cautioned that many businesses, particularly in manufacturing and essential services, operate with minimal profit margins; therefore, imposing arbitrary fees could lead to layoffs and business failures, ultimately harming the economy. While Trade Minister Jumoke Oduwole announced efforts to attract over $50 billion in foreign investments under the Bola Tinubu administration, such initiatives could be thwarted by counterproductive regulations.

Investors favor environments that offer stability, predictability, and fairness; arbitrary levies without consultation undermine Nigeria’s competitiveness. This situation signals a broader trend in which businesses bear the brunt of regulatory burden, and the Federal Government must prioritize business sustainability over revenue generation.

In light of these issues, it is imperative that the new levies be suspended and the previous N1 million fee structure reinstated, until a comprehensive review can be conducted. Legislative amendments to the FRC Act should also be pursued to eliminate potential abuses.

Finally, instead of stifling business growth, the government is urged to introduce incentives, such as tariff reductions on essential industrial inputs, tax holidays for struggling businesses, and streamlined regulations, to promote economic activity more effectively than arbitrary levies can.

In conclusion, Nigeria’s business environment is under severe strain due to the recent regulatory changes imposed by the Financial Reporting Council. The significant increase in levies disproportionately affects smaller enterprises while favoring larger companies, raising concerns regarding equity and the long-term sustainability of businesses. To foster a thriving economy, it is crucial for the government to support businesses through incentives and by maintaining a regulatory framework that promotes stability and fairness, rather than imposing arbitrary fees.

Original Source: punchng.com