Sunday, 15 November 2015


Dr. Jimoh Ibrahim, GMD, Energy Group
The imposition of one trillion naira fine (over five billion dollars) on the Nigeria subsidiary of commu­nication giant, MTN, has been a source of concern to the global community since the news broke. There have been arguments for and against, either justify­ing the need for such action or insisting that the fine was clearly a political issue and definitely not good for business.

There is no doubting the fact that either side of the argument is good for consideration and will remain a lesson to both regulators and operators. Now, what lessons can be learnt from this to prevent future occurrence?

Regrettably, business decisions and foreign direct investment will not wait for the resolution of the crisis. Some investors may have already made up their minds not to touch investments that have to do with Nigeria or continue to invest in Nigeria.

Some investors may have decided to withdraw recognition and respect for institutions that should protect their investments in Nigeria, especially local laws. They may have resolved to protect themselves henceforth by subjecting disputes arising from their investments to international arbitration. Unfortunately, investment is not a judicial matter!

The argument has always been made that international organisations should respect the laws and institutions in any country where they operate if they want to be profitable and sustainable. And no nation operates without laws.

The Nigerian government has spent a lot of resources in time past to make the business environment friendly and attractive to foreign companies. Such government efforts include amendment of local laws to give investors the opportunity to be on equal footing with local investors, or in some cases, allow foreign companies to have more competitive advantage than the local companies. Consider the Foreign Investment Protection Act.

The CEO of a foreign company is more likely to see the president of Nigeria more easily and faster than the CEO of a local Nigerian company. In his days, President Jonathan would have readily seen the CEO of MTN before seeing a Minister or indeed the CEO of, for instance, Globacom. To some people in government, only foreign companies “know how to do business,” as they are the only ones who come bearing the almighty dollar. It’s nice to see that the dollar can also come with problems that can actually consume the naira, especially if security is at issue.

The matter at hand is very simple. MTN violated the laws and regulations put in place by the Nigerian institution that is, by law, mandated to regulate the communication industry by not deleting the telephone numbers of subscribers that are not registered in their system.

The regulating agency directed that unregistered subscribers should not have access to the telephone network so as to be able to monitor and enhance the integrity of calls and callers, as well as ensure that there is no security breach. This type of regulation is normal in a developing country such as Nigeria, where security is an issue. And non-compliance may be interpreted to mean that the company does not want to comply with a regulation that is likely to cause depletion in its profitability. Regrettably, no nation will compromise her security for any company’s profitability.

It was President Obama who first argued that Africa must encourage institutions and build them, rather than individuals! He was heartily applauded when he said these famous words in Ghana. But what was Obama thinking? Did he conveniently forget that individuals build institutions? In the United States today, many successful institutions are now in the hands of the fourth or fifth generations of their founders. If individuals are not built, how will institutions be built?

Obama could never have argued in this manner when he was our teacher at the law faculty in Harvard. Did Obama consider the fact that institutions, by the level of their resources, can destroy a developing country such as Nigeria? How many women were killed in India when the government of that country was promoting foreign investor, GE Health Care’s Ultrasound machine?

The Government of India was very excited to promote the ultrasound compact machine at the expense of indigenous health solutions when GE said they had developed a machine that will give relief to millions who suffer from painful or potentially life threatening diseases, such as breast cancer, uterine fibroids, cardiac diseases and gynecological disorders. But pregnant women in India used the machine to detect the sex of their fetuses. And once it was discovered that the foetus was female, the pregnancy was promptly aborted.

There is an inordinate preference for male children in India because of the huge dowry parents have to pay to the families of prospective grooms to get their female children married. The ordinarily well-intentioned ultrasound machine therefore became a means of avoiding the ‘misfortune’ of having a baby girl in India.

In 1998, the government of India responded to the allegation that GE’s ultrasound machines were being misused to facilitate female feticide in India by enacting the Pre-Natal Diagnostic Techniques (PNTD) Act, a law that prohibits any person or body from using equipments or techniques for the purpose of detecting the sex of an unborn child. What then happened to GE’s investment in India?

The Western argument of creating and assuring strong institutions for business development in developing countries is made to favour the imperative of such institutions to regulate business. If the institutions that protect their investments are strong, it will communicate strong signals to foreign investors that they can do business in Nigeria. This requirement is necessary in ensuring the independence of such institutions as regulators, the judiciary and the parliament. Unfortunately, the West did not tell us when a country will be deemed mature enough to create and protect strong institutions.

The fallacy of the argument of strong regulations in developing countries is better explained by a recent development in China. China is set to recruit more judges in addition to her 200,000 judges, with the Supreme Court alone having 340 judges! No one will say that because judges are corrupt, we should sack all of them and start all over again. It takes time to build institutions and Nigeria cannot be holier than her capacity for holiness.

The government of China largely owns the enterprise and it is a case of regulating themselves ! China today boasts a very strong economy. Indeed, the Asian giant is about to take over the world, with an impressive reserve of over four trillion dollars in cash as at yesterday!

We gain nothing by regulating successful companies that we don’t have the capacity to develop out of business. The dilemma of the five billion dollar fine imposed on MTN can be resolved, depending on the strategy of MTN. A lesson to learn for companies similar to MTN is to take Corporate Social Responsibility seriously. This is probably why it appears that Nigerians are not supporting MTN against the fine. Nigerians ought to have enjoyed more Corporate Social Responsibility from MTN. That would probably have created an emotional and moral burden for the regulator in deciding what fine to impose and how to mitigate those fines. The need to invest in the eco system is urgent!

In 2006, American company, Google, entered into the Chinese market. After investing several billions of dollars in China, Google exited China in 2010 simply because the Chinese Government shut her gateway against Google! In India, GE Healthcare claimed they had found a new market to solve some challenging health problems. But after investing billions of dollars, the civil society of India raised the alarm that Indians were using the ultrasound machines to reduce their female population. GE embarked on serious Corporate Social Responsibility to prevent what would have become a serious integrity issue for the global company.

The options for MTN are quite straightforward. The communication giant can either go the Google way in China or take the GE Health Care option in India. Wishing MTN the best of luck!

N.B: To get a compilation of lectures delivered by Dr. Jimoh Ibrahim at different places on wealth creation, especially how he conquered poverty at became a multibillionaire at a record age of 36, click on the link below: