How SON, NAFDAC stall business growth in Nigeria – LCCI-CIPE’s study

For the organised pri­vate sector, the inter­vention of the Federal Government is very auspi­cious at this critical period to clarify the roles of its agen­cies whose activities have been identified to be stalling the growth of business in the country.

Its recent study has revealed that regulatory challenges and their attendant costs have been the major factors stifling healthy growth of businesses across several sectors of the Nigerian economy.

This revelation was part of the findings of a research conducted by the Centre of International Private Enter­prise (CIPE) in collaboration with the Lagos State Cham­ber of Commerce and Indus­try (LCCI) on the “Impact of Regulatory Agencies on Busi­nesses.”

The report had revealed that beyond infrastructure shortcomings, infractions by most of the regulatory agencies including Standards Or­ganisation of Nigeria (SON) and National Agency for Food and Drugs Administration Control (NAFDAC), have forced some businesses either to close shop, relocate to other countries or move into the in­formal sector.

It noted that regulatory agencies in Nigeria continued to be riddled with red tapism and bureaucracy, resulting in a complex web of unclear and frequently-changing regula­tions, adding that such an en­vironment not only makes it difficult for entrepreneurs to do business but also allows for arbitrary and inconsistent en­forcement of laws and regula­tions by government agencies.

“In a bid to avoid the red tapism, private sector op­erators often find themselves compromising on standards forcing most companies to suffer higher/unnecessary costs, inefficiency and un­friendly business climate.

“For small and medium-sized enterprises, the effects of arbitrary regulatory policies  are more profound because of their inherent vulnerability,” the study stated.

On the modus of the study, LCCI explained that being a leading voice for the private sector in Nigeria, it took it upon itself to investigate and create a platform for engage­ment with key public regula­tory agencies especially SON and NAFDAC.

According to the report, as the two agencies are the most famous regulators in the Nige­rian manufacturing, industrial and allied sectors, it becomes more important as their regu­latory mandate is broad and largely complimentary es­pecially in the food, drugs, drinks, cosmetics and chemi­cal products subsectors.

Some of the problems identified by the study group include high rate of human interface between the agen­cies officials and businesses in the process of registration; arbitrary charges, fees and fines, and evidences of re­petitive inspection exercise by the agencies on claims of test failure (especially NAFDAC) whereas such claims are most­ly unverified.

The report also identified overlapping of functions and fight for supremacy among the agencies and high fre­quency of factory visit, stating that the study found that num­ber of inspection visits range from four to 10 times a year depending on the company’s production capacity and other factors.

regular visits is that the same quantity of product samples is collected by the agencies during each visit. The companies are compelled to pay inspection fee for each visit and take care of transpor­tation of the agency officials on each factory visit,” among others, it said.

Other faults identified by the study include the col­lection of excessive product samples; approval delays and absence of national standards, which make genuine import­ers and those with contraband goods to “cut corners” with the officials.

It added further that, “some companies induce the agency officials because they don’t want to pass through the rigour associated with pro­cessing documents. This is mostly fuelled by the need for quick approval of papers/per­mits to meet certain commer­cial deadlines or to circumvent inherent/artificial bottlenecks in the system.

“Sometimes, companies’ representatives go out of their way to tip the officials to save their jobs considering that a major regulatory query issued against the company may lead to the manager in charge being blamed or fired by the management for mishandling relationship management with the regulator.

“We also found that some importers may bring in many products but would lobby reg­ulatory officials to pay inspec­tion fee for only few of the products. Those that import contraband goods also do the same thing by “cutting their ways” with the officials.”

While proffering the way out, the study stated that any approach to fighting the ills must first address the institu­tional factors that allow in­fractions to occur and reduce/eliminate the incentives for business to participate.

It stated however that: “To start with, frameworks that will enhance the collabora­tion between SON and NAF­DAC’s regulatory and moni­toring functions will be very helpful to build trust and re­spect among the two agencies. More enhanced collaborations between the two agencies will certainly reduce unnecessary pressure on the businesses suf­fering from the age long silent battle for supremacy between SON and NAFDAC.”

The report also charged the management of the agencies to take the enforcement of rules against human interface by their officials very seri­ously.

It reasoned that high degree of human interface for regis­tration and obtaining permits remains even after the leader­ship of SON and NAFDAC have instituted reliable pro­cesses that eliminate/reduce human interface in their op­erations.