Enforcing Corporate Governance Code in Telecoms Sector

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The renewed sensitisation campaign on the adoption of the mandatory corporate governance code in the telecoms industry, will drive the growth in the sector, writes Emma Okonji

Convinced that strict adherence to the rules that are enshrined in the Code of Corporate Governance, which was introduced in the telecoms sector in 2014, would address all grey areas affecting the health of operators in the sector, the Nigerian Communications Commission (NCC), last year, decided to make the code a mandatory baseline for all operators.

In order to achieve this, the commission, last week, commenced the enforcement of the mandatory code, through a sensitisation campaign at the zonal level, beginning with the South-east zone.

Introducing the code
Before 2014, each telecoms operating company had its own traditional corporate governance code that guides the daily operations of its business. But most times the code was either not adhered to or is restructured intermittently in line with the interest of the business owners and at the detriment of its staff, especially the non-management staff who are not on the board of directors of the telecoms company.

However, in order to reflect the international flavours of the country’s telecoms industry, the telecoms regulator, in 2014, after wide-industry consultation, came up with a standard code of corporate governance for the telecoms sector, and made it a voluntary code that could be applied side-by-side with the existing traditional code of the telecoms companies.
Two years after the voluntary code was introduced, NCC saw the need to make the code a compulsory baseline for all telecoms operators. But unsatisfied with the implementation level, despite the reward and punishment strings attached to the compulsory code, NCC, last week, commenced a full sensitisation campaign at the zonal level, beginning from the South-east of Nigeria, Enugu precisely.

Reason for mandatory compliance

Giving reasons for introducing the mandatory code of corporate governance in the telecoms sector, and the need for the sensitisation campaign, beginning with the South-east, the Chairman, Governing Board, NCC, Senator Olabiyi Durojaiye, said the mandatory compliance framework was introduced amidst a receding economy triggered off by a combination of factors such as falling oil prices, embarrassing public and private sector corruption, huge internal and external debts, weak income per capita/per head, excess of imports over exports resulting in adverse balance of trade and of international payment, huge expenses in combating and refurbishing Boko Haram damages in the North-east and infrastructural deficit and restiveness in the Niger Delta.
According to him, by July 2016, inflationary pressures, spiked by successive negative growth in the Gross Domestic Product (GDP), effectively slipped the economy into recession.

At the telecoms industry level, the picture was not any better. On the surface, the industry posted stellar performances and contributed significantly to GDP well above N1.4 trillion per quarter in 2016 in the face of a receding economy. It also appeared insulated from shocks at the macro-economic level.
Durojaiye, however, said that occasioned by the ubiquitous and predatory new media such as Over the Top (OTT) providers, poor service quality indices, as well as rising debt/expenditure profile, all combined to foist an oppressive operating environment on industry players.

“Over the years, the commission has made remarkable progress in the technical regulation of the industry, but was also concerned about the absence of a formidable regime to guide the ethical conduct of its licensees across various market segments and value chain, and the introduction of the code was designed to address this yawning gap,” Durojaiye said.
“Furthermore, the events of the recent past in the industry underscore the urgent need for stakeholders to implement the time-tested governance principles in the conduct of their businesses. From deliberate violation of licence conditions to serial breaches of contractual obligations, the industry has never been this threatened. The industry is on a threshold, and requires a paradigm shift from the traditional corporate governance principles of board/management strategic initiatives, stakeholder satisfaction and financial auditing, to a more robust enterprise risk management framework that speaks to value propositions such as reputation, quality and quantity of human capital, protection of human and labour rights, among others,” Durojaiye added.

The objectives
Citing the recent World Bank report on the ease of doing business in Nigeria as part of the objectives to intensify campaign on the adoption of the code as a compulsory baseline for all telecoms operators, the Executive Vice Chairman of NCC, Prof. Umar Garba Danbatta said the World Bank report, which disclosed that Nigeria moved 24 points in the international ladder on that body’s index on ease of doing business, corroborate the need to implement the compulsory adoption of the Corporate Governance Code.

“The deliberate efforts of the federal government under an initiative in that regard under the FGN’s Economic Recovery and Growth Plan (ERGP) geared towards creating transparent business investment environment which will be attractive to potential investors, led to the initiative on ease of doing business framework released by the FGN Economic Team led by the Vice President. Efforts in that regards has in less than two years brought positive fruits. That positive trend has equally positively impacted foreign direct investment (FDI) in that period,” Danbatta said.

NCC’s determination
Speaking on the relevance of the code and the need for operators to adhere strictly to it, Danbatta said in appreciation of the relevance of the telecoms sector to the attainment of those objectives, the regulator is committed to deliver regulatory excellence and facilitate operational efficiency, geared towards making the sector attractive to drive the level of investment and capital inflow needed.
According to him, the evaluation report of the state of the industry suggests that most challenges negatively affecting the health of operators in the sector are attributable to poor governance issues.

Trending issues

Worried about the poor state of the telecoms industry, which the NCC wants to address with the compulsory adoption of the code of corporate governance, Danbatta highlighted the views of members of the House of Representatives at a recent public hearing convened to inquire into the health of the sector, which disclosed that the sector was owing about N143 billion in taxes to government.

“Without prejudice to the sanctity of the ball pack sum quoted, the fact that such huge sum could be owed say a lot about the standard of corporate governance in our sector. Better disclosure policy would in our opinion not allow such huge debt to accumulate,” Danbatta said.
He added that NCC has also been having serious issues with operators on the integrity of SIM registration data generated by operators and their agents under the SIM registration regulation, which portends national security implications. These challenges emanate from the state of our corporate governance practices, which the sensitisation campaign and the code are intended to sensitise the telecoms industry about,” he said.

Strategic collaboration

In order to effectively address the poor state of the telecoms sector through the code, Danbatta said the regulator would seek strategic collaboration and partnership, as vehicle for building synergy and trust to boost investor confidence through accountability and disclosure policies. He is of the view that optimal compliance level could ultimately lead to sector players-self-regulation in due course.

“However, consistent with the regulator’s open and transparent approach to discharging its regulatory oversights the commission has further developed a programme for further stakeholders’ sensitisation workshop anchored on zonal basis to further enlighten and gain more robust stakeholders’ buy-in to ensure attainment of the code stated objectives,” Danbatta said.

He added that as technology trends emerge to disrupt traditional economic order, the sector must leverage its strength to provide the safeguard needed to ride the storm of the disruption in a manner that the disruption is both innovative and creative.
He explained that a regime of sanctions has been put in place to facilitate compliance. He however added that a regime of reward and recognition for excellence has equally been developed to recognise full adoption and consistent compliance, while urging
stakeholders to embrace the code and strive towards full compliance even as the regulator commits to constant review of the principles in consultation with stakeholders to ensure alignment with global best practices and standards.