Eben Joels: FG’s Continued Gas Importation Spells Doom for Naira
Partner, Stransact-RSM, Nigerian Correspondent firm for RSM, Eben Joels, spoke with select journalists to discuss the unique essence of Nigeria’s economy, SMEs, the role of technology in tax administration, audit, due diligence, how to save the naira from free-fall. Adedayo Adejobi presents the excerpts
Analysts say the economy is on the brink of collapse, what’s your structural assessment of the economy?
The Nigerian economy is still a rent-seeking economy where a lot of members of the rich class became rich by collecting economic rent from others, not from doing anything intellectual or serious. In that environment, it’s only natural that, over time, the people you’re getting the economic rent from will get poorer. And those economic rent collectors not used to working, when they take over industries, will only be able to run it down. Unless something miraculous happens, the current generation will never witness another oil boom again in their lives, because the infrastructure that makes the oil boom possible no longer exists.
In those days, when international gas prices skyrocket, we made a lot of money but today, our population is rising and our need for gas consumption is also rising. We make a lot of money selling crude, and then use the same money importing refined petroleum products from aviation fuel, and diesel to prime motor spirit. We’re even struggling to meet our bills in importation. Previously, we made a surplus, but there is no more surplus. Because pricing is international, when prices go up, the cost of importing also goes up.
When this government came to power, one of the things they promised us, was that they would fix the refineries in one year-short timeline. The Nigerian National Petroleum Corporation (NNPC) Group Managing Director (GMD) said it was possible in one year. Seven years after, the refineries are not fixed. Instead, the Government wants to acquire a stake in the Dangote refinery. I don’t think the people who run the country take the issues seriously enough to understand that we need to develop our own local refining capacity, even if it means empowering local small-scale modular refineries. Rather than declare them illegal, the Federal Government could work with them to get them an investment, standardise their processes, and create a modular refinery Chain. The more we import gas as crude oil prices rise, the more our naira falls. The political class needs to be awake.
What can be done to stabilise the free fall of the naira?
The common-sense approach is simple is that the naira will appreciate if production appreciates and a lot of people earn foreign exchange. A lot of people actually earn foreign exchange in Nigeria now. Eight years ago, things like monetisation of YouTube or social media accounts for dollars to flow into tour account wasn’t as ubiquitous as we have it now. That tells you that we need to free up our economy so that individuals are able to earn foreign exchange directly.
The government needs to relax our exchange controls, remove export restrictions, and make the naira a free market-determined currency and not a government-imposed rate. The more we have the government put its hands on things, the more problem we have. If we fix our ability to export without restrictions, remove restrictions around the control of the naira and let it find its true market value, the currency will stabilise and would be a proper measure of the strength of our economy; rather a situation whereby the value of naira is tied to how much dollar is needed by politicians.
Do you think Nigeria’s tax administration strategy and emphasis on increasing taxes, as we have seen in the last few years, is a viable strategy?
In today’s world, everybody knows that to get things done, the best way is to have the buy-in of the other person. Global Companies know that it’s a big stain on their reputation for them to be accused of evading taxes. They also want to be compliant. The approach of a wise tax man is to appeal to the sensibilities of the company to remind them that they are corporate citizens who need to be seen as such. The government does better in its approach to collecting taxes. Although the approach is much better than it was seven years ago when they had all manner of people at everybody’s door claiming to be consultants for FIRS, harassing people who work very hard to keep the country’s economy afloat. They are better, but there’s still a long way to go.
Seven years ago, your firm had a battle with the FIRS over this matter. What has changed? What can be better?
They no longer have the generic approach of having consultants to audit companies. Now, they use their staff to do the work. Business data is very important and not something I should allow just anyone access to because you have a letter from FIRS. I think they got the lesson. We were one of the few firms that pushed back and said there is no legal basis for sending consultants to our clients. Some others were happy to represent their clients, but we didn’t allow the FIRS have access to our clients. We were one of the few firms that pushed back based on the law.
And you succeeded?
Yes, We did.
What do you see wrong with the SME section of the economy? What can be done to help them have a buffer in the nation’s economy?
Continuous education to orientate our SMEs on the importance of them developing the right character for business is key. Don’t go with the crowd. Every society and home is built on values. The values that the business holds, it sets out to be, to become, is the strongest thing that helps the business to succeed. Capital and every other thing is a plus. Most businesses start without identifying what their values are, so they get into other SME markets because they need to survive and then they do anything and everything anybody in Nigeria would do to survive. Our values are part of things that made us attractive to RSM Global.
An SME that wants to go places, need to identity the values it wants to be associated with in business. Those values should be based on the society or immediate environment. You cannot set out to go global and set your operations manual local- there is a mismatch in value alignment.
How does Compliance fast-track ease of doing business in Nigeria?
The thing with Nigeria is the absence of clarity in the business environment, and it’s bad for business. You can see it clearly with the APC Presidential Convention. Compliance is not the issue, but clarity on what we need to comply with, and what we need to have to be seen to have done to stay compliant. If you keep shifting the Compliance goalpost, there will be no clarity for the business owners.
What’s your experience in the financial services industry, and your current role at Stransact-RSM International?
I have more than 20 years experience of in providing quality and timeless financial advisory services, reviewing accounting systems, assisting businesses with the right strategy, due diligence, tax planning, tax advisory services, and resolving difficult tax situations. It’s a tough environment and market, but somehow, when you have the expertise, your expertise would make room for you.
So, even if the four big firms are competing against us, our dream has always been to be the alternative to the big four firms. We set out to be an alternative providing the same value and superior value where possible at an affordable cost for small businesses. i guess that led us to become practice to RSM International, a legacy firm of over 90 years, covering 108 countries and almost 40,000 employees across 800 offices. They did not have proper representation in Nigeria and were looking for a transparent and compliant firm that would represent them in Nigeria with the quality and capacity of the big firm with adequate processes and internal procedures; hence, we struck a responsive chord. It was as though our firm was purpose-built for them. They looked at the consistency in the quality of our work and came to the conclusion that we fit the bill to be their correspondent firm in Nigeria. We are looking to attain full membership very soon.
As a player in the “Big 6” global firms, what is the unique essence of your correspondent status, and what does it portend for Nigeria?
RSM is very big, and the sixth biggest firm by revenue in the world. In 2021, RSM made more than $7.5bn globally. In the United States of America which is a massive market, RSM is the 5th biggest firm. It brings healthy competition into the Nigerian market which helps to make the service providers better.
When we rebrand our firm as RSM Nigeria, one we hope to do as soon as we conclude our internal processes as RSM International, we want to offer the quality of the RSM brand. Because you cannot grow properly without the right advice, our target market sets its focus on small businesses aspiring to grow. We are providing small businesses that we’re hoping will change the landscape of the economy over the next few years, with quality advisory services, and best practices gained from membership of and collaboration with RSM.
The Stransact-RSM International’s Value Proposition is ‘empowering you to move forward with confidence’- The Power of Being Understood. What informed this tagline, and how does that connect with your Nigerian SMEs who make up the largest market?
The power of being understood is a very important attribute for you to forge a proper alliance with anybody. As a business, we know what small businesses face. In addition to the power of being understood, we focus on the middle market firms who have the potential to get there. When we engage at any time, we spend a lot of time, understanding their unique situation and seeing things from their perspective. We deploy the power of empathy, so we understand what they go through and use that to build connections.
RSM is a 90 years legacy firm in 108 countries, with 40,000 employees across 700 offices. How important is this market to RSM?
We, Nigerians may look down on ourselves, but RSM International sees the Nigeria market as a very important market, and the rest of the world sees Nigeria as a very important country. We have the highest concentration of black people in the world in one country. In the next 25 years, Nigeria’s population is projected to exceed that of the United States of America.it means it could be one of the three most populated countries in the world, by the end of this century. If we continue with this birth rate, by 2099, we could have 800 million people after India and China. So, when a 90-year-old company plans, it plans long-term. RSM intends to have a proper firm in Nigeria because it’s a very important market both in terms of population size and projections for the economy if we get our political environment right.