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Welcome to our final discussion of the year, and to some the end of the decade. Since we started this discussion series in February, we have run through a series of topics including issues on technology law, labour law, sports law, IP etc. Did you have a favourite discussion?
Today we ware going to go all in and conduct a brief yet comprehensive review of how the law affected business and businesses in 2019.
In order to not get lost in this discussion topic, we are limiting our discussion to
1) Corporate Commercial law
2) Tax law
3) Banking and finance law
4) Trade and Investment law
All right, let us get in it.
1) Corporate Commercial law
2) Tax law
3) Banking and finance law
4) Trade and Investment law
All right, let us get in it.
Corporate Commercial Law-
The year started with a lot of buzz in corporate commercial law. It ended with mixed feelings. The anticipated Companies and Allied Matters Bill was not passed into law, however, we got the FCCPA and this was a welcome development to the legal world.
The year started with a lot of buzz in corporate commercial law. It ended with mixed feelings. The anticipated Companies and Allied Matters Bill was not passed into law, however, we got the FCCPA and this was a welcome development to the legal world.
The Federal Competition and Consumer Protection Act was enacted by the National Assembly in December 2018 and subsequently signed into law by President Muhammadu Buhari in January 2019.
The introduction of a codified set of competition rules into Nigeria’s regulatory oversight framework came as a long-anticipated change.
Prior to the enactment of this Act, there was no all-embracing competition or anti-trust law in force in Nigeria.
Prior to the enactment of this Act, there was no all-embracing competition or anti-trust law in force in Nigeria.
The Act repeals the Consumer Protection Council Act, Cap. C25, Laws of the Federation of Nigeria, 2004, and Sections 118, 119, 120, 121, 122, 123, 124, 126, 127 and 128 of the Investments and Securities Act, Cap, 124, Laws of the Federation of Nigeria, 2004
It is important to note that the Consumer Protection Council (CPC) has transitioned into the Federal Competition and Consumer Protection Commission (FCCPC).
The Act also establishes the Federal Competition and Consumer Protection Tribunal which is expected to adjudicate over matters which arise from the operation of the Act.
Interestingly, the Tribunal is also empowered to hear appeals from, or review any decision from the exercise of the powers of any sector-specific regulatory authority in a regulated industry in respect of competition and consumer protection matters.
The Tribunal can impose administrative penalties for breaches of the Act, and oversee forced divestments, partial or total, of investors from companies.
The Act prohibits and voids restrictive agreements between business entities.
The Act prohibits and voids restrictive agreements between business entities.
The description of restrictive arrangements which are likely to prevent, restrict or distort trade is very wide-ranging and includes the prohibition of minimum resale prices (even for patented goods),
direct or indirect price-fixing, collusive tendering, withholding supply of goods and services from a dealer, exclusionary contractual provisions, etc.
he specific implication of the establishment of the Tribunal is that it can hear appeals from the exercise of powers by any sector-specific regulatory authority in a regulated industry in respect of competition and consumer protection matters.
The Act contains provisions prohibiting stakeholders from making or entering into agreements which have the effect of halting, limiting, impeding or manipulating competition in a market. It provides that any such agreement would be void and of no legal effect.
The Act prohibits any agreement or condition contained in an agreement that purports to establish minimum prices to be charged on the resale of goods and services in Nigeria.
The Act, however, distinguishes fixing of minimum prices from the recommendation of prices; the latter is permitted prohibited.
The Act vests the President with the power to declare that the prices for certain goods and services shall be controlled by the Act.
This Order is to have a date on which it ceases to be in force.
This Order is to have a date on which it ceases to be in force.
The Act provides that when this Order is made and the regulated prices for goods and services are released, goods and services shall not be supplied at any other price.
The punishment for a person (and/or director) violating the Order is a fine not exceeding N50,000,000 (Fifty Million Naira) and for a body corporate, a fine not exceeding 10% of its turnover in the previous year.
Part XII of the Act regulates mergers. A proposed merger shall not be implemented unless it has first been notified to and approved by the Commission and a party to a ‘small merger’ may implement that merger without approval from the Commission.
The Act also regulates the marketing of goods and services, protects the consumer from false advertising, protects consumers’ rights to examine and return goods, etc.
The Act provides for the duties of a manufacturer, importer or distributor of goods to label goods properly, duty to withdraw hazardous goods from the market, and liability for defective goods.
So the Act goes a long way to helping to protect consumers and combatting monopolies. It is a step in the right direction and one can foresee a decade of businesses being kept on their toes by consumers and the regulators.
The question of whether the Act can handle Anti-Trusts is gonna be one that will be asked till we see a credible test.
The year in Review was also an important year as it brought to fore a new era in labour law.
The National Minimum Wage Act of 2019 established an updated minimum wage of NGN 30,000. This will evidently go a long way if inflation dotes not keep rising at an accelerated rate. There are concerns about whether the Government can afford to pay the new minimum wage.
That is likely to be a contentious issue in 2020.
Another important issue is the creation of the Code of Corporate Governance 2019 by the Financial Reporting Council of Nigeria.
The Code has been lauded as a step in the right direction to improve stakeholders confidence. However, it must be noted that there is a need for more sector-specific regulation to improve corporate governance
It is hoped that there will be greater strides in corporate and Commercial law in the following year and the next decade
Trade and Investment law- We have heard a lot about trade this year. More than we have heard in a while, to be honest. The biggest reason is that there were very serious issues in Trade that had become so polarising and popular they were discussed from board rooms to bars
2019 in Trade law began with a bang with the execution of the instruments of ratification of the African Continental Free Trade Area (AfCFTA) agreement on April 29, 2019, by 22 countries. The AfCFTA entered into force on May 30, 2019.
It is a historic Trade agreement that has taken years to create.
Fifty-four African nations met to work out an agreement on the pan-continental free trade zone.
Fifty-four African nations met to work out an agreement on the pan-continental free trade zone.
The AfCFTA could potentially unite 1.3 billion people, create a $3.4 trillion economic bloc and boost trade within the continent itself radically
the Agreement could make it easier for businesses to expand operations across the region.
the Agreement could make it easier for businesses to expand operations across the region.
However, for Nigeria, it was complex as we held off from signing for months. Our government got cold feet over issues of consumer protection, dumping and protectionism of Nigerian businesses.
While our concerns were valid, they would have been addressed by Municipal legislation and enforcement of the current laws we have in place. We eventually ratified the Agreement, however, scarcely had the ink dried on the agreement before we landed into another trade fiasco
Well, we signed the Trade Agreement, for Free Trade then closed our borders.
One of the biggest stories this year was Nigeria’s newly acquired, populist protectionist stance.
One of the biggest stories this year was Nigeria’s newly acquired, populist protectionist stance.
This stance is now Part of our Public Policy as the Benin-Nigeria border has been closed for months to check “massive smuggling activities, especially of rice”, taking place on that corridor.
According to President Buhari, the limited closure of the country’s western border was to allow Nigeria’s security forces to develop a strategy on how to stem the dangerous trend of smuggling and its wider ramifications.
Following the initial directive on border closure, the FGN upped the ante by outlawing the discharge of petroleum products to retail stations within 20km of our its land borders, to buttress its stance, nip the illicit trade in petroleum products in the bud,
and discourage round-tripping and save subsidy-related expenditure.
It is notable that PMS is sold at a much cheaper price than most of our African Neighbours
The price disparity clearly creates ample room for (risky) arbitrage, especially with the existence of porous borders.
It is notable that PMS is sold at a much cheaper price than most of our African Neighbours
The price disparity clearly creates ample room for (risky) arbitrage, especially with the existence of porous borders.
Marketers can obtain PMS at subsidized prices from the NNPC and proceed to distribute same at margins of c. NGN225 (ex-other costs) to Nigeria's West African neighbours - escalating the country's already-excessive under-recovery costs.
Indications from the data on PMS consumption and imports point to some early success of the restriction directive - an opportunity to significantly cut the subsidy bill.
However, we opine that there are more efficient solutions- such as more stringent licensing requirements and effective, tech-savvy border policing will certainly do better than outrightly limiting supply to the affected areas.
Eventually, individuals and businesses in and around border communities also need fuel for commercial and domestic ends.
The border closure has been bad for businesses. It has resulted in a supply deficit of food items such as rice, oil and frozen foods, amongst others.
The border closure has been bad for businesses. It has resulted in a supply deficit of food items such as rice, oil and frozen foods, amongst others.
The end result is the rising prices of goods. The Federal Government's mandate to halt the supply of petroleum products to border communities also triggered the ridiculous rise in the price of fuel in those areas.
The result of these trade policies of these translated to sky-high inflation factors rate as seen in the month of November 11.85%.
To a very large extent, the rise in inflation rate is expected to persist as we approach the festive seasons.
To a very large extent, the rise in inflation rate is expected to persist as we approach the festive seasons.
Intense demand for staples, such as rice, vegetable oil, frozen foods and pepper amongst others will trigger a continued rise in the inflation rate.
The upward review of the Nigerian worker's minimum wage from NGN18,000 to NGN30,000 will not help matters.
The upward review of the Nigerian worker's minimum wage from NGN18,000 to NGN30,000 will not help matters.
The implementation of the new wage is scheduled for December 2019 and it is expected to stimulate consumer spending and boost the overall economy eventually.
We have established the inflationary impact of these measures on the domestic economy, however, there the negative impact of this border closure flows beyond Nigeria's borderline.
Shutting the doors at neighbouring countries with which it signed a free trade agreement pushes it farther from achieving the regional integration agenda.
For Benin economy, whose major agricultural produce export is to Nigeria (about 20% of its national GDP), the great loss has been incurred from rotten agricultural produce.
Also, the social wellbeing of Nigerians who live in border communities in Nigeria has been hampered by the loss of their means of livelihood as they have been unable to move their goods into neighbouring countries, whom they transact with.
This is just the tip of the iceberg as there is now a credible threat of reciprocity in Ghana and the potential of a west African Trade war in coming years if we do not move cautiously.
Despite the aforementioned, a number of market players have been able to milk in gains in the period since the closure.
Pasta producers, for instance, have reportedly benefited from the mandate, reporting increased patronage, as individuals have begun to substitute pasta for Asian produced rice.
Individuals are also beginning to patronize local rice millers and poultry and maize farmers.
Individuals are also beginning to patronize local rice millers and poultry and maize farmers.
From this perspective, the border closure walks towards achieving the intended objectives of rejuvenating the Nigerian economy (GDP Q2 -2.12% and Q3 - 2.28%) and creating employment opportunities.
Nonetheless, insulating domestic private sector players does not in itself stimulate innovation- competition does.
Trade protectionism can only go so far, and market players require much more, as access to cheap credit and availability of affordable infrastructure (electricity etc.) also help business thrive.
Technically, Nigeria's closure of its borders would only offer temporary solutions.
Technically, Nigeria's closure of its borders would only offer temporary solutions.
By the time the borders are reopened in January 2020, it will be a return to old habits as the quality and pricing of domestically produced commodities remain uncompetitive.
It is quite evident that the border closure stands in stark contrast to the principal objectives of the AFCTA. Consequently, regional trade and cross-border investments are in dire straits, limiting the overall competitiveness of the continental market.
expectedly, there is some pushback from entrepreneurs in neighbouring countries that are caught in the economic cross-fire. News reports from Ghana suggest that traders are shutting down foreign-owned businesses, in defiance.
Taking cues from China, the closure of the Chinese borders came at a time when the resources and technology needed to make the nation self-sufficient were readily available.
Moreover, it is clear that border closure was insufficient as a tool to drive Chinese economic success.
Moreover, it is clear that border closure was insufficient as a tool to drive Chinese economic success.
Rather, intentional efforts at diversification, a critical emphasis on technology-based education, deliberate infrastructural development and the general enhancement of domestic capacity facilitated self-sufficiency and worked simultaneously with the border closure initiative
to catalyze economic growth
We also opine that it is imperative for the Federal Government to offer a transition phase before embarking on implementation critical decisions such as a complete closure of the borders -
We also opine that it is imperative for the Federal Government to offer a transition phase before embarking on implementation critical decisions such as a complete closure of the borders -
to afford all stakeholders opportunities to plan their affairs and check elevated inflationary pressures that might arise from the closure.
Wow! look at the time. We have only gone halfway. We're gonna stop here for now and round up this discussion, Same Time on Friday. Please join us then. Thank you.
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