The Nigeria Employers’ Consultative Association (NECA) has vehemently criticized the Financial Reporting Council of Nigeria (FRC) for imposing what it deems “exorbitant” annual dues on private and non-quoted companies. This levy, stemming from the implementation of the Financial Reporting Council Amendment Act 2023 (FRC Act), has dramatically increased the financial burden on these businesses, causing widespread concern about its potential to cripple operations and stifle economic growth. NECA argues that this policy contradicts the government’s ease of doing business initiatives and sends a negative signal to potential investors, both domestic and foreign. The association has called for immediate government intervention to suspend the new levies and initiate a comprehensive review of the FRC Act, emphasizing the need for a more balanced and sustainable regulatory framework.
The core of NECA’s discontent lies in the substantial increase in annual dues for private companies. Previously set at N1 million, the new policy ties the fees to company turnover, resulting in charges ranging from millions to hundreds of millions of naira. This contrasts sharply with the capped fee of N25 million for publicly listed companies. NECA Director-General, Adewale-Smatt Oyerinde, argues that this disproportionate burden on private companies, already grappling with multiple taxation, regulatory hurdles, and rising operational costs, could lead to widespread layoffs, business closures, and a significant economic downturn. He emphasizes that many businesses, particularly in manufacturing, trading, and essential services, operate on thin margins, making them especially vulnerable to such substantial increases in regulatory fees.
NECA’s concerns extend beyond the immediate financial impact. The association warns that such unpredictable regulatory practices create an unstable investment environment, deterring both local and foreign investors. This, in turn, undermines Nigeria’s global competitiveness and hampers economic growth. Oyerinde highlights the importance of regulatory consistency and transparency in fostering investor confidence, stressing that arbitrary levies erode trust and push businesses towards financial instability. He argues that a stable and predictable regulatory landscape is crucial for attracting investment and stimulating economic development.
The association has proposed a three-pronged approach to address the issue. First, it calls for the immediate suspension of the new levies and a return to the previous N1 million fee structure pending a thorough review of the FRC Act. This immediate action aims to alleviate the pressure on businesses and prevent further economic damage. Second, NECA urges a legislative amendment to the FRC Act to remove ambiguities and ensure a more transparent and equitable regulatory framework. This aims to provide long-term clarity and predictability for businesses, reducing uncertainty and fostering a more conducive investment environment.
Third, NECA advocates for a collaborative dialogue involving the Federal Government, the Ministry of Industry, Trade and Investment, and key stakeholders, including NECA itself, the Manufacturers Association of Nigeria (MAN), and the Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA). This multi-stakeholder approach seeks to develop a more sustainable and justifiable compliance framework that balances the need for effective regulation with the imperative to support business growth and economic development. NECA emphasizes that the private sector is the engine of the Nigerian economy, and policies that hinder its growth ultimately harm national development.
NECA’s strong condemnation of the FRC’s new levy policy reflects the growing discontent among businesses over what they perceive as excessive and arbitrary regulatory burdens. The association’s call for immediate government intervention underscores the urgency of addressing the issue to prevent further damage to the Nigerian economy. The proposed solutions—suspension of the new levies, amendment of the FRC Act, and multi-stakeholder dialogue—offer a pathway towards creating a more balanced and sustainable regulatory framework that supports both effective oversight and economic growth. The government’s response to this escalating situation will be crucial in determining the future trajectory of the Nigerian business environment and the country’s overall economic prospects.
The situation underscores a broader tension between the need for effective regulation and the imperative to foster a conducive business environment. While regulation is essential for ensuring transparency, accountability, and investor confidence, excessive or poorly designed regulations can stifle innovation, discourage investment, and hinder economic growth. The FRC’s new levy policy, as criticized by NECA, exemplifies this tension. While the FRC’s mandate to enhance financial reporting standards is important, the implementation of the new levies, with their substantial increase in costs for private companies, has created a significant burden on businesses and raised concerns about its negative impact on the economy. The challenge for the government is to find a balance between these competing demands, implementing regulations that protect investor interests and promote market integrity without unduly burdening businesses and hindering economic growth. The ongoing dialogue between the government and stakeholders like NECA will be crucial in achieving this delicate balance and fostering a sustainable and prosperous economic future for Nigeria.
