Models and International Best Practices in Regulatory & Anti-corruption Compliance Monitoring in Nigeria

Dr. Sam Amadi Chairman & CEO Nigerian Electricity Regulatory Commission (NERC)

Presentation outlay
PART 1 Corruption: intro Causes of corruption Ease of capital flight International Angle: Tax Havens The great Nigerian Silence The facts Effects of corruption on Nigeria This government is trying, but must be supported

Introduction
Oldest and complicated phenomenon A kind of: bribery Fraud Nepotism (partiality) Need driven Greed driven Cronyism Collaborative (it takes two)

Causes of corruption
Lack of transparency (inflow & outflow of money) Silence Poverty Greed Illiteracy Unmet expectations Low public sector wages Increasing rate of taxation Increasing inflation rate Increasing rate of competition

Ease of capital flight

The ease with which Nigerians can siphon & take huge capital out of the country is our bane.

Ease of capital flight from Nigeria

Tax Havens as Nigerian Scourge

Small countries like Switzerland, Liechtenstein, Angola, Bermuda etc, receive & keep looted fund with ease. They also have zero or very low income tax They ask no questions on the source of monies deposited in their banks. They keep all banking records secret and offer little cooperation to International anti-graft agencies.

The black economy

Unholy relations between nefarious bureaucrats, politicians & the corporate community fuels a huge black economy At least, $70-80 billion is believed to be lost annually to black economy Nigerian should have been developing in leap and bounds where it not bedraggled by black economy

Effect of corruption
Struggle to overcome infrastructural deficit Inadequate healthcare provision Unsatisfactory educational facilities Less employment opportunities Lack of welfare provision Loss of a large chunk of GDP per year Top ten oil producer, not translating to top ten economy

Effect of corruption contd

Lack of transparent & technological efficient economic system We should have been in the league of countries like South Africa, Malaysia, S. Korea, Hong Kong, China, Brazil, etc, in terms of production vis--vis consumption. Our generation is primarily: consumption driven Occasioned by corruption induced high cost of production

This govt is acting, but Nigerians must take up the challenge

In his most recent press briefing, President Goodluck Jonathan, pointed to the fact that Nigerian must reject corruption, by ceasing to worship it proceeds. Through stringent & Int. best Practice procurement procedures, this administration has been cleansing our public institutions The FOI was introduced to throw open the annals of government

We must adopt & enforce Int best practices in anti-corruption

We must develop a societal attitude that rejects corruption in all its manifest. A national agenda against all ramifications of corruption, and a strong will to enforce same must be drawn. We must ensure Nigeria friendly global antisecret banking rules Fight capital flight to a complete stop

In conclusion
Corruption is universal It threatens Both developed & developing countries, however, it is the ability to develop, deploy & effectively enforce anti-corruption laws that differentiate between a develop and perennially developing country. Corruption is a major constraint that is hindering Economic political and Social development Hence we must jointly view it vas a problem requiring urgent attention.

Part 2
Models & international Best Practices in Regulation and Anti-Competition Compliance Monitoring in Nigeria

Regulation
An all encompassing public policy term which is a direct result of the societys concept of the role of government Connotes control, direction & guidance, and influence of actions of business by government to promote public interest and welfare Regulation could be both restrictive & facilitative

Economic regulation
Takes the overt barriers to entry and exit, licensing and tariff laws, price and wage controls Covers sectors of the economy such as electricity, gas, etc., which are deemed strategic to government.

Command & Control Regulation

The exercise of government influence or control by imposing standards backed by serious sanctions Uses carrots and sticks in reining over industries Cost of service or ROR Regime Establishes a satisfactory or normal profit or rate of return on the firms regulated asset base, after allowing for efficient capital and operating costs.

 The Electricity Board (EB), Electricity Commission of Nigeria (ECN), national Electricity power authority, NEPA era, which were characterized by State involvement in the generation, transmission and Distribution of electricity, all as a single administrative unit under a monopoly module. This was a vertically integrated State run system. This nationalization period occurred between 1896 -2005

Regulatory periods in Nigeria

The regulatory periods

Opening up/ restructuring period From 2005 to present, i.e., since the establishment of an independent regulator to oversee a competitive but controlled market. This era started with the drawing up of the 2001 National Electricity Power Policy, NEPP. The pursuance of NEPP lead to the enactment of EPSRA 2005 It moved on to the unbundling of NEPA, into Holding entities, & establishment of NERC

Regulatory periods contd

The post EPSRA electricity era is distinguished by the determination, and thus, efforts of the State to open the NESI for competition and involve private sector and other stakeholders in the provision and regulation of electricity

Philosophy of reforms
De-macrosification Privatization Deregulation Liberalization re-engineering/re-tooling/re-inventing Governance International best practice Fiscal self sustenance

Regulatory & anti competition

The private sector has been drafted in to perform the task of providing adequate, safe and reliable electricity, which the State over time has proven itself as been incapable of providing The advent of NERC the Regulator via the Statutory instrument of EPSRA, simultaneously ended the monopoly of NEPA in power generation Opened the sub-sector to private sector participation

Regulatory & anti competition contd Gave rise to NERC licensed IPPs Now onwards, NERC licenses & oversees every participant in the market The government has retained the Transmission end of the industry, but contracted its management out, so as to oxygenate this critical segment with international best practice. The TCN however is now licensed & regulated by NERC

Regulatory & anti competition contd The EPSRA of 2005 transferred the powers to set electricity tariff to NERC, thus ending the FMPs politically tinged tariff setting era. Erstwhile NEPA privatized assets under the Holding Company name of PHCN, has been sold to the private sector in a percentage ratio determined by the NCP and implemented by the BPE

NERC Regulation & anticompetition

Open access in Transmission and Distribution Creation of the wholesale electricity spot market Licensing of market settlement duo of SO & MO Given the current fiscally deficiency of the market, licensing of NBET

NERC anti-Competition rules

Market safeguards Cross ownership prohibition No generation company, distribution utility or stockholder/director thereof shall be allowed to hold share in the Transmission company or its concessionaire and vice versa Fit & proper persons test for directors & management

NERC Regulation & anticompetition

Concentration of ownership limits No company can own or control more than 30%of the installed capacity of a grid and/or 25% of the national installed capacity Bilateral supply contracts No distribution utility shall be allowed to source from bilateral power supply contracts, more than 50% of its total demand from its affiliate in generation.

finally
With the EPSRA 2005, innovations were envisioned to be introduced, e.g., segregation of sub-sectors Provisions to safeguard competition will not be automatic or instantaneous, Hence the Transition Electricity Market (TEM) which is now been introduced There are outstanding issues such as How to effectively fund NELMCO, Increase fiscal generally & confidence, so as to wean the NESI off bulk trading payment

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