Corruption & Regulation

7/27/2019 Corruption & Regulation

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Models and International Best Practices in Regulatory

& Anti-corruption Compliance Monitoring in Nigeria

Dr. Sam Amadi

Chairman & CEO

Nigerian Electricity Regulatory Commission (NERC)


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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


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Introduction

Oldest and complicated phenomenon

A kind of:

bribery

Fraud

Nepotism (partiality)

Need driven

Greed drivenCronyism

Collaborative (it takes two)


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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


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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


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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.


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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


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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 teneconomy


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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--visconsumption.

Our generation is primarily:

consumption driven

Occasioned by corruption induced high cost of

production


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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


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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 anti-

secret banking rules

Fight capital flight to a complete stop


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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.


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Part 2

Models & international Best Practices in

Regulation and Anti-Competition Compliance

Monitoring in Nigeria


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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


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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.


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Command & Control Regulation The exercise of government influence or

control by imposing standards backed byserious 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.


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Regulatory periods in Nigeria The Electricity Board (EB), Electricity

Commission of Nigeria (ECN), nationalElectricity 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


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The regulatory periods Opening up/ restructuring period

From 2005 to present, i.e., since theestablishment of an independent regulator to

oversee a competitive but controlled market.

This era started with the drawing up of the2001 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


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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 stakeholdersin the provision and regulation of electricity


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Philosophy of reforms

De-macrosification

Privatization

Deregulation Liberalization

re-engineering/re-tooling/re-inventing

Governance International best practice

Fiscal self sustenance


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Regulatory & anti competition

The private sector has been drafted in toperform 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 NEPAin power generation

Opened the sub-sector to private sector

participation


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Regulatory & anti competition contd

Gave rise to NERC licensed IPPs

Now onwards, NERC licenses & oversees everyparticipant in the market

The government has retained the

Transmission end of the industry, butcontracted its management out, so as to

oxygenate this critical segment with

international best practice. The TCN however is now licensed & regulated

by NERC


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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


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NERC Regulation & anti-

competition 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


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NERC anti-Competition rules

Market safeguards

Cross ownership prohibition

No generation company, distribution utility orstockholder/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


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NERC Regulation & anti-

competition

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.


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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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Contact us at:Adamawa Plaza, Plot 1099 First Avenue,

Off Shehu Shagari Way,Central Business District,

Abuja

THANK YOU

Website/info: www.nercng.org

E-mail: [email protected]

Electricity on Demand
http://www.nercng.org/mailto:[email protected]:[email protected]://www.nercng.org/

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Corruption & Regulation