New leadership and the regulatory changes they bring can have a profound impact on the landscape of business operations. Following the swearing in of President Bola Ahmed Tinubu on May 29, 2023, businesses have found themselves in a sprint to navigate new realities and find ways to adapt to new rules, policies and laws which have continued to emerge. This altered political landscape makes it necessary for most businesses and particularly medium to large-scale businesses to give consideration to matters of regulatory transitioning. The phrase ‘there is a new sheriff in town’ colloquially and somewhat effectively communicates the extensive changes moving across government ministries, agencies, authorities, administrative organs, and states.
Regulatory transitioning is the process of changing regulatory policies, laws, or frameworks to adapt to evolving economic, social, political, or environmental conditions, which could occur at different levels. It also includes a change of persons who occupy leadership positions in ministries, parastatals, regulatory agencies, and government institutions to adapt to the strategy and agenda of a new political administration.
With the present administration in Nigeria, the first change came via President Bola Ahmed Tinubu’s inauguration speech where he announced the removal of fuel subsidies. This had an immediate and significant impact because, while targeted at eliminating the arbitrage opportunities and smuggling of petroleum products, it also had the effect of raising operational costs for businesses which has led to higher inflation, which according to the National Bureau of Statistics went up immediately to 27.33 percent. Relatedly, this has prompted a push for energy efficiency and alternative energy, reinvigorating Nigeria’s path to net-zero emissions by 2060, offering both business risks and growth opportunities.
It may be recalled that at the start of President Muhammadu Buhari’s 2015 regime, its own transition reform included the Treasury Single Account (“TSA”), which was introduced to consolidate government funds and reduce financial leaks. Following this, in 2016, the whistleblowing policy was subsequently introduced to combat corruption and promote financial integrity. Under the same regime, key reforms included the enactment of the Federal Competition and Consumer Protection Act 2018 and the Nigerian Financial Intelligence Unit Act 2018, which targeted financial crimes. The Buhari administration also introduced the Finance Act in 2021 which introduced over 40 amendments to 13 existing legislations.
Finally, in the twilight of President Mohammed Buhari’s administration, the enacted Business Facilitation (Miscellaneous Provision) Act 2023 improved business ease, amending various laws such as the Companies and Allied Matters Act 2020, Nigerian Export Promotion Council Act 2004, Customs and Excise Management Act 2004, Financial Reporting Council Act 2011, and the Immigration Act 2015.
Regime changes offer opportunities but also entail risks in navigating new regulations. Businesses should carefully assess and proactively manage these dynamics.
Since the inauguration of President Bola Ahmed Tinubu, several policies, administrative and legal changes that affect businesses and the economy have been announced and implemented by the administration and we review some below:
1. Changes within the Central Bank of Nigeria (“CBN”): as part of the broader regulatory transition, leadership changes within government agencies and regulatory bodies have continued to occur. Following the suspension of Mr. Godwin Emefiele as the CBN Governor, Mr. Folashodun Adebisi Shonubi served in an interim capacity until the substantive CBN Governor, Dr. Olayemi Cardoso was appointed in September 2023. The transition has seen the introduction of Operational Changes in the Foreign Exchange Market which resulted in the unification of all exchange rate windows into the Investors and Exporters (“I&E”) FX Window.
In addition, the new CBN administration has taken a proactive stance on enhancing governance standards within the banking sector and issued the “Corporate Governance Guidelines for Commercial, Merchant, Non-Interest, and Payment Service Banks in Nigeria”. This imposes more rigorous regulations on banks, particularly concerning insider-related loans and corporate governance practices. Under the new guidelines, directors and associates of banks are no longer authorized to write off loans without obtaining explicit approval from the CBN. Also, directors who preside over underperforming facilities for a duration exceeding one year will face disqualification from their board positions and will be prohibited from participating in any other financial institutions under the supervision of the CBN.
As a further step, the CBN initially unveiled its intentions to reintegrate Bureau de Change (“BDC”) Operators into the foreign exchange market and this was outlined in the CBN’s circular titled “Operational Mechanism for Bureau De Change Operations in Nigeria.”This new approach included a stipulation that BDC operators must now provide statutory periodic reports through the Financial Institution Forex Rendition System. Currency speculation and a huge back log of foreign currency payment obligations has meant that demand still far outstrips supply and therefore businesses are struggling to stay afloat and hedge against the tide of a fast and constantly depreciating Naira.
Finally, in a significant reversal of a long-term policy which clearly demonstrates the impact a new government can have on business, the CBN lifted the ban on accessing foreign exchange from the official market for the importation of a list of 43 items. The CBN Circular had in 2015 barred items such as: rice, cement, margarine, poultry, palm kernel, tomatoes, roofing sheets, steel nails, furniture, fabrics and clothing, and foreign securities amongst others from access to foreign exchange from official sources at essentially lower official rates.
2. Removal of 5% Tax on Telecommunication Services, Locally Made Products: under the 2023 Fiscal Policy Measures (FPM), the administration of former President Muhammadu Buhari approved 5% excise duty on post-paid and prepaid telecommunication services. However, the Tinubu-led administration has given an order suspending the 5% Excise Tax on telecommunication services as well as the Excise Duties escalation on locally manufactured products. The recently introduced green tax by way of excise tax on single-use plastics has also been suspended by an executive order.
3. Appointment of New Service Chiefs: very early, there were appointments of seven new service chiefs to replace those appointed by the last administration. They included the National Security Adviser, Chief of Defence Staff, Chief of Army Staff, Chief of Naval Staff, Chief of Air Staff and a new Inspector General of Police. Given the significant security challenges that had bedevilled the nation, businesses expect improved security for lives, property and for national assets that are used to generate revenue and provide the infrastructure that supports growth and development.
4. Board Dissolution of Specific Ministries, Departments and Agencies and appointment of Ministers and new MDA Leadership: in July 2023, the new administration dissolved the boards of all Federal Government Parastatals, Agencies, Institutions and Government-owned companies except that of the National Agency for Food and Drug Administration and Control (NAFDAC) and the National Drug Law Enforcement Agency (NDLEA). Consequently, the Chief Executive Officers of the Parastatals, Agencies, Institutions, and Government-Owned Companies were directed to refer matters requiring the attention of their Boards to the President, through the Permanent Secretaries of their respective supervisory Ministries and Offices until new boards are constituted.
Further in August 2023, Federal Ministers were appointed into President Tinubu’s cabinet with the most anticipated being the Minister of Finance and Coordinating Minister of the Economy, Mr Olawale Edun. His profile, skills and experience appear to have been positively received by large sections of the business and international investing community particularly when paired with that of the new CBN governor, though it is widely noted that the economic recovery task ahead of them will be difficult and extremely complex.
Most recently, leaderships of several agencies including the Chief Executive Officer of the Nigerian Communications Commission (“NCC”), Officer of the Postmaster General of Nigeria Postal Service (“NIPOST”), Corporate Affairs Commission (“CAC”), Nigeria Investment Promotion Council (“NIPC”), Standards Organisation of Nigeria (“SON”), the Industrial Training Fund (“ITF”) and several other agencies have been changed with immediate effect. This, as we have pointed out earlier, will herald changes, in some cases quite significant ones, in the agencies and for the industries, sectors and businesses that they regulate and or serve.
5. Establishment of the Presidential Committee on Fiscal Policy and Tax Reform: in a bid to create a sound fiscal policy environment and eliminate barriers impeding business growth, President Tinubu created a Presidential Committee on Fiscal Policy and Tax Reform and appointed respected tax specialist and then Fiscal Policy Partner and Africa Tax Leader at PWC, Mr Taiwo Oyedele, to chair the Committee. Members of the Committee were selected from public and private sectors, and the committee was recently inaugurated by the President as an advisory body with the primary objective of enhancing revenue collection efficiency, ensuring transparent reporting, and promoting the effective utilization of tax and other revenues to boost citizens’ tax morale, foster a healthy tax culture, and drive voluntary compliance. The primary mandate of the Committee is to address critical challenges across fiscal governance, revenue generation and economic growth. In October 2023, the Committee presented its ‘Quick Wins Recommendations’ to the President. The Recommendations addressed the duplication of functions in the public service, use of technology to expand the tax net, facilitating the use of mobile phones for conditional cash transfers, removing impediments to export promotion and bottlenecks regarding Exports Expansion Grants (“EEG”), removing restrictions on repatriation and use of export proceeds by exporters, discontinuing the forex verification portal and requirement for Certificate of Capital Importation (“CCI”) and removing export proceeds restriction, amongst others.
The lengthy catalogue of critical changes announced or proposed from Day 1 of this new administration may foretell of more to come with their impact potentially felt farther afield including formulating and unfolding the details of the implementation of those changes already made.
Regulatory Transition Risks
We will consider Regulatory Transition within the known classes of risks that may affect businesses as follows:
1. Economic Risks: The difficult regulatory environment, high inflation, currency policy inconsistencies, and limited foreign exchange availability are some of the challenges that affect businesses, causing operational constraints and affecting their ability to repatriate funds and to access foreign exchange. These led to a decline in foreign direct investment (“FDI”) over the last few years.
2. Legal and Regulatory Risks: The legal and regulatory landscape has witnessed significant transformations, including the enactment of 19 new laws prior to the end of President Mohammed Buhari’s administration. Riding on that momentum, President Bola Tinubu signed several noteworthy legislations including the following:
- Nigeria Data Protection Act 2023: On June 12, 2023, President Tinubu assented to this landmark legislation, establishing the Nigeria Data Protection Commission (“NDPC”) as the sole regulator for personal data processing and protection. Companies must review the new law and powers of the NDPC, evaluate their data privacy compliance, and implement necessary measures for compliance.
- Constitutional Amendment on Judicial Retirement Age: The retirement age of judicial officers has been harmonized and increased from 65 to 70 years. This change can help expedite pending cases, retain experienced judges, and address court congestion challenges, enhancing the administration of justice which can in turn facilitate the quicker resolution of business and commercial disputes.
- Electricity Act 2023: Following the constitutional amendment, states now have authority over electricity generation, transmission, and distribution within their areas covered by the national grid system. The Act promotes power generation, transmission, and distribution at the national level, encourages renewable energy integration, and offers investment opportunities in the power sector, potentially addressing the demand for reliable power in Nigeria.
3. Investment Risks: In February 2023, Nigeria was placed on the Financial Action Task Force’s (“FATF”) grey list due to non-compliance with anti-money laundering and anti-terrorism financing standards. This listing signals to investors and the global community that illicit activities, such as money laundering and terrorist financing, pose a risk in the country. Consequently, it hinders foreign direct investment and impedes economic growth. To address this, the current administration is taking steps to implement policies aligned with FATF standards such as the further development of the recently established Beneficial Ownership Registry, increased reporting of suspicious transactions and other critical measures, to remove Nigeria from the grey list and avoid blacklisting.
4. Security Risk:Over the years, many of Nigeria’s security issues became considerably worse, and this impacted on the safety of businesses and their employees, and caused disruptions in business operations across the country. Terrorist activities in the Northeast have made states in these regions unsafe and therefore unattractive for businesses to operate and thrive. Businesses must watch closely and adjust to the policies and planned actions of the newly appointed service chiefs and build new and wholesome relationships with security agencies in their communities.
5. Political Risk: Political risks encompass government actions that limit an investor’s rights, diminish business value, or create an uncertain environment. Elections, their outcomes and public perceptions regarding fairness and non-manipulation may introduce political instability that impacts businesses. There are several pending election petitions ongoing in Nigeria regarding the February National Assembly and Gubernatorial elections, the November gubernatorial elections most recently held in states like Imo, Kogi and Bayelsa and with the July coup in Niger, all posing regional political and security risks for businesses to consider. The inflationary economy and the resulting public hardship, increased poverty and repeated threats of nationwide strike action by organised labour, all further underline the delicate political balance to be maintained.
At this point, we reiterate that regulatory transitioning has the potential to offer business growth opportunities. During President Goodluck Jonathan’s tenure, the Nigerian Oil and Gas Industry Content Development Act promoted indigenous participation in the oil and gas sector, fostering economic growth, job creation, and increased oil contract awards and undertakings. The rise of the Nigerian technology sector and the Fintech industry can also be traced back to the mobile telecommunications revolution of the Obasanjo regime. This momentum was further propelled by the banking policies of successive administrations, which liberalized digital and electronic transactions, commerce, and a myriad of value-added convergence services and products.
Risk Mitigation Strategies
The Nigerian regulatory climate is complex with multiple agencies and laws governing various sectors across different industries. Businesses should always seek to understand the relevant regulatory frameworks that affect their investment, operations, financing, governance, taxation and labour practices, and their industry or sector, to prepare and plan, manage or prepare resources to address changes. Below are some of the strategies that can be adopted:
1. Adaptation: Political transitions can be a source of uncertainty for businesses operating in any nation. Adaptation is crucial. After analysing and assessing industry-specific risks, businesses can commit to a set of actions that accommodate the regulatory changes, seize opportunities and respond to new threats.
2. Build Wholesome Relationships with Key Stakeholders and Authorities: It is important for businesses to maintain open communication with regulators, engage in consultations, attend industry events, and join associations to foster transparent, collaborative relationships.
3. Periodic Review of Internal Policies: Businesses should evaluate internal policies to align with evolving regulations during transitions.
4. Employee Awareness and Training: employees play a crucial role in regulatory compliance. It is critical to invest in employee awareness and training to ensure compliance with new rules to foster a culture of regulatory adherence.
5. Political Risk Insurance (“PRI”): political risk insurance is a risk mitigation tool that protects investors, organizations and businesses that face the possibility of loss of assets as a result of political events. It covers many possibilities, including, expropriation, political violence, and terrorism. A political risk insurance policy can secure physical assets, investments, and loans of businesses. For example, where the tools of trade of an oil and gas company are sabotaged as a result of an insurrection during a political transition, political risk insurance coverage could compensate and make good the losses suffered by the company.
6. Develop a Crisis Management Plan: a crisis management plan outlines how a business will address potential crises and risks related to a regime change. Businesses should create a crisis management strategy and transition plan which should cover employee safety practices, supply chain interruptions, legal challenges, regulatory investigations, financial and operational contingency plans, and communication plans. This would enable them to minimise damage and restore business operations as quickly as possible.
7. Seek Professional Advice: businesses can seek professional advice from legal, financial, and other experts with experience operating in Nigeria. This can help them stay informed about upcoming legal and regulatory changes, obtain advice to manage various risks and develop appropriate responsive measures.
Businesses must adopt a proactive and adaptable approach to effectively navigate regulatory changes, as this is pivotal in ensuring their sustained compliance, competitiveness, and long-term viability. Particularly for businesses operating in Nigeria, a deliberate effort should be made to foresee the possibilities and hazards associated with the ongoing regulatory transition. Seeking professional guidance is of utmost importance, as it enables businesses to anticipate growth prospects and innovative business development avenues. Furthermore, such consultations offer valuable insights for reducing, mitigating, or even eliminating potential risks.
 Mark John & Nwaiwu Johnson, “Impact of Political Environment on Business Performance of Multinational Companies in Nigeria.” AFRREV, VOL. 9(3), S/NO 38, July, 2015 accessed at https://www.ajol.info/index.php/afrrev/article/view/119132>.
 CAP. N108 Laws of the Federation of Nigeria
 CAP. C45 Laws of the Federation of Nigeria
 Definition by World Bank Group Multilateral Investment Guarantee Fund- https://www.risk-officer.com/Political_Risk.htm#:~:text=Political%20risk%20is%20the%20risk,in%20which%20they%20have%20invested
 https://www.mondaq.com/nigeria/oil-gas–electricity/1019096/overview-of-nigerian-local-content-law-in-oil-and-gas industry#:~:text=The%20Local%20Content%20Act%20is,different%20oil%20contracts%20and%20undertakings.