What Is Wrong With the NGO Regulatory Bill?

Originally published in Premium Times on October 6, 2016- premiumtimesng.com

While it is very difficult to regulate NGOs without infringing on the fundamental human rights for freedom of speech, some level of regulation for the non-profit sector is needed. Such regulation however should be crafted in a way that would benefit both the sector and the public, especially in an NGO-donor relationship where trust is crucial.

Recently, conversations about the NGO Regulatory bill dominated the airwaves with well-founded analysis from numerous quarters. Such critique was expected considering the enormous potential of having vibrant and independent non-governmental organizations. More importantly, at this critical time when the country is wading through the murky waters of economic instability, retracted growth and development, the non-profit sector can supplement government efforts. I was initially excited at the news of a Regulatory Bill for NGOs but that feeling vanished the moment I examined the draft copy of the bill. To say that I was disappointed and heartbroken is an understatement. Despite my curiosity about the content of the bill, I literally cringed on reading through it. My frustration began from the very first page of the bill, indicating heavy interference, coercion and control from government and its agents. This article augments existing advocacy on the regulatory bill, which is currently a step in the wrong direction and provides further analysis on how the bill can be reshaped to serve a higher purpose that will benefit citizens of Nigeria.

Regulating NGOs is not entirely a bad move but careful consideration must be given to the fine line between regulation and absolute control. A regulation of this nature, with adequate research and input from key stakeholders, can open up the non-profit sector and position it as a viable contributor to economic development. The era of solely depending on government for the provision of public and social services is quickly waning and NGOs have the capability to harness support from both the government and the business sector. This realization can assist in closing the gaps associated with the under-provision of public goods, over-exclusion of private goods, and contract failure in service delivery.

Fundamentals of NGOs

My reservations about the bill started with its failure to consider the fundamental definition of an NGO and the basic criteria or qualification for an NGO. I would have imagined a detailed classification by service area; for example, religious, arts and culture, education (basic and higher education), health, human services, public, societal benefit, and advocacy groups. It is unclear whether membership organizations like the National Union of Teachers (NUT), credit unions, and service clubs like Rotary and Lions clubs fit perfectly into the NGO classification. I expected a mandate to create a repository of all registered NGOs in the country; unfortunately, it remains a remote dream. Furthermore, the bill failed to thoroughly examine the involvement of NGOs with political activities, despite Nigeria’s evolving democracy.

The bill also fails to make provision for registration at the state level. I believe NGOs should be able to register and also file annual financial reports at that level, instead of the monopoly of a centralized system. The term ‘non-distributive’ constraint did not appear anywhere in the bill, which makes me wonder about the ideal governance structure for NGOs in Nigeria. This constraint prevents directors and promoters of NGOs from sharing the proceeds of the organizations. It would also clarify whether boards can accept remuneration or be compensated and ultimately if directors are eligible (or not) to deal with the organization at arm’s length. This ‘non-distributive’ clause has been suggested by many researchers as one of the reasons NGOs are trusted by donors and the public at large.

Nonprofit–Government Relationship

Another reservation with the bill is with the composition of NGO regulatory boards, as well as the role defined for the Commission. It was interesting to see how the bill was silent on the process of selection, which I think is paramount, considering the large numbers of NGOs in the country. Also, the mandate that the Commission would advise government on NGO activities was not very clear. I believe there is an opportunity for strengthened relationships, if properly pursued. But, at the same time it can usurp the responsibility of NGOs as an independent sector. For instance, in Canada, government and key stakeholders established a Voluntary Sector Initiative in 2001 to strengthen the relationship between government and non-profits. This initiative came into being, despite large government funding for charities in the country. As promising as this initiative appeared to be, they still experienced the problem of accountability, independence, and micro-management from government. This scenario would be worse for Nigeria with zero government support for NGOs.

NGOs and Fiscal Incentives

The current provisions of the NGO bill mandate organizations to seek approval from Federal Ministries and disclose funds pledged by donors, including the mode of disbursement, before implementing projects. Likewise, it assigned a percentage of funds for direct support of target beneficiaries, but left it unlocked. Apart from the fact that this dictate is absurd, it will also completely erode the freedom of the NGOs.

The process of laying a solid foundation for continual existence of the third sector should not be done without adequate research and buy-in from stakeholders. It will be worthwhile to study how NGOs/non-profits have thrived in developed countries, with lessons that can be adapted and improved on to suit our unique landscape.

Rather than having heavy restriction on funding, I would propose structures that can promote indigenous funding for NGOs outside foreign donations. Specific solicitation for more support from the government through tax breaks and grants for service provision should replace the current provision. NGOs can also enjoy tax relief from both personal and corporate income taxes, which I believe are progressive in structure, but they must pay tax on revenue generated from activities unrelated to charitable causes. The scope of personal income tax can be expanded to promote incentivized giving from the populace and not only wealthy households. The government can also strengthen the FIRS (Federal Inland Revenue Services) to indirectly regulate non-profits; this can be achieved through submission of annual financial reports, which would be made public. Only duly registered NGOs will access income, as well as corporate tax relief, and be eligible to give tax receipt to individuals and organizations for their donation. FIRS can also be empowered to investigate organizations that it suspects exist to enrich staff and boards but cannot investigate excessive expenses or poor management.

NGO Regulatory Bill and Future Opportunities

The process of laying a solid foundation for continual existence of the third sector should not be done without adequate research and buy-in from stakeholders. It will be worthwhile to study how NGOs/non-profits have thrived in developed countries, with lessons that can be adapted and improved on to suit our unique landscape. If careful consideration is given to this bill, it will be an opportunity to open up the NGO terrain in Nigeria.

The Regulatory Bill could help create more professional roles for Financial Advisory Professionals, Fundraisers, Accountants, and Lawyers in order to direct gifts and maximize tax benefits for donation. Grant writers, Major Gift Officers, Development officers, Growth and Advancement officers for Higher Education, and Case Managers are also new roles that would spring up in NGOs. Adequate attention would be paid to the recruitment/laying off process of NGO workers, as well as the use of volunteers, who are strong drivers in the sector. There would also be training and capacity building opportunities for non-profit professionals through emerging associations like Association of Fund Raising Professionals and Certified Fundraising Executives. Academic circles won’t be left out with research opportunities in addition to curriculum development around non-profit and NGO leadership and management.

Increased funding channels would be available to NGOs, instead of heavy dependence on international aids and grants. The Regulatory Bill would support Endowment funds, Donor Advised Funds, Charitable trusts and Annuities, Private Grant making foundations and Planned giving (which is often set up by the elderly to allow them realize tax benefits on their bequests in their lifetimes and that could serve as major donors for developmental projects.)

While it is very difficult to regulate NGOs without infringing on the fundamental human rights for freedom of speech, some level of regulation for the non-profit sector is needed. Such regulation however should be crafted in a way that would benefit both the sector and the public, especially in an NGO-donor relationship where trust is crucial. Violation of public trust can mar the existence of NGOs. Naturally, the sector allows self–regulation and monitoring bodies, such as the media and watchdog organizations. They can continue to provide some form of voluntary regulation by making information about fundraising and administrative activities of NGOs available to the public. Donors on their part can also systematically impose restrictions and instructions as contained in the contract/Memorandum of Understanding or grant acceptance document before commencement of a proposed project; and the state can help ensure compliance through the Federal Inland Revenue Services (FIRS).

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