As headwinds continue to hit the nation’s economy, with ominous signs about growth prospects, Nigeria’s low rating in the current World Bank Index on Ease of Doing Business, which outlines issues assailing economic activities in the country is a timely wake-up call for the Buhari administration; and one which must be treated with the urgency it deserves. An essential part of the ecology of democratic governance is a conducive environment for economic development. The fact that Nigeria barely notched from the 170th position in 2015 to 169th out of 189 countries, is an embarrassing assessment and a euphemism for corruption and bad governance. For the Buhari administration faced with the challenge of creating jobs and fighting unemployment, this is a wake-up call to re-draw Nigeria’s economic blueprint by studying how other nations fare in terms of the various ease of doing business indicators.
According to the report released by the World Bank on its website, besides improvement in protecting minority investors and registering property compared to 2015, not much has improved in dealing with construction permits, cross border trading, contract enforcement and resolving insolvency. In reaction to the report, the federal government announced the creation of an Inter-ministerial Committee headed by Vice-president Yemi Osinbajo with Trade and Investment Minister, Okey Enelamah, as vice chairman. The committee will also include representatives of the organized private sector which will avail it the benefits of experience, while the government will ensure backing with political will and overall direction. While the inter-ministerial committee is commendable, it must learn from past mistakes and one way to do this, is to set measurable, achievable goals in specific areas, within specific time frames, else it will be just one committee too many, and another waste of time venture.
The World Bank report is based on the research of experts who identified specific challenges to improve Nigeria’s ranking. These include sloppy taxation system, epileptic power supply, getting credit, enforcing contracts, trading across borders, bureaucratic bottlenecks among others. The performance of assessed countries is compared to their peers. In a damning indictment, the World Bank noted that, “Everything takes time in Nigeria.” On average, it takes a month to start a business, compared with one week in Zambia; 908 hours to pay taxes; 10 weeks to register property (at about 11% of its value), as contrasted with 3% in Rwanda; and six months to get electricity, compared with one month in Rwanda.
According to the report, Nigeria’s physical infrastructure does not provide enough support for new and growing businesses. The report highlights the impact of Nigeria’s well-documented infrastructural challenges on new businesses; noting that epileptic power supply has resulted in backup generators forming a key part of business assets, significantly increasing operating expenses. Yet, manufacturers must rely on diesel supply which is hampered by perennial shortage of petroleum products. The report also revealed that the cost of capital charged by Nigerian banks and investors is so high as to impede profitability. In some cases, Nigerian banks demand 150% of the requested loan amount in collateral, thereby automatically disqualifying many small businesses from funding eligibility.
Nigerians are all too familiar with the challenges of interstate commerce, as transporters moving goods across the country are harassed by multiple government agencies. In many parts of the country, they dare not travel by night. Road transportation is burdened with more than 90% of haulage of raw materials and finished products. Yet the road infrastructure nationwide is an emergency in its own right. Since 1972, studies and recommendations for the funding and management of road transport network have not been implemented due to lack of executive will; especially by civil servants who have resisted change by undermining the necessary reforms in the sector.
Beyond the challenges outlined in the report, it is tempting to question the logic of comparing Nigeria with its unique challenges to other countries. However, valid principles are applicable across countries, so, Nigerian leaders must stop making excuses and imbibe good examples from other countries that have successfully improved their business climate. Kenya climbed 21 places between 2014 and 2015 by making critical reforms leading to improved power supply and access to business finance as well as changes in property registration procedures. For Nigeria, it was recommended that a focus on improved taxation and property registration would take Nigeria 47 notches up to 122 by 2019; towards achieving the Nigerian government’s goal of rising to the first 100 by year 2020.
The clear assumption here is that the longer it takes to secure key regulatory inputs or the costlier key services are, the more time it takes to make goods, the less profit will be made and the less income created. Why should an investor locate a company in Nigeria if his competitor would have completed the same business in Ghana by the time he finally secures company registration, land title and required regulatory permits for production? These problems further cascade into cross-border trade. The report revealed that on average, it costs $786 for compliance with requirements at Nigeria’s borders. In Kenya, the corresponding figure is $143. As a result, Africa’s largest economy has not reaped the benefits of its leadership in the continent.
The challenge of development is to tread this narrow path by identifying regulations that are good and necessary, and shunning ones that thwart creativity and hamper the functioning of businesses. A modern economy cannot function without regulation but, at the same time, it can be grounded by cumbersome regulation. Importantly, the World Bank report is more concerned with the environment governments build for businesses to thrive and how this environment impact foreign investors. A positive sign in this direction is that Trade and Investment minister is a member of the committee charged with improving Nigeria’s business environment. His announcement that government has resolved to implement the Nigerian Industrial Revolution Plan launched by the Jonathan administration in 2014 is a step in the right direction, but he must match words with action.
In its drive to attract investors in a highly competitive global village, Nigeria must muster the will to harness and foster its full potentials. If the Buhari government is serious about change, this World Bank report should be an agenda for action and a basis for benchmarking improvements in the business climate. Sadly, besides the inter-ministerial committee, there is no evidence that government officials will read, let alone elaborate action based on the World Bank and sundry reports.
