Doing business in Nigeria continues to present its peculiar challenges, not only to aspiring entrepreneurs but also to established local and foreign investors. Year after year, surveys by respected international agencies always come up with the conclusion that the country’s business terrain is one of the toughest and most unfriendly in the world. This year’s Ease of Doing Business report from the World Bank says nothing different.
Indeed, it is amazing that even when the government acknowledges the existence of certain drawbacks to the smooth running of business and promises to ease off the obstacles, the situation remains more or less the same. This is what the recent data released by the World Bank, where Nigeria is ranked 169th out of 189 countries surveyed in the Ease of Doing Business, confirms. Despite promises to provide an environment conducive to business, the Doing Business 2016 report showed that the country only improved marginally from 170th last year to 169th this year.
For a country with so much potential, and currently Africa’s largest economy, this is very disappointing. It can only be imagined what would happen if the authorities could take the necessary steps to position Nigeria as the preferred investment destination. All that is needed is simply an enabling environment for business to thrive.
The rating of other African countries in the yearly World Bank report, which investigates regulations that enhance business activity and those that constrain it in countries around the world, only accentuates Nigeria’s dire situation. While it may be understandable that a country like South Africa, unarguably Africa’s most developed economy, fared better than Nigeria, it is quite difficult to fathom why the so-called giant of Africa is trailing countries such as Sierra Leone, Zimbabwe, Togo and Lesotho, among many others.
It is a clear evidence of how much the Nigerian system stifles creativity and continues to keep the country economically and technologically down. It also explains why some business concerns have been relocating to Ghana and some other climes, where conditions are less stifling. With the prices of oil, Nigeria’s economic mainstay, at a 10-year low, a more friendly business environment would have helped to speed up the country’s economic diversification and ramp up job creation for the teeming number of school leavers currently swelling the population of those in the labour market.
Needless to say, one of the factors responsible for the inclement business environment in Nigeria is the hopeless power situation. Under the Getting Electricity category, Nigeria ranks 182nd out of 189 countries, a decline from last year’s 181st position. While South Africa, for instance, boasts over 45,000 megawatts of electricity for her estimated population of 52 million people, Nigeria’s electricity output fluctuates between 2,500MW and 5,000MW. This is what is available for industrial and domestic use in a country of estimated 170 million people.
Easily the most noticeable drawback to business, the lack of constant electricity makes the cost of production prohibitively high and renders goods produced locally uncompetitive in terms of cost. It is the main reason Nigeria’s textile and garment industry, for instance, has shrunk from the peak that boasted over 175 mills in the 1980s and 1990s to less than 30 now.
Nigeria also fared badly in the categories of Registering Property, Paying Taxes and Trading Across Borders, where she was ranked a joint 181st and 182nd respectively, retaining the positions for last year in the last two categories. As for Registering of Property, it was actually an improvement on that of last year which stood at 185. Enforcing Contracts and Resolving Insolvency are the other areas where businessmen encounter problems in the country. In both categories, Nigeria retained her last year’s position of 143 out of 189 countries. In the Starting a Business category, Nigeria was ranked 139th, eight steps worse off than last year’s situation.
The only areas where she featured below 100 were in the Protecting Minority Investors and Getting Credit categories, where she placed 20th and 59th respectively. The former witnessed a rise from 33rd while the latter was a fall from the 52nd position. But then, what businesses go through to access credit, with the very high interest rates of between 20 per cent 30 per cent, makes the World Bank ranking contestable.
For a country badly in need of foreign and local investments to boost the economy and create jobs, this is an opportunity to remove all obstacles to starting and sustaining business. It is not as if efforts had not been made in the past, they just have not been far-reaching enough. According to the World Bank report, the noticeable progress made in Protecting Minority Investors and Getting Credit has been as a result of such efforts. The former was achieved by subjecting “related-party transaction to external review” and approval by disinterested shareholders; while the latter, in a 2013 review, was as a result of improved access to credit information “by distributing credit information from retail companies.”
However, despite the introduction of an online system in 2008 for company name search and increased efficiency in company registration, Nigeria still remained 139th in starting business. Dealing with Construction Permits has also been made easier by the official time limit for the issuance of such permits.
But despite these token steps, it is certain that reforms have to be more radical. For instance, there is hardly anything that can be achieved if the power situation is not improved. Efforts also need to be intensified in border policing to avoiding the dumping of cheap and probably fake and inferior goods within Nigeria’s borders, which stymies local manufacturing. The issue of multiple taxation should be given a serious attention, while interest rates should be such as would make credits accessible, especially to the small- and medium-enterprises, which are the engine room of job creation in every economy. The government should also intensify efforts to provide adequate security, which is necessary for business to thrive.
