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Nigeria: Rise In Ease Of Doing Business

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In July 2016, the Nigerian government inaugurated the Presidential Enabling Business Environment Council, as the administration’s flagship initiative to reform the business environment. The PEBEC, chaired by Vice President Yemi Osinbajo was also to attract investment and diversify the economy to reduce the nation’s reliance on oil.  The big picture was to make it easier for micro, small and medium enterprises to do business, grow and contribute to sustainable economic activity, and provide the jobs essential to improving social inclusion.

The PEBEC later approved the third 60-day National Action Plan (NAP 3.0) from February 5 to April 5, 2018 to drive the ease of doing business initiative. The action plan was expected to further reduce the challenges faced by the MSMEs when getting credit, paying taxes or moving goods across the country among others by removing critical bottlenecks and bureaucratic constraints to doing business in Nigeria.

In May 2017, Osinbajo as the acting President also signed Executive Order 1 on improving transparency and the business environment in Nigeria. Luckily, the implementation of some of these reforms and others across various sectors helped Nigeria move up 24 places in the World Bank’s Ease of Doing Business Index 2018. Nigeria actually moved up from the 168th position in 2017 ranking to 145th in the 2018 report scoring 52.03 out of 100.

This “improvement” was a product of serious effort put in by the government having also joined the Open Government Partnership, developed a National Action Plan and committed to “Improving the ease of doing business and Nigeria’s ranking on the World Bank doing business index”.

Now, what were the issues considered on the World Bank doing business index? Have the achievements translated to real benefits to the ordinary business owner on the street? Could the government have done better on some of these issues? The very first of the issues is starting a business, how easy or difficult is it to register and start a business? Then, dealing with construction permits and getting electricity. Without electricity, it is extremely difficult to operate a small business like welding, barbing and hair dressing salon, cyber café, business centre and printing work among others. These small businesses may end up committing their profit to generate alternative power supply like buying generators and fuelling such generators on a daily basis.

Other factors include registering property, getting credit, protecting minority investors and paying taxes. The intention of government is to see that the difficulty around these issues are removed such that Nigerians or even foreigners who want to do business in Nigeria do so with ease.

There is the factor of trading across borders, enforcing contracts and resolving insolvency. The combination of all these factors and others creates a good or bad business environment. The truth must be told, even with the commendation so far regarding improved business environment in Nigeria or ease of doing business, Nigerians know that some of the factors still pose a serious challenge to the business community. The recent window of opportunity announced by the Vice President between October and December 2018, to register new business at N5,000 instead of N10,000 is equally commendable but we all know that the electricity problem in Nigeria remains unsolved. Even if it costs zero naira to register a new business and the issue of epileptic power supply is not addressed, one of the most important factors has yet to be addressed. The 2013 privatisation that led to the handing over of 10 distribution companies and four generation companies to investors appears to be breeding more problem rather than solution.

It may be easy to pay tax, but in terms of getting credit to do business in Nigeria, the interest rate per annum is still on the high side. For commercial banks, the interest rate is as high as between 21 per cent and 26 per cent per annum, while for micro finance banks, it is about 35 per cent per annum. Under the circumstance, it may be difficult to borrow for productive or business purposes.

For people to appreciate the “improvement” in the ease of doing business ranking of Nigeria, the Federal Government should work hard to simplify business registration procedures, and offer steady and predictable electricity supply. This is one of the most important conditions for businesses to thrive. The interest rate needs to be reduced to single digit, to enable interested person(s) to borrow and invest in productive ventures, pay back and even make profit to remain in business. Getting borrowers to repay loans is one of the biggest problems commercial banks are currently facing in the country.

Credit: Punch

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