Nigeria: The Ease of Doing Business and Business Confidence

By LakinbofaGoodluck

The World Bank in its recently released Ease of Doing Business report titled “Doing Business 2018: Reforming to create jobs,” ranked Nigeria 145th out of 190 countries in the Ease of Doing Business index for 2018. Nigeria moved 24 points from 169th in the 2017 ranking. The latest report puts the country among the top 10 most improved economies in the year under review. The report has been well received by officials of the government, economic analysts and business stakeholders across sections of the country. In the wake of the 2017 report released in 2016 that ranked Nigeria 169, the President set up the Presidential Enabling Business Environment Council (PEBEC)in July 2016.Headed by the Vice President, Prof.YemiOsibajo,the intergovernmental and inter-ministerial council was mandated to remove bureaucratic constraints to doing business in Nigeria and make the country a progressively easier place to start and grow a business.Consequently, the Enabling Business Environment Secretariat (EBES)was set up to coordinate with Ministries, Departments and Agencies of the government in the execution and implementation of the action-plans of PEBEC.

To ensure purposefulness and success measurability, the reform areas pursued by PEBEC are directly hinged on the metrics used by the World Bank to measure the ease of doing business in countries. This means that improved ranking in the World Bank’s Ease of Doing Business report will naturally be a success stamp for PEBEC. In all fairness, this is probably the most tenaciously pursued endeavour by the current administration. With a series of Executive Orders by the Vice President and accelerated passage of bills by the National Assembly, Nigeria was able to significantly activate necessary reforms in the Nigerian business landscape. Many of the achievements recorded by the committee were largely recorded in the 60 day National Action Plan (NAP 60), that ran from February – April 2017. Within the period, the Corporate Affairs Commission (CAC) improved its online business registration process, which currently enables the registration of business in Nigeria in two days. Following the passage of the Secured Transactions in Movable Assets (Collateral Registry) Bill and Credit Bureau Services Bill, and the implementation of other reforms, Nigeria is now ranked 6^th in easy access to credit according to the Credit Bureau Limited.It is truly an elating report that serves as some form of reward for hard work and purposeful headship.

It is appropriate for the latest report to elicit excitement from Nigerians. And the PEBEC, led by the Vice President, deserves commendation for improving our ranking from 169 in 2016 to 145 in 2017. However, a 10-year historical analysis of the ranking shows that Nigeriahad had a better standing before we started diminishing for lack of attention to ease of doing business in the country. The country’s status started plummeting from 218 in 2007 to an all-time peak of 170 in 2016, making us one of the twenty worst places to do business in the world. This was the point the government suddenly realised that if status quo was maintained, we wouldprobably have to compete with Somalia as the foremost worst country to do business in the world.

To a large extent, the metrics for measurement by the World Bank have always remained constant, which makes it easier for interested and purposeful policy makers to measure up and make the environment business friendly. But in our typical manner, we did not find cogent reasons to reform our business environment. The World Bank had always reported the difficulty in doing business in Nigeria, and how hostile it is to the growth and development of Micro, Small and Medium Enterprises (MSME) in the country. Until recently, registering a business in Nigeria could take 30days or even more, compared to less than a day in New Zealand. This explains why Foreign Direct Investment (FDI) to the country has been dropping in a rather disturbing manner. For instance, between 2004 and 2014 Nigeria ranked among the top three destinations for FDI in Africa with investment ranging from $5-7billion according to the United Nations Conference on Trade and Development (UNCTAD). But in contrast, according to the National Bureau of Statistics, Nigeria recorded no direct capital investment inflow in the third quarter of 2016.

The Business Confidence Index which measures the level of optimism or pessimism that pervades the business environment of a country, further gives credence to the abysmal state of our business environment. The Nigeria’s Business Confidence Indexhas been on a decline since 2016 currently standing at -2.60 compared to Germany with 116.7. The Business Confidence in the country reached an all-time high of 41.10 in the second quarter of 2011 and a record low of -29 in the fourth quarter of 2016. Naturally, when business confidence is low, investors are cautious in making capital investmentsas a result of uncertainties in the economy. This probably explains why the unemployment rate in the country has been on a steady increase from 6.4% in January 2015 to 14.2 % in January 2017 according to the National Bureau of Statistics (NBS). Sadly, the youth unemployment rate is higher than the general unemployment rate. According to NBS youth unemployment currently stands at 25.2%.This perhaps has a correlation with the 125,790 reported casesof crime in the latest NBS “Crime Statistics: Reported by Type and State” compared to Singapore with less than 1000 reported cases of violent crime.Is it not puzzling that while countries like Canada with a higher aging population are creating immigration policies to attract youths to drive their economy, Nigeria seems unbothered by a growing youth population with no jobs?

The many years of poor rating in ease of doing business and the persistent low Business Confidence explain why a country of 180million population would have a GDP of $405billion and per capita income of $2,200, when Sweden, a country of 9million population flaunts a GDP of $511billion and a per capita income of $51,599. We have lived consistently on the proceeds from crude oil and cared less about growing our economy. While the world is embracing the knowledge economy, we have clung to an oil economy. Nigeria was plunged into recession because of fall in global oil price and drop in local crude oil output. The country eventually came out of recession because of the stability in oil price and the increase in oil output. As a result of this dependence on oil and its attendant economic magic, our leaders have cared less about creating the enabling environment for other businesses to grow.Our woes are more compounded by the cancerous corruption that has penetrated and settled into the inner artery of our corporate existence.

This is why one should commend the constitution of the Presidential Enabling Business Environment Council (PEBEC) and the strides they have made so far. The latest improvement in the country’s ranking will naturally have impact on the Business Confidence Index and provide the much needed assurance for investors to consider the country for investment. The more business friendly a country is, the higher FDI it attracts. The more FDI a country attracts the more jobs that are created for the population. An active and properly engaged population births a socio-economically stable society, which is the hallmark of great nations. Beyond the commendations, there are still areas in the World Bank report that require improvement and urgent attention. Nigeria ranked poorly in the Resolving Insolvency and Trading across Borders metric. Let it be made clear to policy makers that our current business environment does not encourage export. According to the report, between 2007 and 2017, the only recorded business reform aimed at improving export is theupgrade of facilities at the Apapa port in Lagos, which was done in 2009.

This implies that investors who intend to invest in exportable goods are not welcomed in Nigeria at the moment. Of course, the chaos in Apapa and its environs clearly reflects that reality. The problem is that we easily talk about export, but we do not match our words with actions. Nations become richer by engaging in international trade, in this case exportation; nations remain poor by not engaging in international trade.Our nation is too blessed and strategic to be averse to export. If our business environment remains unfriendly to export, we can keep moving steps in Ease of Doing Business ranking and not make any significant progress. In any case, whilst we celebrate the latest ranking, we are still one of the worst 50 countries to do business in the world. We need to aim at becoming one of the best 50 countries to do business in the world. This requires consistent and unrelenting effort by the government and every stakeholder. It is sad that we live in a country where reforms are usually not sustained or completely abandoned after a few achievements. The Vice President, PEBEC, and the entire government must see the latest report as a call to do more; we still have a long way to go. In actual fact, we have just attained the state we were three years ago. We need to set a new record.