Nigeria may have attained its best ease of doing business (EoDB) ranking since 2015; the frontline experience of businesses still falls well below acceptable standards. Poor infrastructure, multiple exchange rates, scarcity of FX, unfavourable port tariffs, discouraging actions of public servants who interface with businesses, bestial insecurity level, and the dearth of useful incentives for businesses amongst others continue to diminish investors’ confidence in the economy.
These bottlenecks bedevilling the nation have whittled down the growth potential of the economy, crushing underlying business profitability.
According to an IMF recent report, the economic growth projection from 2022 to 2026 will barely top the current 2.7 per cent trajectory. Considering also that the World Bank put the national population estimate at 2.5 per cent per annum as of 2020, the difference between the economic growth potential and the annual population growth rate is a mere 0.2 per cent. This is not impressive, and it calls for urgent growth action.
Simply put, without urgent intervention to improve the economy through the implementation of attractive policies that will improve investors’ confidence in the economy as well as reinvigorate market outlook, there may not be enough jobs for the 3.5 million young people that are said to be joining the country’s labour force annually.
The EoDB ranking mirrors a country’s regulatory environment in terms of the conduciveness for starting and operating a business locally. Published by the World Bank, the global financial institution uses different parameters to define the simplicity of regulatory practices in around 190 countries.
Some of the parameters that the institution focuses on in ranking economies are trading across borders, protecting minority investors, starting a business, access to credit, level of tax infrastructure, property registration, availability of electricity, dealing with construction permits, and resolving insolvency.
In pursuance of the goal of improving Nigeria’s business climate and the poor EoDB ranking, the current administration set up the Presidential Enabling Business Environment Council (PEBEC) in 2016. In the same year, the Federal Executive Council (FEC), presided over by Prof Yemi Osinbajo, the Vice President of the federation strategically proposed a bill that would positively enhance the procedures for doing business in the country.
The council believed that a focus on due process and diligence in business procedures across the key EoDB index would yield the desired improvement in the business environment.
Recalling this improvement focus, during the 5th anniversary of PEBEC, Dr Jumoke Oduwole, the Special Adviser to the President on EoDB, said, “We decided to work on transparency. One better way was to demystify information and give the information to Nigerians – business people who want to do work in Nigeria, to make sure that people have the information they need to make quality decisions. We decided to have a strong technology drive; pushing agencies to have functional websites, and the websites should have critical and quality information.”
Although the brilliant approach, including the 60-Day National Action Plan (NAP), adopted in 2017 to fast track the attainment of the PEBEC mandate, has yielded a continuously improved ranking for the country on the EoDB platform, analysts say the impressive economic ranking does not reflect the true reality in the market.
One of the gross shortcomings of the Nigerian business environment is what importers go through at the local port daily. Precisely, import tariffs are far above reasonable level.
According to a trade.gov report, “The NAIDP imposes a 35% levy on automobile imports, in addition to the 35% tariff already levied, for an effective total duty of 70%. The NAIDP allows companies that manufacture or assemble cars in Nigeria to import one vehicle for every one manufactured in Nigeria.”
Understandably, the government is trying to generate more revenue for the economy. Achieving government revenue growth at the detriment of the businesses operating in the country and the well being of the masses is a deep concern.
Olugbenga Jaiyesimi, a respected local analyst, said, “One is not averse to growing government revenues but it should not be achieved at the expense of businesses. To achieve it, we have to grow the economy, especially the manufacturing sector.”
He continued, “We have to achieve it by reducing taxes and many other government fees, not by increasing them. This attracts more businesses to Nigeria and makes up for the lower taxes while at the same time increasing employment. This has been shown to work elsewhere. Ghana adopted this policy a few years back and droves of businesses moved into Ghana.”
The EoDB is not a growth tool. It is a mere reflection of the operating environment. Targeting improved global ranking is fine but prioritizing the frontline experiences of business operators is better. This is key to attracting foreign investors.