Doing Business in Nigeria

The “Doing Business” Survey provides objective measures of business regulations and enforcement in 181 countries/economies across the world. The 2009 report released by the World Bank Group in May shows that the global top ten in terms of overall ease of doing business were Singapore; New Zealand; USA; Hong Kong; Denmark; UK; Ireland; Canada; Australia; and Norway-no surprises there, even though it brings home the complete domination of modern civilisation by Western and East Asian nations. Other regions-Eastern Europe, South America, South Asia, Middle East and of courses Africa continue to lag behind the rest of the world. But then there are those whose response will be that American democracy is over two hundred years old as if we must repeat and re-learn the two centuries of American trial and error over again before we develop. The fact that the leading nation in this survey, Singapore was behind Nigeria in 1965 should shame those who continue to argue in favour of national mediocrity!
Given that we have decided to stop comparing ourselves with the developing world in terms of infrastructure, standard of living, quality of elections, levels of corruption and other developmental indices, I thought perhaps it was pointless comparing Nigeria with developed nations (we’ve even given up on comparing ourselves with North African nations-Egypt, Morocco, Algeria, Libya etc!). Better to focus on the sub-Saharan region to see how we rate in comparison with the rest of our peers in the lowliest region in the world. Well the result in order of performance-Mauritius, South Africa, Botswana, Namibia, Kenya, Ghana, Zambia, Seychelles, Swaziland, Uganda, Ethiopia and Nigeria. Nigeria was twelfth in sub-Saharan Africa and 118th globally. By comparison, Mauritius was first in the region and 24th globally; South Africa-second and thirty-second; Botswana third and thirty-eighth; Namibia fourth and fifty-first; Kenya eighth and eighty-second; Ghana sixth and eighty-seventh; Zambia seventh and hundredth; Seychelles eighth and 104th; Swaziland ninth and 108th; Uganda tenth and 111th; and Ethiopia eleventh in sub-Saharan Africa and 116th in the world.
Nigeria is behind Ghana in West Africa and if the report is believed it is easier to do business in Ethiopia, Uganda and Swaziland than in Nigeria! Nigeria’s global rating declined four places from 114 in 2008 to 118 in 2009, while many African nations reported improvements. How did we earn this rating? A review of the breakdown of our scores and ratings reveals some not-too-surprising explanations. We recorded reasonably acceptable ratings on six criteria-employing workers, investor protection, getting credit, enforcing contracts, starting a business and closing a business coming 27th, 53rd, 84th, 90th, 91st and 91st globally in these areas. These ratings are consistent with the experience of businesses. You can easily get labour and since labour protection is weak, you can easily dispense with them. Unemployment is very high and even though there are issues with employee skill levels and productivity, the labour pool is very large.
Nigeria does not have a history of expropriating private investors’ assets, but it is possible that our ratings in this respect may deteriorate as we begin to seek to change oil sector contracts, cancel concluded privatisation transactions, cancel 2.3GHz spectrum auctions validly carried out by the NCC etc. The financial sectors’ increased capacity meant that it was reasonably easy for large businesses to access credit. Even then small and medium enterprises still have difficulty securing credit and the banks have recently become tighter with loans in the wake of the margin loan crisis. The rating of 90th in enforcing contracts is perhaps generous considering the length of time commercial litigation consumes but the ratings with starting and closing a business reflect the improved services at the Corporate Affairs Commission and Nigerian Investment Promotion Commission.
The areas in which we did very poorly will not surprise anyone-paying taxes (120), cross-border trade (144), construction permits (151) and registering property (176). The problem of multiplicity of taxes, rates and charges by federal, state and municipal authorities and arbitrary imposition of new charges at every whim is a major problem for businesses. The rating for cross-border trade reflects the continuing problems with the ports, customs, foreign currency procurement and borders and the severe logistics constraints that Nigerian businesses have to contend with. The last two poor ratings are also consistent with expectations. It is easier (and cheaper) for a camel to pass through the eye of a needle than for a business to register interest in land and obtain construction approvals from town planning authorities. In terms of registering landed property, there are only five countries in the world worse than Nigeria!
No Nigerian business person will argue with any of these ratings which are obtained on the basis of surveys of businesses operating in each rated economy or country. If we want to attain the objectives of Vision 2020 clearly we have to do better. If we must be one of the top twenty economies in the world, is it not reasonable that we seek to be in the top twenty in terms of the ease of doing business amongst global economies? We need private capital in power, transport systems and infrastructure, manufacturing, agriculture, mining, health and educational facilities, tourism and services (financial, ICT, logistics etc) and other sectors if we are to grow this economy at the desired speed. We can’t get that private capital if businesses believe our business environment is mostly hostile to business.