‘Regulatory bodies see businesses as cash cows’

Muda Yusuf is the director-general of Lagos Chamber of Commerce and Industry. He speaks with Odinaka Anudu on why many Nigerian businesses are not competitive. Excerpt:

Nigeria rose five places in the latest World Bank Doing Business ranking, jumping to 170 (out of 189 countries). Do you agree that doing business in Nigeria now is better?

I will not agree that there is an improvement in doing business in the country. I still feel that there is something about the parameters being used that is not right. For instance, they looked at business registration. This is one area where there is high performance. Business registration is a one-off.

It is unlike the issue of infrastructure that you confront on daily basis. And for registration, you can just contract a lawyer to do it for you. There is also something said about improvement in credit or ease of getting it, which again we do not agree with. The credit situation is still as bad, if not worse than it used to be. The majority of businesses we know complain of high cost of credit. The micro, small and medium scale enterprises (MSMEs) are still complaining about access to credit and conditions given by banks.

More important is the infrastructure, where energy is the number one issue. Government has reformed the power sector but the benefits are yet to manifest. Many of these manufacturers and service sector players have to rely on alternative sources of power. They use diesel, and many SMEs use smaller generators. If you move closer to them, you will hear lamentations on how much they spend daily on this. And this is affecting cost of production and is in turn affecting competitiveness. If your cost of production is high, you cannot be competitive, especially in the face of influx of goods from Asia.

You are dealing with high cost of energy, money, logistics, compliance with regulatory authorities, high cost of ports, demurrage and the like. To make matters worse, there is depreciation of naira. We already have these existing problems, and on top of that, we now have depreciation.

For you drive development in any country, you need power. It is a major infrastructure that drives SMEs growth, agriculture and industrial development. If you do not have power, there is no way you can develop agro-allied industries. You need such industries to support the agric sector.

So, how can we resolve the energy crisis?

Given our own peculiar situation or the fact that we are still developing, and given that we want to support businesses and create jobs, government needs to intervene to ensure that energy issue is resolved. In a developing economy, you do not put critical infrastructure in the hands of the private sector, especially in a situation where the private sector has issues with funding and capacity. President Obasanjo had to withdraw money (about $5 billion)from Excess Crude Account to fund the NIPPs. If you are expecting the private sector to invest $5 billion, do you think it would be as fast as that?

I admit the fact that government is not a good manager of assets or resources but the government of Nigeria has the resources to invest in infrastructure. The private sector has the management competence but it doesn’t have the resources. The government has the resources but it does not have the competence and discipline. They should have identified these gaps and do the synergy between the private and the public sectors to deliver the infrastructure.

So, in terms of power, government should play a role. It may be a contradiction of a sort to ask government to intervene when it has privatised. But my position is that it is a critical infrastructure, and for a developing economy, government should identify the bottlenecks and bail out.

If there is a failure in the power sector, just as it is now, nobody will blame generation or distribution companies, but they will all blame government. Have you ever seen anybody blame Ikeja or Eko disco? But you know that is your GSM line is not working, you don’t blame the government, but telecoms companies. Since there is competition in that space, you can drop the line and switch to another. But there is not competition in power. When you are in Ikeja disco, you are hooked there. You can’t say that Eko disco is cheaper and you jump over to it, unless you pack to another location. So it is still a monopoly environment.

There is this issue between Consumer Protection Council (CPC) and Nigerian Bottling Company (NBC), regarding a consumer complaint of two half-empty cans of Sprite. A civil penalty of N100 million and investigation cost of N60 million were slammed on NBC. Don’t you think that these are very high and could discourage investors?

You see, the regulatory environment is a big issue for investors. First, the regulators are the accusers and the judges. They are the ones that will give you charges and penalties. Secondly, their charges are too much, sometimes outrageous. There has to be a mechanism to regulate these charges. What you find is all that of them seem to be on their own. They impose the charges and that is the end. Nobody has powers over them. There is also the issue of duplication of functions between NAFDAC, SON and CPC. We, in fact, made this point to the minister of industry, trade and investment and he said there was an ongoing process to identify these overlaps and see how they can be better streamlined. Our members are also complaining about frequency of visits. Each time they go, they demand for this or that. These are the complaints but we have lodged them in appropriate quarters.

But are you not worried that their activities could impact negatively on Foreign Direct Investment?

This is generally a bad signal. The beauty of the economy is to have regulatory agencies that are fair, just and equitable, that creates a level-playing ground and conducts its activities with utmost integrity. It is not a very good signal. But for me, domestic investments are more important than foreign investments. You get more value from domestic investments, in terms of jobs, re-investment, profit retention, especially for small businesses. Foreign investments are good and at governmental level they pay attention to them. But what indigenous companies are doing is much more than what foreign investors are doing. I know FDIs use more technology. The more technology they use the less labour they require. They make profits and off they go with them. So activities of regulatory bodies affect both domestic and foreign investors.

How can we rejuvenate the non-oil export sector in the face of the current economic situation?

The problem the non-oil export sector is facing is lack of competitiveness. If you produce here and you are not competitive either in terms of price or quality, you cannot do any successful export. So it goes back to the issue of quality of business environment. You need to create a business environment that will enhance productivity and minimise bottlenecks. The beauty of export in general is competitive advantage. We have this advantage in oil and gas. We have no business importing petroleum products; we are on oil producing country. There are a thousand and one things we can produced that are oil-based that will give us an edge over other countries. If we have a well-developed petrochemical industry, we can make a lot of money from it. If we have refineries working, we should be exporting petroleum products. Then we have fertilizer plants; then the agric and agro-allied industries.