Why Nigeria’s doing business ranking matters

Why Nigeria’s doing business ranking matters
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The 2019 World Bank Doing Business indices showed clearly that Nigeria must get its acts together to become attractive. Perception matters and investors look at numbers to make vital decisions. Nigeria ranked 146 out of 190 economies in the 2019  World Bank’s ranking.

Africa’s most populous nation ranks 12th  on getting credit; 120 on starting a business; 92 on enforcing contracts; 171 on getting electricity; 157 on paying taxes; 182 on trading across borders; 149 on resolving insolvency, and 184 on registering property.

From these, it is crystal clear that the country has major hurdles to cross in the areas of starting a business, getting electricity, paying taxes, trading across borders, registering property and resolving insolvency.

Let’s start with starting a business. As of the time the report came, the Corporate Affairs Commission’s performance and compliance with 24-hour registration was poor. Has it improved? Many entrepreneurs agree, but believe it is not as fast it should be. Perhaps, the problem lies in the states where new businesses are asked to pay huge taxes and levies. All over the world, larger chunk of jobs are created by new businesses, not existing ones. This is why the United States of America is worried that new business formation is down 100,000 annually in the country.

 A study done by the United States Census Bureau on the jobs created between 1980 and 2005 showed that 100 percent of new jobs within this period were created by businesses that were less than five years. Older existing businesses, in aggregate, shed about one million jobs annually on the average.

“Innovation mostly comes from new businesses,”   John Dearie, founder and president of Center for American Entrepreneurship (CAE), said in Washington D.C, United States, recently.

But most states in Nigeria do not care. Once an entrepreneur opens up a restaurant, hordes of touts besiege the business place demanding huge sums of money.

Rwanda generally ranks 29 but specifically 51 on starting a business. Little wonder unemployment rate in Rwanda fell by 3.4 percentage points between August 2017 and August 2018. This, perhaps, shows how the country values new businesses.

Next is getting electricity where Nigeria ranked 171st. It is a shame that a country of 200 million people generates about 5,000 megawatts (MW),which is about 0.000025MW per capita. Worse still, it distributes 2,500 to 3,000MW.

Potentially, Nigeria has the capacity to generate 12,522 megawatts of electricity from its existing plants across the country, according the data obtained from United States Agency for International Development (USAID).

South Africa may be having problems with its Eskom, an equivalent of the old NEPA or PHCN in Nigeria, but it still has the capacity to generate 51,309 (MW). Yet, this country ranked 109 on getting electricity. Kenya’s current effective installed electricity capacity is 2,651 MW, with peak demand of 1,802 MW as of June 2018, which is why it ranked 75 on getting electricity.

According to a survey conducted by the Manufacturers Association of Nigeria (MAN), expenditure on alternative energy sources totalled N93.1 billion in 2018.

 

In fact, MAN has set up a power company with a view to seeking ways of getting steady energy supply at reasonable costs.

Kudos to Nigeria on being 12th on getting credit chart, but trading across borders is still an issue. The country ranked 182nd on trading across borders for obvious reasons. Today, Apapa gridlock and access to major ports in the country continue to make products less competitive in the global market. Cashew and cocoa exporters lament that their products get bad due to delays and they lose overseas customers because of Apapa and Tin Can situation.

During  a recent conference, the Ogun State chapter of Manufacturers Association of Nigerian (MAN) concluded that the gridlock in Apapa has raised production cost, as members often pay unnecessary demurrages due to delays of getting containers out and in of Apapa.

“If Nigeria does not want to collapse its economy, then the Apapa gridlock has to be solved urgently,” the association said.

Even the Nigeria Customs Service does not have functional scanners. More so, roads from Lagos to Cotonou, Benin Republic, are bad. There are more obstacles from those policing the borders than the two countries have. More so, other nations see Nigeria as a protectionist trying to ban products that they cannot even produce in the desired quantity. The steel sector is a clear example of this. Manufacturers say some items on the Central Bank of Nigeria’s list  of banned items are still not produced in the right quantity.

Again, Nigeria ranked 149 on resolving insolvency because cases are often stuck for ages in courts. It took many years to resolve the ownership of Ajaokuta Steel Complex. Aluminium Smelter Company’s case is still in court. When will this be resolved?

Even cases taken out of courts are not easily resolved.

Think about Nigeria’s regulators. They are powerful and sometimes perform overlapping responsibilities. The National Agency for Food and Drug Administration and Control (NAFDAC) does not accept tests done by the Standards Organisatio of Nigeria (SON). They both must do separate tests on an individual business.

Other countries have performed better than Nigeria in many areas, which is why Rwanda was 29th I  in this area; South Africa was 82nd, and Ghana was 114th.

Analysts want Nigeria to resolve Apapa and Tin Can ports’ terrible situation, while also looking at renewable energy to improve the poor energy situation. They insist Nigeria cannot make headway without steady power supply, calling for a market-driven charges from power suppliers.

 They also want a speedy resolution of business-related issues as well as harmonisation of taxes and regulations. They add that Nigeria must bring many into the tax net while making taxes transparent and clear.

Odinaka Anudu, Joseph Maurice Ogu & Gbemi Faminu

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