Hassana (not her real name) is wedged behind her HP workstation with stacks of documents required to register a client’s business in a one-room apartment in Jabi, Abuja. On a table nearby, a scanner and a printer whir along as she spends monotonous hours signing and scanning document after document to upload onto the website of the Corporate Affairs Commission (CAC).
Over a five-day period, Hassana, a lawyer, tried to register a company on the portal of the agency charged with regulating the formation and management of companies in Nigeria. From the public search, to the reservation of name, to the registration itself, the process left Hassana frustrated and groaning as the server of the agency kept crashing. The constant breakdown of its servers is one of the major barriers to registering a company in Africa’s largest economy.
Each time Hassana called the customer service hotline of CAC, she was told someone will work on her registration and get back to her via email. “This is not unusual,” she says, “it is either the server is down or staff of the CAC do not attend at all to your documents. You are forced to constantly call them. Doesn’t this then defeat the objective of complete online registration they boast about?” she says.
These setbacks are happening early in August, almost a year to the day President Muhammadu Buhari signed the 2020 Companies and Allied Matters Act (CAMA) into law. The law, one of the most important pieces of legislation, seeks to improve conditions for doing business and promoting Micro, Small and Medium Scale Enterprises (MSMEs) in Nigeria.
A major driver for the update of CAMA was the need for laws that spurred new businesses, especially MSMEs. According to the National Bureau of Statistics (NBS), small and medium scale enterprises (SMEs) in Nigeria have contributed about 48 percent of the national GDP in the last five years. With a total number of about 17.4 million, they account for about 50 percent of industrial jobs and nearly 90 percent of the manufacturing sector, in terms of number of enterprises. These catalyse jobs, help reduce poverty and grow the economy.
With most of such businesses in Nigeria operating in the informal sector, an update to CAMA was meant to use technology to make the process cheap, seamless and integrated with the tax authority and the CAC. More businesses in the formal sector will increase the tax revenue of the government, according to a report by the Centre for the Study of the Economies of Africa.
The CAC swears that this is the best of times for those seeking to register their companies because the process is easy and without hassles. “The process is still challenging,” says Hassana.
Running a business is hard and frustrating in Nigeria. Business owners have to deal with many challenges such as obtaining all manner of permits, access to electricity, access to credit, filing of taxes, property registration, protection of minority investors, enforcement of contracts and flexibility in employment regulation and redundancy costs. Put together they make doing business in the formal sector uninviting.
Owners of small businesses in Nigeria face a hurdle transiting into the formal sector. Registering their company, which should be the most basic, is a challenge. Those who dare to overcome the barriers hire Hassana who runs a law firm from her home in Jabi, a middle-class suburb in the city. She makes a living helping clients navigate the maze of bureaucracy required for registering a new company. “I have spent the last 10 or so years either registering companies or drawing up agreements for clients”, she says.
This in no small way adds to their business and start-up costs. While it officially costs less than N10,000 to register a business name, contracting it can cost an additional N30,000 at least, a pricey sum for many seeking to register a business name for their small business.
Sometimes, many are forced to hand over the process of registering their companies to staff of the CAC, who by regulation and law are exempt from doing so, notes Hassana. “A lot of registrations are done by staff of CAC who tell customers they can facilitate the registration for them. It is no wonder the server is always down and staff are nowhere around to attend to your documents”.
But it is not just MSMEs that find it problematic engaging with the CAC. Several lawyers in Abuja, Lagos and Ibadan who spoke with BusinessDay say the incapacity of CAC to manage its systems and processes remain a big threat to the Federal Government’s widely touted wish to promote and improve the ease of doing business in the country.
“The attitude there is very lackadaisical”, says Ese, an Ibadan-based lawyer and accredited agent of CAC.
Ese paid the 15-year annual returns of a client a couple of weeks ago. And two weeks after CAC has only acknowledged returns for six years. “Some faceless person who is supposed to attend to my case in the back office is obviously not doing his or her job. My client needs these acknowledgements to bid for a job, a bid that has a definite deadline. What this means is that my client could be denied the opportunity of competing for and winning a lucrative contract just because of the inefficiency of CAC and its staff,” according to Ese.
The ineptitude, many say, goes right to the office of the Registrar-General. The Registrar-General is the Chief Executive of the Commission and is saddled with the responsibility of its day-to-day management.
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Another lawyer told BusinessDay that registering not-for-profit organisations (NGOs) can be tedious. The office of the Registrar-General handles the registration of NGOs, including religious organisations. “It took me eight months to get first availability from the RG’s office for an NGO a client wants to register,” she says. The delays and excuses make his clients suspicious. It leaves them “thinking that you have eaten their money and do not want to do their work.”
The CAC has dismissed these charges of inefficiency and ineptitude. In a widely publicised rebuttal early this month to a write-up that questioned the commission’s capability and credibility, the CAC says it was “a champion of service delivery to the commendation of successive administrations.”
The CAC also said the systems and processes it put in place including the Entity Electronic Account, the online Customer Support Centre and the publication of the “Companies Regulations 2021 were approved by Adeniyi Adebayo, the minister of Industry, Trade and Investment.”
The CAC rebuttal however showed an agency concerned only about how the Ministry of Trade and Investment views it rather than the customers and agents that helped it rake in nearly N20 billion last year.
This disconnect, in the view of many who have engaged with the commission, confirms that the current CAC is unable to support the government’s drive to make doing business in the country easier.
Institutional lethargy and poor management can be counterproductive, increasing the cost to do business. Studies show that higher business start-up costs unfavourably affect the number of new market entrants. Firms that never incorporate because of prohibitive actions of state actors like the CAC represent a net loss of public revenue.
This was why in July 2016, President Buhari set up the Presidential Enabling Business Environment Council (PEBEC) to eliminate bureaucratic constraints to doing business in Nigeria, and make the country a progressively easier place to start a business and grow it.
This was why the revamped Companies and Allied Matters Act 2020 made it possible to register a private limited company in Nigeria entirely online.
In October 2020, the commission announced its commitment to register companies within 24 hours, approve names the same day and “ensure five-day completion for other post-incorporation services not available electronically.”
In April this year, the commission further announced that “following the successful deployment of an end-to-end registration module, it is now prioritising the reduction of the registration of new companies to just three hours before the end of 2021.”
After the overhaul of CAMA, registering a business was supposed to become seamless. However, it is anything but that. While the CAC says that the entirety of the registration procedure is online, the reality is that documents filed with CAC are filled on its website, downloaded and printed out, signed, scanned and uploaded onto the registration portal.
Hassana not only has to contend with CAC, two recessions in five years have reduced the pace of business activities. “Business has been very slow since 2016 because the economy has been utterly sluggish. Right now, what thrives in Abuja are MoUs and land agreements. There is always one such deal or the other,” she says.
