Ranked 131 out of 190 countries in the 2020 edition of Doing Business, the performance of Nigeria on the ease of doing business is commendable.
The ease of doing business ranking, which the World Bank compiles every year, is often quoted and popular among investors; it’s become a shorthand for judging how friendly a country is to business. It also spurs competition among countries – Nigeria, the largest economy in Africa, has often lagged smaller African economies like Rwanda.
Nigerian was ranked 15th when it comes to getting credit, one of ten factors the index ranks. This improvement shows how technology is democratising access to credit. Financial technology companies (Fintechs) have tackled this once knotty area of banking in Nigeria: giving credit without collateral. Getting credit is now the least headache of a business in Nigeria.
Starting a business is still a challenge, so too are getting electricity, registering property, paying taxes and trading across borders. These problems are related to regulatory capacity and policies, the uncertainty of which, is killing businesses in Nigeria.
Understandably, President Buhari and his aides will brag about this latest result; good performance on the World Bank ranking is useful for pitching to foreign investors. From now on the expected refrain, dropped at every occasion and in every presidential speech, will be that Nigeria’s improvement on the ranking is a sign that this administration is keen on making doing business in Nigeria easier.
Unfortunately, the actions of the Buhari administration belie its words. It’s one thing to traverse the world on a charm offensive with the intention to lure investors, it’s an entirely different thing when the actions of government don’t match its intention. Take the closure of the borders; it’s a real challenge to doing business that even the recent ranking highlights – Nigeria is ranked 179 out of 190 countries.
Reducing the time and cost of administrative processes is welcome. Making it easier to register a business, to pay taxes etc. are part of what makes doing business more conducive. Concrete and consistent actions, however, speak louder than indices. It’s hard to convince any investor to stake millions in the economy when regulations and policies are uncertain.
Despite the record low prices of stocks, regulatory uncertainty is keeping local and foreign investors away from the stock market, a barometer for judging confidence in the economy. Shutting borders indefinitely, forcing banks to loan to the real sector, restricting access to foreign exchange and limiting individuals and non-banks from trading in Treasury Bills contradict sales pitches about how it’s now easier to do business in Nigeria.
Uncertainty about whether electricity tariffs will be raised to reflect the true cost of generating and distributing it affect constant supply. With regular electricity small and large businesses will save thousands of hours and millions of naira they otherwise spend on getting petrol or diesel and on their generators are in working order.
Even businesses that import goods which aren’t restricted from foreign exchange worry about uncertainty when their finished goods can’t be exported to other West African countries because the borders have been shut to prevent the smuggling of rice and chicken.
Contending with haphazard, short-term, poorly thought policies and regulations undo whatever gains the country has made on the ease of doing business scorecard.
There are other realities the rankings don’t capture and which frustrate Nigerian entrepreneurs: infrastructure, skills, security and corruption. While an executive order can reduce the time and cost of getting a construction permit, it will take more than that to build goods roads, keep them safe from bandits, kidnappers and crooked customs officials.
