In 2010, a global research and consultancy firm looking to expand into Nigeria tried to meet with government officials at the Ministry of the Interior to obtain expatriate quotas for their staff, a necessary step before they could set up offices in the country.
“It took us one year before we were actually able to meet with the appropriate government people in Abuja,” a senior partner at the firm who prefers anonymity told BusinessDay. “Sometimes we set up meetings, landed in Abuja, only to be told that the official had travelled.”
The above is just one example of the mounting roadblocks to doing business, often emanating from the federal, state and local levels, which companies operating in Nigeria are facing. This is effectively rubbishing the finance minister, Ngozi Okonjo-Iweala’s stated goal of improving the ease of doing business in the country.
Nigeria is already notorious for being a difficult place to do business and the deteriorating business climate may be compounding the problem. In the World Bank’s latest ease of doing business ranking, Nigeria fell nine places to rank 147 from 138 the previous year.
Businesses already burdened by poor electricity and transportation infrastructure and low access to affordable financing are now contending with multiple taxation from regulatory agencies, as well as inefficiencies at the ports that are spiking the cost of production. Nigerian telecoms providers, for example, tell BusinessDay that too many applications are required to roll out communication networks and base stations.
“The organs of the state are an encumbrance to our businesses. Here in Lagos, getting our fibre in the ground is becoming almost an impossibility, due to the high cost and taxes from the state and local governments,” said Wale Goodluck, a corporate services executive at MTN Nigeria, at the BusinessDay 2013 telecoms roundtable held last October.
The Lagos Chamber of Commerce and Industry (LCCI) reckons that the activities of regulatory agencies have the capacity to overburden companies whose growth are critical to job creation in the economy.
“We conducted a survey on the activities of some public regulatory agencies including the National Agency for Food and Drug Administration and Control (NAFDAC). It was discovered that businesses are increasingly at the receiving end, mostly in the following areas: delay in registration and certification of products, multiplicity and arbitrary charges, frequency of visits that come with costs to the companies, overlap of functions with other agencies, excess human interface in operational framework and collection of excessive quantity of products supposedly as samples,” said Goodie Ibru, the immediate past president of LCCI, during an interactive session between SMEs and NAFDAC in Lagos last year.
At the seaports, a new destination inspection scheme, championed by the Nigeria Customs Service (NCS), threatens to unravel some of the modest reforms made by the finance ministry since 2012 aimed at sanitising Nigerian ports that are notorious for corruption and a customs service often with an incentive to slow down the clearance of goods rather than speed it up.
The new regime at the ports has made it impossible for manufacturers to clear their goods in time since the NCS took over from Cotecna, as the PAAR (pre-arrival assessment report) now takes a minimum of two weeks to be released to manufacturers by the customs. This has led to a situation whereby importers and manufacturers who import raw materials spend upwards of N150,000 in extra terminal and shipping charges per container.
A large manufacturer who spoke with BusinessDay on condition of anonymity said the major issue was Customs’ unpreparedness for the job.
“Customs has been given this responsibility, but it is evident that they are not equipped for it. The scanners for the containers are not working; our goods are now delayed for weeks, costing us millions. Someone should be held accountable for this,” he said.
The manufacturer noted that gradually, everybody’s cost of clearing is going up (from the small scale to large manufacturers), adding that this would soon affect the man on the street in the form of higher prices or inflation.
BusinessDay learnt that manufacturers caught in this new bout of inefficiency at the ports cut across all sectors of the economy, from food to milk, and industrial goods producers. This threatens to unleash a vicious circle of default and bankruptcy for SMEs and other manufacturers that cannot hold out against the inefficiencies and rising cost of doing business in Nigeria.
“If small SMEs cannot clear their goods due to high charges, then they cannot pay the banks, and maybe the banks will lose money and lay off some workers, so this affects everybody,” said another manufacturer.
The manufacturers are losing out in four areas: higher shipping charges in form of demurrage, terminal charges, bank interest rates, and the possibility of goods damaged from excess stay at the ports.
“The regulatory agencies and government bureaucracy now operate as toll roads and view businesses as cash cows to be milked,” said the CEO of a large FMCG manufacturer in Lagos, who does not want his name in print. “The problem is that even when you pay the toll, you are still bogged down and don’t get to pass.”
By: PATRICK ATUANYA
