When the Ghanaian government said late last month that it was considering compensating companies and traders who have lost their goods and other valuables as a result of the closure of the Nigeria-Benin border, it left many Nigerian businesses, particularly the small and medium-scale enterprises, wishing their government could be as mindful of them.
The compensation is yet to come, but the Ghanaian government has demonstrated genuine interest in creating an enabling environment for its private sector.
The first place to look to see evidence of Ghana’s better commitment to its private sector compared to Nigeria’s is the World Bank’s annual ease of doing business ranking which measures reforms made by government to simplify the lives of the business owners plying their trade on their turfs.
Ghana had a score of 60 points in the 2020 rankings, bettering its much bigger West African neighbour by 4 points, as Nigeria managed 56.9 points. In terms of position, Ghana sits in 118th position of 190 countries with Nigeria much lower at 131. Despite moving 15 spots to get to its position of 131, it’s Ghana that’s ironically closer to a target set by Nigerian President Muhammadu Buhari to move within top 100 by 2020.
With the year of reckoning upon Nigeria, that target looks every bit unrealistic. “For its size, Ghana is showing an ability to get things done better than Nigeria and is genuinely interested in creating an enabling environment for its private sector to flourish and make positive social impact,” said Timothy Olawale, director-general, Nigerian Employers Consultative Association (NECA). NECA, which has some 5000 member companies, is an umbrella organisation of employers in the organised Private Sector.
Ghana is getting many things right and it’s not just it, but a host of smaller African nations that are gradually gaining grounds on Nigeria while the country continues to bask in the euphoria of being big and mighty, according to Olawale. “Nigeria needs to cut out its larger-than-life approach to the economy and realise that until the private sector is thriving, job creation, poverty reduction and sustainable economic growth will not happen,” Olawale told BusinessDay in his Ikeja, Lagos office.
Policy inconsistencies, lack of infrastructure from power to roads and constraints to trade – which has taken a turn for worse with the near six-month abrupt land border closure – are some of the well-known challenges to doing business in Nigeria.
Only in seven countries globally is it harder to get a property registered than in Nigeria, according to World Bank data. Trading across borders and getting electricity are also high ranking challenges for businesses. Nigeria somewhat shines in the area of getting credit, as that is where it has its highest rank of 15. Some small businesses, however, have their reservations about whether getting credit is easy in Nigeria.
A local monthly survey done by the Central Bank has ranked lack of access to credit, along with lack of electricity and other infrastructure, as some of the biggest constraints to businesses since it started compiling data.
Ghana is not without its challenges but it has managed to get one of the most important hindrances to business, unstable electricity, out of the way – something Nigeria has failed to resolve despite being much bigger and with more resources.
Ghana moved from a shortage of electricity as recently as 2014 to being burdened with too much electricity five years later. A good problem, say many Ghanaian businesses who now enjoy 24-hour power supply, even though the government is contractually obliged to spend money for excess capacity that is not being consumed.
Ghana has an installed capacity of 5,083 megawatts, according to the Energy Commission of Ghana. That’s almost double peak demand of 2,700MW. In Nigeria, official data suggest there’s an installed capacity of 7,000MW but businesses and households consumed an average of 3,713MW of electricity in 2019, according to CBN data.
The International Monetary Fund estimates the annual economic loss of Nigeria’s struggle to keep the lights on at about $29 billion (N8.9 trillion).
Muda Yusuf, director-general, Lagos Chamber of Commerce and Industry (LCCI), estimates the economy loses even more than that at N10 trillion. “The obstacles to doing business is why the likes of Ghana are able to attract more investment than Nigeria, which is an anomaly given Nigeria’s sheer size,” Yusuf said.
“Resolving the multifaceted power problem in Nigeria is one of the ways government can turn the page in ties with the private sector.” Another area where the Ghanaian government has demonstrated its willingness to create an enabling environment for the private sector is in its investment in human capital and education.
That investment has meant Ghana’s adult literacy rate has shot up from as low as 57 percent in 2001 to 79 percent in 2018, growing at an average of 17 percent per annum. Nigeria, on the other hand, has an adult literacy rate of 62 percent, 17 percentage points behind Ghana. Higher literacy rate increases the amount of goods and services that an employee is able to produce and that adds to the overall productivity of the company where he or she is employed.
Higher literacy rate also helps businesses spend less on training staff, thereby keeping costs lower. The two outcomes in literacy rate experienced by both countries is a function of their spending. In the last 40 years, government funding in the education sector in Nigeria has varied between 6 percent and 9 percent of the national budget, according to data from the budget office.
This is lower than most other African countries which range between 11 percent and 30 percent. In Ghana, the government spends 20 percent of its budget on education. Ghana’s economic policies have yielded robust growth for the economy of 27 million people. The economy grew 7 percent in 2019. Nigeria, on the other hand, probably grew 2.1 percent in 2019, ahead of the February 24 release date for fourth quarter GDP.
The Nigerian economy has grown below population growth rate since 2016, making the task of curbing rising poverty even more difficult. “The country surely needs to re-evaluate its ties with the private sector if it must achieve its economic and social goals,” one South Africa-based economist said. “What I see is a lack of trust in the private sector by the government and the longer that stays, the more disastrous for the economy and the people.”
LOLADE AKINMURELE
