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Reforming the ease of doing business in Nigeria

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Small and Medium Scale Enterprises (SMEs) are the engine of the economy and contribute in no small measure to job creation, GDP growth and also ensure that there is a proper flow of money across the economy. That is why it is essential to create a robust regulatory environment as well as improve the ease with which businesses are conducted to enable private enterprises, especially SMEs, to flourish.

 

This is even more important now with Nigeria battling high unemployment rate and a demographic time-tomb. For the country to be able to create jobs for its teeming youth population, SMEs and businesses must flourish and for SMEs to flourish, the ease of doing business must improve.

 

To help countries in this important area, the World Bank Group produces a report, “Doing Business” which compares business regulation for domestic firms in 189 countries under seven rubrics: starting a business, dealing with construction permits, getting electricity, registering property, trading across borders, enforcing contracts, and resolving insolvency.

Ease of Doing Business in Nigeria score averaged 145.09 from 2008 to 2018, reaching an all time high of 170 in 2014 and a record low of 120 in 2008. For instance, it takes 5 days to start a business in Rwanda while in Nigeria, the least is 28 days. Also, Nigeria’s cost to export is around $786 compared to Rwanda’s that is a mere $183.

On coming to power in 2015, the government, as part of its determination to reduce the country’s reliance on oil and enable businesses to flourish, decided to reform the business environment by working on the rubrics to improve Nigeria’s ease of doing business. In July 2016, the government inaugurated the Presidential Enabling Business Environment Council (PEBEC) chaired by the Vice President, Yemi Osinbajo with Minister for industry, trade, and investment, Okey Enalema, serving as vice chair. To show its seriousness towards implementation, a secretariat – the Enabling Business Environment Secretariat (EBES) – domiciled in the office of the Vice President, was set up to drive implementation. A departure from the past was the decision of the PEBEC to adopt a global best practice model with performance tracking elements which is measured by the World Bank Ease of Doing Business Index (DBI).

 

On February 21, 2017, the first 60-day National Action Plan, which contained initiatives and actions to be implemented by ministries, department and agencies, the National Assembly, and some state governments and the private sector. Two other National Action Plans (NAPs) were launched between 2017 and 2018.

 

Some of the reforms targeted by the plans include eliminating the manual registration process at the Corporate Affairs Commission in some states, increased access to credit for SMEs by registering at least 300 micro-finance banks on the collateral registry, reduce challenges faced by SMEs when getting credit, paying taxes and the elimination of illegal roadblocks on major trading routes across the country. Others include clearance of all pending NAFDAC registration applications to improve efficiency; and creation of a strengthened single joint cargo examination interface in all airports & seaports for import and export to reduce the time spent at the ports.

 

These plans, confirmed to have been largely implemented, have resulted in significant progress over the past three years.  For instance, Nigeria moved up 24 places in the World Bank’s ease of doing business index 2018. It moved up from the 168th position in 2017 to 145th in 2018 scoring 52.03 out of 100.

 

Encouraged by the successes, the PEBEC commenced the fourth 60-day National Action Plan (NAP 4.0) to run from March 1st to April 29th 2019. NAP 4. 0 is aimed at reducing “the challenges encountered by SMEs and businesses in identified areas of focus such as starting a business, getting credit, paying taxes, enforcing contracts or trading within and across borders, amongst others, by eliminating critical bottlenecks and constraints to doing business in Nigeria.”

 

NAP 4. 0 is expected to strengthen the ongoing reforms and drive institutionalization, which will ensure the sustainability of the reforms.

 

Clearly, many challenges and bottlenecks remain: companies continue to grapple with high production costs and low demand, SMEs and critical businesses have been shedding jobs and many have been closing shop. They are yet to begin to feel the impact of Nigeria’s improvement in the ease of doing business ranking.

 

However, the reforms and their timely implementation offer hope.  In 2017, Nigeria was among the top 10 reforming economies in the world after years of decline. What is needed is a sustained effort at reforms to gradually dismantle the bottlenecks and improve Nigeria’s business climate.

 

But make no mistake, Nigeria’s business climate needs to improve. The country faces a clear existential challenge with a record unemployment and youth-unemployment challenge. The government cannot create the jobs needed to take these youth out of the streets. Only the private sector, and mainly SMEs can. Therefore, everything must be done to improve the business environment to enable more of these businesses to spring up, survive and flourish. The PEBEC, its secretariat, MDAs, concerned private sector participants and all must work round to clock to deliver on the reforms targets.

 

Ben Okpanachi

Okpanachi writes from Abuja

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