Nigeria’s recent improvement on Ease of Doing Business (EoDB) ranking is worth celebrating. According to the latest World Bank’s Ease of Doing Business Index, Nigeria moved up significantly by 15 places, from 146 to 131. Also, the report named Nigeria as one of the top 10 most improved economies in the world for the second time in three years. Nigeria is one of only two African countries to make this prestigious list.
The remarkable feat could stimulate the Gross Domestic Product (GDP), encourage local entrepreneurs and boost foreign direct investment if it is sustained. The Doing Business Index (DBI), which is also called Ease of Doing Business, is an annual ranking that objectively assesses prevailing business climate conditions and regulations across 190 countries based on 10 ease of doing business indicators.
Also, the index captures ease of doing business reforms that have been validated by the organised private sector and offers comparative insights based on private sector verification using two large commercial cities with a population of that country that is higher than 100 million. In Nigeria’s case, Lagos and Kano states were used by the World Bank group.
The parameters used in the report included data on tax compliance, ease of obtaining construction permits and enforcing contracts and property registration. Other criteria used were stable power supply, access to credit, and trading across borders. For Nigeria to have been scored highly on these parameters is an indication that the country’s business environment may have changed for good. Indeed, Nigeria’s latest ranking on ease of doing business, which came on the heels of the ratification of the African Continental Free Trade Area (AfCFTA) agreement, would further boost investment. It is perhaps a pointer that the Presidential Enabling Business Environment Council (PEBEC), established in 2016, is yielding the desired results.
Even though Nigeria’s 15 places movement in the World Bank’s EoDB is a sign that government’s strategy to improve the business environment in the country is working, there is still much to be done in the area of impact reforms that will restore the current shaky investors’ confidence in Nigeria. And to achieve this, the government should engage more with the Organised Private Sector (OPS) on cost reduction of businesses in the country.
Without doubt, there are still some constraints against ease of doing business. These include poor regulation, infrastructure deficits, multiple taxes, power supply challenges, policy contradictions, exorbitant cost of clearing and transporting raw materials from the ports to the factories, weak port infrastructure, high incidence of smuggling and inventory of unsold goods and insecurity. These factors are responsible for poor performance of businesses in Nigeria, in spite of promising opportunities.
The Federal Government is upbeat about this report, and understandably so, coming years after Nigeria was rated among the bottom rung on the ease of doing business. President Muhammadu Buhari had, while receiving the good news in Sochi, Russia, during his state visit recently, promised more impactful reforms. He assured that with the impending ratification of the Companies and Allied Matters Bill and the introduction of the Business Facilitation (Omnibus) Bill 2019 in view, Nigeria could be among the top 70 in Doing Business Index in the next four years. For this dream to come true, government must walk the talk by improving on all the key parameters that Nigeria was rated very low in the past. We recall that between 2012 and 2015, the World Bank report said there were only 20 countries in the world where it was harder to do business than Nigeria.
In 2015, Nigeria was ranked 169 out of the 189 countries considered in the survey of that year, moving only one place from the 170 position of 2014. Even with the latest report, the World Bank says starting business in Nigeria remains a cumbersome process, adding that virtually every new business in Nigeria is choked up in government bureaucracy, with people resorting to third party agents to help them facilitate the process of business registration. Besides, there is the issue of unstable power supply. Lack of access to credit from financial institutions and its high interest rate, is yet another drawback on ease of doing business in the country. The general insecurity in the country is a disincentive to foreign investment inflow.
To enhance our performance on the ease of doing business, Nigeria’s tax system should also be overhauled. The current regime of multiple-taxation has crippled the operations of many listed firms in the country. Altogether, the government should see the World Bank’s report not only as a pass mark, but also an encouragement to deepen reforms that will restore public confidence in the economy and stimulate economic growth.
There is need to create a conducive business environment that will attract foreign investments. This is the minimum requirement for any country that wants to play in the big league of Ease of Doing Business. At present, Nigeria is not yet there.