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Removing roadblocks to ease of doing business

By Gbenga Salau
23 April 2023   |   4:04 am
Its multitude of imperfections notwithstanding, Lagos remains Nigeria’s economic nerve centre and the country’s major economic focal point.

One of the ports in Lagos

Its multitude of imperfections notwithstanding, Lagos remains Nigeria’s economic nerve centre and the country’s major economic focal point. Besides generating about 10 per cent of the country’s Gross Domestic Product (GDP), it is where most of the country’s financial institutions, commercial banks, and major corporations are headquartered, in addition to hosting most commercial and financial concerns.

Furthermore, Lagos is undoubtedly the hub of Micro, Small, and Medium Enterprises (MSMEs) in the country with over 3.2 million MSMEs.
But all these notwithstanding, the operating environment is bedeviled with all sorts of encumbrances if the recent report of the Presidential Enabling Business Environment Council (PEBEC) on Ease of Doing Business (EoDB) within sub-nationals in Nigeria is anything to go by.

According to the report released recently, Lagos State not only dropped nine places from the 20th position (that it occupied in 2021) to the 29th in 2023, but it also dropped points from 5.28 to 5.16. This latest EoDB point is below the national average point of 5.69. 

Surprisingly, the state is dropping points in EoDB despite reporting several reforms aimed at improving the ease of doing business. 
In the report by PEBEC on EoDB, Lagos State went down in transparency and accessibility of information, as well as skills and labour, even though it went up in infrastructure, security, stability, and regulatory environment.
On a general note, the report stated: “Several sub-nationals have indicated that they have implemented reforms in the areas covered by the indicators. However, it appears that these reforms have not yet notably increased satisfaction in their business environment. This suggests that implementing reforms alone is not enough to improve satisfaction— the reforms must be properly communicated and designed to address the specific pain points of MSMEs. Although reforms may not necessarily lead to increased satisfaction in the short term, they may be crucial in the long term as sub-nationals look to improve their EoDB.”

In the report, which addressed the ease of doing business in states across six indicators and 16 sub-indicators, the first indicator was infrastructure, and it looked at electricity- its availability, cost, and experience; transportation: availability and quality; logistics: availability, cost, and quality, while in telecom and Internet, cost and quality were considered. 
The second indicator looked at secure and stable environment vi-s-a-vis security and safety. The third indicator – regulatory environment spotlighted Business registration: availability, cost, and experience; license renewal: availability, cost, and experience; contract enforcement: availability and accessibility; land and property acquisition: availability, cost, and experience, and paying taxes: availability, cost, and experience among others.

The fourth indicator considered was transparency and accessibility of information, the fifth indicator was skills and labour, and the sixth indicator was economic opportunity.
Underscoring the importance of MSMEs at an event recently, the Country Director of the International Labour Organisation (ILO), Vanessa Phala, said that MSMEs are primary platforms for enterprises that play a crucial role in employment, wealth creation, and economic growth.

“Successful enterprises are at the centre of strong economies and societies; they create employment and raise living standards. MSMEs employ a large proportion of the workforce.
“In Nigeria, SMEs contribute 48 per cent of national GDP; account for 96 per cent of businesses and 84 per cent of employment. This sector contributes significantly to alleviating poverty and increasing job creation,” he said.

Be that as it may, some stakeholders believe that if there is a state that should do more to facilitate ease of doing business, Lagos should be it. 
According to the National Bureau of Statistics (NBS), about 1.8 million persons are unemployed in the state. The NBS also stated that about five million persons are in the labour force among the state’s 9.1 million working-age population.
Commenting on the report, the former Vice President of the Manufacturers Association of Nigeria (MAN), Chief John Aluya, said that the report mirrors the environment, adding that the state should even be occupying the bottom of the ladder.
“Ease of doing business in Lagos State has not improved. In fact, it has gone from bad to worse, particularly with these urchins that are mounting roadblocks everywhere while the state government looks away. If the Lagos State government wants to improve the ease of doing business, it should remove all these urchins from the roads because they contribute significantly to the cost of business operations. You cannot take cargo from Ojota to Amuwo-Odofin without spending between N200, 000 to N300, 000 on touts, area boys, street urchins, or whatever name they are called. I feel really bad because all these monies are not going to the Lagos State government, but into private pockets, and the state government is looking the other way as if nothing is happening.”  
He added that within the Amuwo Odofin Industrial Estate, there are five checkpoints on a road that is not up to a kilometre, and at each point what is being done is nothing other than extortion, collecting money from drivers.
“It makes our goods and products not competitive in the market because transport and logistic are a very important part of businesses. When you send a truck to take goods from Amuwo Odofin to Lagos Island and you pay over N100,000 to touts, what happens to your goods, the price will go up, so it is affecting our business negatively.
“It is only the state government that can come in here to streamline the way things are done. If the state government continues to keep quiet and allow these illegal collections to fester, there is no way that you can improve the ease of doing business, and the ultimate person who takes the bill is the consumer.”
Aluya further said that the state has too many agencies and departments that rip businesses of their finances routinely.  
“We have repeatedly stressed the need to harmonise the number of inspection teams that visit businesses for rates, levies, and sundry charges. We are not saying you should not inspect us. When these monitoring teams come on different days, it is not helping the company’s productivity. The ease of doing business in Lagos is not getting better, but worse. The state should have even taken the last position,” Aluya stated.

On his part, a former Director General of the Lagos Chamber of Commerce and Industry (LCCI), Dr. Muda Lawal, said that despite Lagos having the least landmass in the country (with over 20 million people), many more people are still migrating into the state, thereby putting a lot of pressure on its infrastructure and facilities.
He also stated that some of the indicators used for the measurement of the EoDB are not within the control of the state government. These issues include power, which until recently was on the exclusive list.
He further said that in terms of infrastructure, the state government has done a lot, just as it has supported MSMEs with loans through the Lagos State Employment Fund. He noted that the agency provides loan support to MSMEs without demanding collateral.
According to Lawal, despite the challenges in the state, it is where the businesses are, and where they can thrive better, because of available opportunities.   
He, nonetheless, said that the state government should do a lot in getting rid of the touts who mount roadblocks and extort money from motorists and vehicles conveying goods. 
Lawal added that potable water remains a major issue for not only individuals but also for businesses, just as there is a compelling need for the state to continually better its transportation system, by expanding the rail and subsiding water transport.
He called on the state government to also create more industrial hubs, as well as maintain infrastructure within existing industrial estates.
When the Ministry of Commerce, Industry, and Cooperatives was contacted for the state government’s position on the report, and what concrete steps it plans to take in blocking some of the loopholes identified in the PEBEC report, the Public Relations Officer (PRO) of the ministry, Mr. Wale Akudo, promised to get back after being briefed but was yet to as at press time.