Nigeria’s rise in the World Bank’s Doing Business ranking does not reflect the country’s reality
The World Bank released its Doing Business 2020 report and Africa’s economic powerhouse, Nigeria, was ranked among the most improved countries. It ranks 131st among 194 countries observed; it moved 15 spots from the 146th placement in the 2018 ranking.
This is good news, of course, except that it does not reflect the true economic situation of the country at the moment. Interestingly though, President Muhammadu Buhari who, prior to the release of the World Bank report, had faulted data collated by international bodies as “wild estimates that bear little relation to the facts on the ground”—has suddenly expressed delight with the new ranking. But contrary to the report, the reality is that Nigeria is far from an economy with improved ease of doing business, especially considering the bad economic policies of the Buhari administration.
However, despite the country’s ratification of the Africa Continental Free Trade Agreement (AfCFTA), which aims to promote free trade among African countries, the Nigerian government has its borders closed; The government hopes this would stop the importation of rice and encourage local production.
Whereas the government claims to be saving huge sums of money from the border closure. Business owners dealing on imported and perishable goods complain they are losing hundreds of millions of dollars as their goods are denied entry into the country. To make matters worse, the borders will not open until January.
The Federal government also has recently become notorious for its unreasonable and outrageous taxation policies. So much that Nigerians now hope the government would not end up taxing the air they breathe.
It is interesting how quickly the government comes up with new tax policies while the new minimum wage seems to take forever to be implemented. In September 2019, the Federal Executive Council (FEC) increased the Value Added Tax (VAT) rate on the supply of goods and services by 50 per cent, which takes effect in 2020. Sadly, though, this increment will most likely affect macro-market operations in Nigeria as businesses would make less profit; It is a common economic behaviour for people to buy fewer items to save cost. This may well compel businesses to lay off workers, thereby amplifying the rate of unemployment in the country.
Likewise, the incessant increments in electricity tariffs still impede the ease of doing business across the country.
By January 2020, Nigerians will be paying over half of what they currently do for electricity, even as power delivery in the country has yet to improve. This outrageous billing system will only make businesses in the country that heavily rely on electricity to spend fortunes acquiring alternative power generators that would reduce their profits.
More so, the Central Bank of Nigeria (CBN) recently announced new charges on cash deposits and withdrawals on individual and corporate bank accounts. Individuals would now pay 3 per cent and 2 per cent charges for withdrawals and deposits in excess of ₦500,000 respectively. Also, withdrawals and deposits for corporate bodies in excess of ₦3 million would attract 3 per cent and 5 per cent charges respectively. The CBN claims this policy would encourage Nigerians to handle less cash and, instead, embrace digital transactions. But in reality, the policy will only make business transactions more cumbersome, given that e-payment transactions in Nigeria have often failed.
Other recent tax policies established by the government with possible negative outcomes on the ease of doing business in Nigeria include tollgate charges, tax on soft and carbonated drinks among others.
Although Nigeria’s rise in the World Bank’s Doing Business Index is good news, it’s not worthy of celebrating. In fact, the country is still 131 places away from the most business-friendly country.
Rather than blindly celebrate, the Nigerian government needs to work on creating an enabling environment for businesses to thrive. This can be achieved by reviewing many of its current tax and monetary policies, which would help sustain businesses and encourage more startups.
Muneer Yaqub is a Writing Fellow at African Liberty and a social development journalist. He is reachable via @elmunir5