When ease of doing business yields frustrating returns
Rethinking Nigeria’s Dismal IFC Rating, Fixation On Oil, Others
In spite of the serious beating the price of crude oil has received in the international markets, it is apparent that Nigeria remains glued to black gold as the funding source of its national aspirations. The spasms and convulsions as oil makes modest gains in its difficult efforts to rebound, are feverishly followed by Nigerians across all sectors. For the political elite, it is an age-long matter of old habits dying hard. State governors talk glibly about their inability to pay workers’ salaries, without exploring ideas on how to respond to the reality of a federation account that can no longer fill their beggarly monthly bowls.
At the federal level, a lot of lip service has been paid to the need to diversify the economy. But the level of governance has not been able to grapple with the fundamental issues, which would allow for the deepening of the nation’s economic base. As the world economy is increasingly defined by innovation, technology, smartness and the flourishing of the entrepreneurial spirit, the Nigerian system is still fixated on the old ways that have been vanquished by the realities of globalisation.
Nothing more eloquently demonstrates this decades-old malaise than the recently released survey by the International Finance Corporation (IFC) on the ‘ease of doing business. In the rating, Nigeria was ranked a 181 out of 189 countries. For a country reeling in the throes of an economic recession triggered by its dependence on a volatile commodity, which fluctuates according to the vagaries of the international environment, many were expectant that the pains of the moment would motivate a new approach towards revamping the economy. Genuine entrepreneurs prayed fervently that government would move quickly to push through administrative reforms that would make the business climate less hostile. Business leaders longed to see real progress in the power sector, which has severely constrained activities in the real sector, ramping up the cost of production to a point that puts manufacturers at a serious disadvantage, especially when they have to compete with cheap substitutes from places like China.
With 15 months of the administration of President Muhammadu Buhari already spent, business leaders are being constrained to launch a frantic search for what genuine reforms have taken place in the Nigerian business environment. That search is much more compelling, when it is imagined that the nation’s tax authorities, the Federal Inland Revenue Service have made a lot of fuss about widening the tax net to capture more businesses. The scenario is ironic because several businesses have been scorched out of existence by the harsh conditions in the business environment. The initial attempts to use the muscle of the state to control the forex markets left several business with serious injuries. Newer businesses that could have come on stream were generally scared away from venturing due to the uncertainties in the investment space. Old obstacles piled on top of the fresh hurdles faced by business, increasing risk and forcing entrepreneurs to think twice.
A lack of clear economic direction also sent signals to portfolio investors from outside Nigerian shores to take to their heels. As expected, the segment of the population that has been impacted the most by the squeeze in the business space is Nigeria’s army of unemployed youth. It was this segment of the population that assumed the role of principal actor in the movement, which propelled the APC government to power in 2015. Going by the raw deal the economy has received so far, the youth could be pushed to the point of re-evaluating the electoral decision in 2015.
Beyond the current statist interventions couched as social protection plans towards creating opportunities for youths, through government run schemes, many adventurous young Nigerians were hoping for real changes in the business climate to provide the platform for them to launch out and take the world by storm, business-wise. In sectors like Information and Communications Technology (ICT), young Nigerians are blazing the trail across the globe in this sector driven by creativity and innovation. Nothing more demonstrates that potential than the recent visit of facebook founder, Mark Zuckerberg to Nigeria.
The real question to ask therefore is that in this world of innovation and start-ups, where other fellow MINT (Mexico, Nigeria, Indonesia and Turkey) group economies are leveraging on the upsides of a global market place, what does Nigeria need to trigger investments from within and without in this time of economic problems? Governance both at the federal and the state level needs to grapple with the basics. Why should the registration of a business in Nigeria take as long as it currently does, due to an archaic process, which heavily depends on manual documentation? Whatever the semblance of online registration currently adopted by the Corporate Affairs Commission (CAC), that process has to be revamped and made to work. It has to be such that potential business owners, including the vast number of businesses in the informal sector would find incentive in coming out of the shadows.
Similarly, the frustration involved in getting landed documents from government because it still takes donkey years, has to be addressed. Other critical processes in the business chain, which would make things happen, involve the need to reform customs and immigration certifications, tax matters and transactions that could facilitate business. For serious investors who want to put their money in the system in the long term, these issues which are largely neglected in these shores, would make a world of difference in determining whether an investor puts his or her money in the system or not.
There is also the issue of sanctity of contracts, which is connected to the judicial system. With a weak judicial system ravaged by corruption, and in which the wheels of justice grind interminably, investors are not likely to be confident enough to commit their resources for the long term. These and many more are the critical areas where serious changes are needed to make the Nigerian business climate welcoming to those prepared to venture. In the end, Nigeria must ask itself, if it is willing to make the commitment to travel on the road to non-oil prosperity.
Initially, that road could prove more difficult to navigate. However, in the long run, it is much more sustainable, and would bring the greatest rewards. And more importantly, creating the right business atmosphere would be a critical step towards unleashing the entrepreneurial potentials of millions of Nigerians, many of who are already holding their own, competing and thriving with the very best across the globe.