A cursory look at Nigeria's low Ranking for Ease of Doing Business

For keen observers, the newly inaugurated Fed­eral Cabinet has a huge task on its hands to restore the current shaky investors’ confidence in Nigeria. In spite of promising opportuni­ties in the country, the latest World Bank’s “Doing Business Report”, has rated Nige­ria as one of the “worst countries in the world to do business”.

This is about the third consecutive year that the World Bank has passed such a damning verdict on Nigeria. This year’s report released early this month, says that there are only 20 countries in the world where it is harder to do business than Ni­geria.

The report ranks Nigeria 169 out of the 189 countries considered in the survey. Nigeria’s position is virtually unchanged from that of 2014 when it was ranked 170 globally. Worse still, Nigeria is placed 39th among African countries listed in the re­port which puts Mauritius top on the log as the best country in the country to do business. Mauritius is promoted as tax ha­ven in the continent with excellent rating on enforcing contracts and paying taxes.

Parameters used in the report include data on tax compliance, ease of obtain­ing construction permits and enforcing contracts as well as property registration. Other criteria are stable power supply, access to credit and trading across bor­ders. Overall, the report claims that start­ing business in Nigeria involves an awfully cumbersome process, adding that very of­ten, new businesses in Nigeria are tied up in labyrinth layers of government bureau­cracy, with people resorting to third party agents to help them facilitate the process of business registration.

Besides, the report dwelt extensively on unstable power supply and lack of access to credit facility as major drawbacks for business to thrive in Nigeria. All things considered, the report substantially re­flects the true picture of why despite po­tential business opportunities, Nigeria continues to struggle on the bottom rung of indices necessary for sustainable eco­nomic growth. For instance, the power sector remains largely unattended to de­spite huge investments and privatisation of the sector. Also, tax compliance and business registration processes remain agonisingly tedious. In fact, government can achieve little in its effort to turn the economy around without addressing the myriad problems that hamper doing busi­ness in Nigeria. If the Buhari administra­tion will bring about the desired change he has promised and achieve inclusive growth, it should see the World Bank re­port as a wake up call to address the many infrastructural deficits. In other words, if Nigeria will remain Africa’s largest economy and the continent’s most promis­ing business hub, the problems identified in the World Bank “Doing Business Re­port” should be squarely addressed. For instance, power supply remains the engine that drives the economy, and as a result, power generation and transmission must improve sigificantly. At present, the con­trary is the case. No doubt, security issues remain disincentive to foreign investment inflows. The nation’s tax system should also be overhauled. Statistics shows that while the average worldwide compliance in tax-payment is 268 hours, and that for many African nations is 230 hours in a year, it takes 956 hours for an average Ni­gerian to comply with tax payment. This is an unhealthy development for a country like Nigeria aspiring to be one of the top 20 economies in the world. A recent report by FIRS showed that total collectable tax revenue represents only seven percent of our Gross Domestic Product (GDP). The truth is that tax avoidance and evasion have become an uninspiring culture of many Nigerians and businesses operating in the country. Government should put necessary mechanisms in place towards making Nigeria preferred destination for investors.

We urge the Federal and state govern­ments to create a business environment that will attract and sustain local and for­eign investors. Such enabling environment should, among other things, be free from unnecessary taxes and harassment. Of crit­ical importance in easing the problems of doing business is putting the enabling laws and necessary infrastructure such as pow­er and good road network in place. These will stimulate local entrepreneurs and at­tract foreign investors into the country.We maintain that if Nigeria must get rid of its perennial low ranking in the global index of Ease of Doing Business, government must put certain critical things in place, because no investor, local or foreign, will like to put his capital and other resources where the environment is not conducive. Indeed, in­vestors are looking for places where their businesses will be safe, countries that have a robust Corporate Governance (CG) and rule of law. At present, international or­ganisations investigate a country’s CG framework before committing themselves into such countries. Let the government halt the nation’s falling standards in global index of Doing Business.

Leave a reply