Juxtaposing ease of doing business and cost of doing business in nigeria – businessday news you can trust businessday news you can trust 1 unit electricity cost in gujarat

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When Nigeria recently received favourable rating in the area of ease of doing business, it was celebration galore. Reason being that it will facilitate and aid foreign investments in the country while encouraging budding and already existing entrepreneurs. Hitherto, the country had been ranked low as a destination of choice for foreign investors and even their local counterparts to engage in business.

To remove the negative perceptions of Nigeria as a difficult environment to do business, the federal government in 2016 inaugurated a high powered council – the Presidential Enabling Business Environment Council (PEBEC) – with the Vice President as Chairman and Ministry of Industry, Trade & Investment as Vice Chair. The mandate of the council as articulated is to remove critical bottlenecks and bureaucratic constraints to doing business in the country and make Nigeria a progressively easier place for Micro, Small and Medium Enterprises (MSMEs) to do business and thrive. As at the time of the inauguration, Nigeria was ranked 169 out of 190 economies in the World Bank Business Rankings.

In its bid to register meaningful impact in the assigned mandate, the Council had since co-opted these critical organizations to aid in the objectives actualization: Corporate Affairs Commission (CAC); Federal Inland Revenue Service (FIRS); Nigerian Ports Authority (NPA); Nigerian Customs Service (NCS); Nigerian Immigration Service (NIS); Central Bank of Nigeria (CBN); Federal Airport Authority of Nigeria (FAAN); Nigerian Electricity Regulatory Commission (NERC); and Lagos E-Planning.

In the area of starting a business, for example, commendable as it seems that the country improved by 1.78%, the signal is that a lot of improvement beckons. As a matter of fact, not a few will question the credibility of that result. Though doing business, for example, at the Corporate Affairs Commission has improved, the verdict out there is that more needs to be done, especially in the area of digitalizing the place vis-à-vis the response time by officials there.

Getting credit which got the highest ranking (25% positive) obviously needs further scrutiny. There is no doubt that a lot of Nigerians will receive that ranking with some derision as if to say “are we talking about a country somewhere other than Nigeria?”. Though Central Bank of Nigeria (CBN) recently alluded to the fact that credit from money deposit banks has improved generally but breaking it down to sectors and sizes of the businesses concerned may not present a palatable mix. There is no gainsaying the fact that Micro, Small and Medium Enterprises (MSMEs) are still facing hurdles accessing credits today in Nigeria.

On the flip side of ease of doing business is the cost of it. Though no scientific study has yet been undertaken to rank holistically the parameters associated with cost of doing business in Nigeria today, a priori what is known may be very telling.

Starting and running a business in Nigeria, quantitatively speaking, is not a child’s play. People jocularly put it this way: “a business man in Nigeria operates a local government of his own”. Apart from sourcing capital with which to start the business which doesn’t come cheap, virtually all the basic infrastructure (ranging from access roads to electricity) needed to be and remain in business are provided by the business concerns. A cursory Interrogation of just three of the parameters will suffice.

Accessing credit which is very central to the sustenance of businesses has been a recurring issue, especially those in the manufacturing sector. Nigeria is not good at statistics but if what is revealed yearly by relevant bodies like the CBN, NBS et cetera is anything to hold on to, then the country needs to do more if the concept of industrialization is to have any meaning. A situation where less than 10% of credit advanced yearly by commercial and even development banks goes to Micro, Small and Medium Enterprises (MSMEs) speaks volume to the economic growth and development agenda of the country. A conscious paradigm shift needs to be instituted from trading economy to one embedded more in manufacturing. As an aside, if a break down is carried out on the World Bank’s favourable ranking of the country in the area of getting credit, it will almost be a certainty that majority of that credit is to trading concerns (mainly those in importation businesses) and the big multinationals. Yet it is an economic truism that MSMEs are the bedrocks and catalysts for economic growth and development.

Getting electricity which inched up by a modest 0.32% by World Bank’s Rating of ease of doing business in Nigeria did not tell the story as far as provision of infrastructure for businesses is concerned. A glance at any company’s annual report, especially those in manufacturing will reveal more. A close scrutiny of the item called operating expenses will reveal even more. Collation of these figures may be the starting point for rating infrastructure holistically as a vital component cost of doing business in Nigeria. The point has already been made about businesses in Nigeria operating as “local governments” of their own.

The third area of interrogation concerns taxation. Yes, the World Bank’s ranking of the country in the area of paying taxes is positive but the crucial question is: at what cost? It is trite to say that businesses in Nigeria are overburdened as far as payment of taxes is concerned. Multiple taxation seems to have been accepted as the new normal of doing business in Nigeria. Different tiers of government impose identical taxes across the board. No serious harmonization of these taxes has been effected beyond sloganeering and empty promises and yet businesses are meant to thrive under such hostile environments. Granting of tax holidays to new but promising enterprises has never gone beyond having them in speeches usually delivered by those in authorities at business gatherings and fora.

Closely allied to the preceding is the magnitude sometimes of the increases in the known taxes and levies. A classic case in point is the recent increase in Lagos land use charges to between 400-500% which were later scaled down by half in some cases following outcry from businesses and individuals residing in the city. As at the time of writing this article, the issue is yet to be satisfactorily resolved with pockets of resistance still simmering. The fear has been expressed that Nigeria’s improvement on the World Bank ease of doing business index is severely under threat by this Lagos State move regarding the land use charge since the survey by the World Bank is usually skewed to Lagos (75%) and Kano (25%). This is aside increases in other levies such as toll gates, vehicle licence renewal where additional N500 had quietly been slammed on motorists in Lagos since 2017 as radio licence, et cetera.

It is clearly evident from the foregoing that a lot of work is still outstanding regarding ease and cost of doing business in Nigeria if the much expected growth and development of the economy would be realized and urgently too. The time for massive improvement in the known parameters is now!