The hurdles of doing business in Nigeria, By Uddin Ifeanyi

Ifeanyi Uddin

Nigeria! Accursed and beloved in the same breath! In the teeth of some of the most incompetent and corrupt leadership to be met with anywhere in the world, examples abound of the rich potentials hidden in the nation’s fraying fabric. I suppose these contradictions drive the endless debates in the country over both the preferred path if the economy is to meet the most basic of our people’s expectations, and the pace at which we should proceed. We just cannot agree over whether the glass we’ve been drinking from (since 1960, or, again, is it 1999?) is half-full or half-empty. In spite of the robust debates over how ingenuous the current administration is, I wager that we share a lot more common grounds: spaces, not exactly white, but not as brawly as their surroundings.

Electricity, is one such. The pros and cons around this are part of the national folklore, and are not worth a going over. The vicissitudes of the manufacturing sector of the economy are another. Contributing 1.12% of total output growth in the first quarter of this year, there is little question that a lot is wrong with the sector. The problem with our manufacturing sector, as with other economies making their way up the production value chain, is not that we have seen services contribute a growing share of GDP, it is instead that there are clear and present obstacles to manufacturing activity in the country. Conversely, the observed growth in the services sector, wholesale/retail trade to be precise, speak to what has been described as the burgeoning “informalisation” of the economy, and the serious issues of unemployment/under-employment that piggyback on this phenomenon.

The National Bureau of Statistics (NBS) estimates unemployment (national) at 23.9% last year, just a little under the 24% for Spain, which most commentators on that country’s dwindling fortunes describe in fin de siècle terms. That the unemployment numbers are kinder to urban dwellers (17.1%) than they are to rural dwellers (25.6%) speaks to levels of immiseration in the villages and farmsteads that will continue to act against the possibilities of a subsistence, rain-fed agricultural sector remaining for long the main driver of domestic output growth. Understandably, females (24.3%) are slightly worse off than their male counterparts (23.5%). But I suspect that there is an enumeration problem added here. Most females in “employment” in the country are in informal, temporary type work that could slip through the gaps in the bean counters’ categories.

So how do we address these problems? In their Report on the 2011 Article IV Consultation with the country, IMF staff point to the Nigeria section in the 2012 World Bank “Doing Business Report”, noting “a need to address difficulties in paying taxes, registering property, and carrying out international trade”, and the familiar plaint over “high cost and inadequate supply of electricity”. Apparently, in Nigeria, an investor seeking to do business (it is insignificant whether this be of the domestic variety, or an FDI-bearing type), and who includes construction of office spaces as part of the necessaries, would spend upwards of 504.8% of the nation’s per capita income on 15 procedures. Then s/he (or they, it doesn’t matter) would have to cool their heels for 85 days waiting for the necessary construction permits.

Unfortunately, competition is not often so lenient; and is wont to soldier ahead regardless. Still, the costs to our would-be domestic operator pile up relentlessly. Our hypothetical investor could find less destructive use of the time spent waiting for the construction permit, than dwell on the 50 days and 6 procedures it took to register the business in the first place. Weak legal rights, non-existent public registries and private credit bureaux, and abysmally shallow credit information, mean that access to credit (once the business gets going) will be up hill all the way. Here, the advantage shifts in favour of the non-resident investor with access to funding from outside the country (if things hold as they are, then count on the Indians’ and Chinese’ growing dominance in the economy).

But even the new Asian imports will have to contend with difficulties in enforcing contracts: the confidence trickster’s milieu. Thirty-eight different steps. Over 810 days of litigation. And at a cost usually equal to 35.3% of the initial claim. After this, you’d have thought it couldn’t get any worse. Still, exporting whatever is produced is even more cumbersome. The World Bank estimates “cost to export” from Nigeria at about US$1,070 per container (US$500 in China, and US$1,013 in Ghana). 29 days to export. The imponderables are endless. Not surprisingly, Nigeria ranked 133 of the 183 countries sampled by the World Bank and the International Finance Corporation in their June 2011 survey of “regulations that enhance business activity and those that constrain it”.

Thus, the test of government’s effectiveness cannot just be in the diverse estimates of percentage implementation of budget numbers (exotic, though this may seem). But in the extent to which we have lowered these hurdles (where we may not be able completely to dismantle them). And on this, there cannot be too much argument. This government is not passing muster.


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