World over, businesses either in small or large scales are the drivers of the economies particularly among nations that are not part of the Organisation of Petroleum Exporting Countries (OPEC). The World Bank Report on ease of ‘Doing Business 2016’ has based its ranking on global best practices in business regulations focusing on different investment cycle and opportunities.
Majority of what determine how countries fare in the Doing Business ranking centre on the adoption of new methodology to business- a more efficient business environment and stronger legal institutions. In the developed world for instance, majority of businesses are handled by capitalists and their contributions to the Gross Domestic Products (GDP) of the UK, USA, China, Singapore to mention a few, have been commendable.
Nigeria is seen as a place where business opportunities are encouraged with improvement in the ‘registering of property’ as well as ‘protecting minority investors’ in the current report. Lagos State ensures that transferring property becomes less costly with the reduction in the fee for property transactions in the state. In the same vein, Kano joined Lagos in ‘strengthening minority investors protection by requiring that related- party transactions are subject to external review and to approval by disinterested shareholders’.
Interestingly, the fore areas, which make business easy for investors focus on; starting a business- business environment; credit facilities, paying taxes and getting electricity.
While other nations in Africa such as Rwanda, Kenya and Madagascar have continued to create opportunities for investors in the small, medium and large enterprises to get credit facilities, improved electricity supply and reducing taxes for new businesses, Nigeria remained struggling to improve the business environment particularly with the security threat constituted by Boko Haram sect. Another instance is the current reform going on in the banking sector, which calls for harmonization of all government accounts- Treasury Single Account (TSA) and the shake-up facing the Nigeria Stock Exchange because of the global economic meltdown and the removal of Nigerians sovereign bonds from the J.P Morgan Index.
In order to encourage foreign direct investors, many African countries have resorted to redefining their taxation policies in favour of entrepreneurs and small businesses as well as artisans. However, the Federal Inland Revenue Service (FIRS), states Board of Inland Revenue and local government income generation and other agencies such as the Nigerian Customs Service (NCS) and the Nigerian Immigration Service (NIS) have increased their capacity to generate income for the government due to the financial crisis rocking many states across the nation.
Recall that Nigeria ranked 169 out of 189 countries on ‘Doing Business Database 2016’. Countries such as Rwanda, Kenya, Madagascar and Senegal are recognized for implementing business reforms that have the capability of improving their economies through provisions of bank and financial supports on access to credit facilities by potential borrower, improved credit information, and reduced time for registration of companies, improved electricity utility and harmonization of business laws among African states.
While Nigeria moved up marginally in 2016 Doing Business Report, it is only 20 places away from the bottom.
Going by the figures given by Doing Business 2016, there is a wide gap in the regulatory efficiency and regulatory quality in Africa and the Middle East. Specifically, the major indicators for investors to be interested in doing business in any part of the world are considered in line with the regulatory efficiency and quality through; time required for business to be registered and the financial indicator, i.e. (the minimum capital requirement), aspect of construction permits, the ease in getting electricity, tax policies, registering property, trading across borders, enforcing contracts, protecting minority investors, accessing construction permits, registering property, and resolving insolvency. The 2014 World Bank Report on Nigeria business climate found that states like Cross River, Ekiti, Niger, Ogun and Rivers were making the biggest strides in the implementation of regulatory business reforms to create better business opportunities for investors. However, the business climate, challenges and obstacles to local entrepreneurs has remained unresolved in the country.
To improve the business climate and make it easier for businesses to operate, the Federal Government has initiated a number of initiatives.
Nigeria government has opened opportunities to business with the development banks initiatives that produced NEXIM Bank, Bank of Industry and Bank of Agriculture, Infrastructure Bank where investors can borrow money to start business below 10 percent interest rates. The country was still nowhere to be found in terms of providing low credit facilities for investors particularly entrepreneurs. Whereas in the developed nations, it is easier to access bank loans with two percent interest rates, the situation in Nigeria is different. To access the available loans even at 9-10 percent interest rates, entrepreneurs are required to present a business idea, proposal or submit collateral. The major challenge businesses face in Nigeria is that of finance; as access to credit facilities go seven point backwards from 52 in 2015 to 59 in the ‘Doing Business 2016 Ranking’.
This is another challenge bedevilling the economy of Nigeria; power supply has remained epileptic despite the privatization of the sector. Tariff charged by the power companies are considered arbitrary and exorbitant- it does not encourage small scale business and entrepreneurship. Nigerians enjoyed much improved electricity supply in the first three months of Buhari’s administration. The story has changed however, and citizens have gone back to using generators to power their businesses. The government has promised to improve on the power sector with reforms that will benefit Nigeria.
The new minister of Power, Works and Housing, Babatunde Fashola has commenced inquiry into the problems of power sector and why it allegedly failed to deliver the desired promises to the country. While assuming office he said; ‘We are here to work with you, in solving problems on ground as quickly as possible. We want to know if some of those problems are man-made or systemic.’
Taxation policy is part of the requisites which lures foreign investors from different countries to any nation for business purposes. The country’s current fiscal policy is not easy for businesses and firms. For instance, multiple-taxation remained unresolved between states, local governments and federal government. In the telecoms sector, the three tiers of government claimed taxes from companies and that contributed to why their tariffs continue to be above international standard. However, the automobile policy of the federal government had licensed 35 vehicle manufacturers. They are to enjoy 20 percent tariff on completely knocked down units (CKDs) as local vehicle manufacturers. This action aimed at encouraging local content and local manufacturing of products and services.
Starting a business
In terms of resources, weather and land mass, Nigeria is certified fit for businesses. However, previous government policies and reforms have not been able to attract enough investors due to challenges of corruption, unstable fiscal and monetary policies and absence of enabling environment for business operations.
The Peoples Democratic Party (PDP) once claimed that policies of the All Progressives Congress President (APC) government of President Muhammadu Buhari was not marketing the country to the rest of the world correctly following various statements ascribed to him while on official trips to India and France.
President Buhari had declared that his administration will focus on security, economy and fight against corruption. During his trip to India, he said Nigeria was at the moment of struggling to pay workers’ salaries and added that he would want to be remembered as a Nigerian president who fought corruption to a standstill…’
According to the Transparency International Corruption Perception Index, Nigeria ranked 136 out of 174 countries in the ranking. Buhari promised to checkmate corruption in the quest to encourage the influx of foreign direct investors. Considerable portion of his time spent while visiting U.S, France and India was devoted to wooing international investors.
The implication of the current stand of the Nigerian government on the fight against corruption is likely to be positive. Many countries, including the United States, United Kingdom and France have shown their commitment to support the administration in the fight against insurgents and corruption. The leaderships of those countries promised to return stolen funds by corrupt public officials to Nigeria in due time.
There are indications that the country would have better economic reforms, changed orientation and robust business opportunities in years to come. The current initiatives of government on the fight against corruption particularly through introduction of the Treasury Single Account could inspire favourable perception from the global community.