Tuesday, August 14, 2012

World Bank Report on Nigeria’s Investment Climate

I could not agree more with the findings of the World Bank which in its Investment Climate Assessment Report for the 2011 fiscal period chronicled the constraints that entrepreneurs face in doing business in Nigeria. The report titled ‘Nigeria, an Assessment of the Investment Climate in 26 States’ was released on August 9, 2012.  The account observed among many other things that Nigerian business environment, in spite of the series of reforms being carried out by the current administration to attract Foreign Direct Investment into the country, remained hostile. The 202-page report said that investors were losing 10 per cent of their revenue to the hostile investment climate in the country. It stated that the areas that account for the 10 per cent loss include poor quality infrastructure, crime, insecurity, and corruption. The assessment reviewed the experiences of over 3000 surveyed business owners in 26 states of Nigeria about the aspects of the business climate that affected their businesses.

There is no gainsaying that the report largely affirmed what many Nigerian economic analysts know about their country. Labour unions such as Manufacturers Association of Nigeria (MAN) and entrepreneurs such as Richard Branson of Virgin Atlantic have also made similar assertions as contained in the World Bank report. The chairman of Virgin Atlantic was alleged to have said among other things that his former airline (Virgin Nigeria) had to fight battles against government agents who wanted to daily make a fortune from the company, politicians who saw the government 49 per cent as a meal to seek for all kinds of favour and regulatory body that didn't know what to do and persistently asking for bribes at any point. What can be more damning?

The aforementioned constraints are not only responsible for low investment drive in Nigeria but also high level of divestment and business mortality. Today, many once flourishing businesses have either collapsed like a pack of cards or their founders have relocated to saner climes where the cost of doing business is not as astronomic like ours. A case in point are our tyre manufacturing companies like Dunlop and Micheline; pharmaceutical companies; vehicle assembly plants like Steyr, Leyland, Volkswagen and even textile mills to mention but a few. Many warehouses of once productive businesses have been acquired by churches and turned to worship centres.

If Nigerian government failed to deal with the enumerated problems in the report we would only continue to mark time on the same spot, a case of motion without movement. It is a known fact that Nigeria is the primary investors’ destination in Africa given the potential of huge market in a country of over 167 million people and the largest black nation in the world. The country  also has cheap skilled labour in abundance. However, serious attention must be paid to incidences of insecurity in all its ramifications, poor social infrastructures such as electricity, water, good roads, hospitals and even recreational facilities. The policy of government must also be investment friendly. Such policies include the tax regime and moratorium; customs duties and goods clearing process, industrial dispute adjudication procedures; labour laws and many others.

Nigeria has Bank of Industry and Agricultural and Cooperative Bank, yet access to finance has been problematic. A case is point is the $200 million entertainment fund pledged by President Goodluck Joanthan during his campaign last year. More than a year after, the bulk of the money has not been disbursed with potential beneficiaries crying over the stringent conditions attached to accessing the loan facility. The entire lending process and procedures set by financial institutions need to be simplified and made investor friendly. We must also combat corruption not by paying lip service but by effectively prosecuting corrupt elements in our society.

The good thing is that Nigerian government is already working to resolve most of the issues raised in the World Bank report given the pronouncements of our Minister of Trade and Investment at the launch. According to Dr Olusegun Aganga, in order to make Nigeria the preferred destination for investment globally, his ministry has already commenced an Investment Climate Reform Programme in October 2011 with support from the World Bank and DFID.

He volunteered further that his ministry was partnering the Ministry of Power on the provision of uninterrupted electricity to nine industrial cities by the first quarter of 2013 and is currently working with the Corporate Affairs Commission, to reduce the number of days it takes to register a business, the processes and the cost. In addition, his ministry is also working to ensure that business registration can be done from the comfort of homes and offices.
Additionally, the Trade Minster said as a pilot, his ministry is working with the Ministries and Agencies under the Lagos State Government to reduce the cost and time of obtaining construction permits, registering property and enforcing contracts as well as working with the tax authorities at both the Federal level and in Lagos State on how to reduce the time and cost of filing taxes. In these initiatives, I do not see any plan to deal with the mounting insecurity and corruption, twin monsters that may render other noble intentions useless. Nonetheless, these are commendable efforts that I wish will bear good fruits such that Nigeria will be able to realise its full investment potentials without government officials necessarily having to globe-trot in search of the elusive foreign direct investments.