Ease of Doing Business in Nigeria

The Ease of Doing Business is an index, developed by the World Bank, that scores and ranks countries based on how easy it is to set up and operate a business in it. It is indicative of how favorable an economy is for business operations and investments which are important considerations for Foreign Direct Investments. In fact, these investors can be local entrepreneurs who are interested in anything that can affect the success of their investments. 

Nigeria is ranked 146 among 190 economies in the ease of doing business, according to the latest World Bank annual ratings. The rank of Nigeria deteriorated to 146 in 2018, from 145 in 2017. Ease of Doing Business in Nigeria averaged 145.09 from 2008 until 2018, reaching an all time high of 170 in 2014 and a record low of 120 in 2008. This directly translates that Nigeria keeps deteriorating as one of the worst countries to do business in the world.

Usually, a nation’s ranking on the index is based on the average of 10 sub-indices: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and  resolving insolvency. So basically, the Ease of Doing business index ranks countries against each other based on how the regulatory environment is conducive to business operation.

It is clear that Nigeria must now intensify her efforts to improve the business atmosphere of the nation by creating an enabling environment for investors. Meanwhile Ease of Doing business goes beyond simply inviting investors and having laws that favour businesses alone. It includes providing of basic amenities such as constant electricity and a network of good roads.

Firstly, a better governance is very essential not only to improve the ease of doing business in Nigeria but also to propel the economy. The problem of corruption, inadequate infrastructure, low skill levels, economic uncertainties, epileptic power supply, bad transportation networks, bad water supply and the attitude of the Nigerian Federal Government towards the investor generally should be improved upon. More so, at this time of growing unemployment and general economic depression, the importance of providing a good environment for businesses to thrive cannot be overemphasized because when there is good governance, companies and business operators will do things right. Once this is done, the survival rates of businesses would be higher which will in turn, increase employment and boost the nation’s economy. Good governance would attract local and foreign investments and also boost the integrity of the Nigerian capital market through the establishment of a culture of transparency.

Another thing is the roles government play in business activities. In many countries of Africa, Government is especially fond of meddling with the business atmosphere either for their political or personal gain. Interference and unnecessary market advantages given to certain favorites of the Government will have to be eradicated in order to attract investors into the country.

Let us also look at the multiple unnecessary taxes and levies from various regulatory agencies. This has created unnecessary fear in the mind of the potential stakeholders. These levies only burden potential investors with the fear of reduced profitability and disruption of business activities.

The primary agencies tasked with tax administration (including audits, reviews etc.) and collecting taxes at Federal, State and Local government levels respectively are the Federal Inland Revenue Service (FIRS), State Internal Revenue Service (SIRS) and Local Government Councils. But in recent times, several other bodies such as the National Assembly, Revenue Mobilization Allocation and Fiscal Commission (RMAFC), Ministry of Justice, Economic and Financial Crimes Commission (EFCC) etc., have also taken up the role of pursuing companies directly to enforce and monitor tax compliance while adding more to the already ridiculous amount of tax being paid by organizations. This should not be so because these multiple tax review processes can be quite hectic, spanning a number of months or years in some cases, requiring allocation of staff and other resources of the taxpayers to attend to regulators. As a result, tax revenue collection is significantly lower compared to other countries with more simplified systems of tax collection.

It is therefore very vital to review tax policies to make the process less complicated through expansion of the existing tax incentives and adoption of a fully electronic system for registering and paying taxes. Though, the introduction of the Integrated Tax Administration System (ITAS) project by the FIRS in 2013 was a step in the right direction, followed by the e-Tax Pay Solution in 2015. Also, in an effort to further simplify the tax payment process and eliminate the hurdles associated with issuing Tax Clearance Certificates (TCC), the FIRS announced on the 26th of April, 2016 that the process of issuing TCCs will be reviewed to abridge the process and make it less cumbersome. Implementing these reviews and a reduction in the tax levied on businesses will certainly improve Nigeria’s rank on the ease of doing business.

Additionally, an improved policy on access to credit, dealing with construction permits, trading across borders, enforcing contracts and resolving insolvency is very much needed. The training of Nigerian Customs Service and Nigerian Immigration Service officials manning the nation’s borders cannot be overemphasized.

It is a fact that some African economies like Rwanda, Republic of Benin, Zambia, Kenya, South Africa, Ghana, among others, fared better than Nigeria the “giant of Africa” in the Ease of Doing Business index. It is a key pointer that so much needs to be done. Therefore, it is imperative that Nigeria needs to remove these hurdles hindering businesses in the country. This will make our economy more investor-friendly. For example, a World Bank document reveals that in Ghana, it will take an importer about 23 days to complete all necessary border and documentary compliance certificates to bring in goods into the country while an exporter will spend 8 days to complete all necessary documents for export. However, in Nigeria, for trade across border, an importer will spend 55 days to complete all necessary border and documentary compliance certificates to bring in goods into the country while an exporter will spend 12 days to complete all necessary documents for export. 

To conclude, this much needed improvement in the Ease of Doing Business can only happen when the new Government in Abuja ensures the following:

·        Better Governance

·        Minimize Nigerian Government role in business activities

·        Put in a sensible tax regime

·        Honest and improved regulatory efficiency

Looking forward to the next President of the Federal Republic of Nigeria minimizing the government role by privatizing ports, railways and even roads (except Border Roads because of National Security).

Hoping that Foreign Exchange Rates will be stable and Business Loans will be easily available through a single window system.

Looking forward to Tax Holidays for both domestic and foreign investors who are setting up businesses in those regions of Nigeria which are difficult to access.

This is imperative.

Such a huge country with great potential needs significant improvement in the ease of doing business.