The Lagos Chamber of Commerce and Industry (LCCI) has expressed some reservation in the World Bank Doing Business report 2020 which saw Nigeria move 15 places up the ladder to 131 from 146 position in 2019.
The Director General of LCCI, Mr. Muda Yusuf who made the position of the Chamber known in a statement in Lagos on Sunday recalled that World Bank captured Nigerian business environment using Lagos and Kano largely as a result of their economic and commercial importance to Nigeria and of course both states were two most-populous states in Nigeria stating that 77% of sampled businesses by the World Bank were drawn from Lagos and the other 23% from Kano.
Yusuf noted that the sampled cities of Lagos and Kano were not holistic and might not be broad enough considering the fact that the combined Micro, Small and Medium Enterprises (MSMEs) in the two cities was less than 15% of total MSMEs (41 million) in Nigeria, according to a 2017 SMEs national survey conducted by the National Bureau of Statistics (NBS).
“We believe that only two cities will not adequately capture what it takes to do business in Nigeria. The report failed to capture cities like Aba, the industrial hub of the South-East region, Onitsha, Abuja and Port-Harcourt where commerce also thrives”, he said.
He observed that Nigeria did not improve on the Getting Credit sub-index which could be attributed to the high cost of obtaining credit adding that the interest on SMEs and commercial loans for most deposit money banks ranged between 20% – 30%, which according to him discouraged businesses from accessing banks’ credit facility to expand their operations.
He however envisaged an improved performance for Nigeria in this sub-index given recent policy interventions by Central Bank of Nigeria compelling banks to lend at least 60% (now 65%) of deposits to small businesses in the real sector.
The Director General further said that Nigeria did not improve on the Paying Taxes sub-index which he attributed to the cumbersome process associated with tax payment, which he said discouraged taxpayers.
According to him, “To support our assertion, a report by Pricewaterhousecoopers (PwC) titled ‘Paying Taxes 2019’ ranked Nigeria 157 out of 190 countries on the ease of paying taxes. We are of the opinion that tax payment process should be simplified to encourage taxpayers fulfill their civic obligations as this would go a long way to boost tax revenue in Nigeria. Meanwhile, the issue of multiple taxations needs to be addressed, especially at the states and local government levels where various fees and levies are charged.
“Tax reforms that will stimulate the growth of MSMEs should be pursued vigorously such that the present revenue drive of the government does not cripple and destroy whatever gains that have been achieved in the MSMEs development in the past.”
He stated that according to the World Bank, Nigeria made getting electricity easier by allowing certified engineers conduct inspections for new connection in Lagos and Kano even as he believed that this reform did not reflect present realities as businesses were still grappling with epileptic power supply, which he said had taken a toll on their cost of production and profitability.
“Lack of access to electricity and unreliable electricity supply remains a key constraint to doing business in Nigeria. According Dalberg, a global policy and advisory firm, individuals and businesses spend nearly $12 billion on self-generated power supply. The challenges confronting the power sector include inadequate gas supply, non-cost reflective electricity tariff; operational efficiencies and poor distribution infrastructure remain unaddressed. We are of the view that the $3 billion facility obtained from the World Bank to revitalize the sector is a step in the right direction and should possibly improve access to stable power supply if strategically deployed”, he posited.
While noting that the survey that underpinned the report was limited to locally owned limited liability SMEs in the formal sector, he however maintained that the informal sector which was home to a large chunk of Nigerian SMEs were not captured in the report arguing that Nigeria had one of the largest informal sectors in Sub-Saharan Africa (SSA), which accounted for 65% of its Gross Domestic Product (GDP) in 2017, according to an International Monetary Fund (IMF) report on informal economy in SSA.
“We are of the view that government needs concentrate more on this sector with a view to transform the sector to maximize its potentials. This is very important as the report failed to highlight the challenges businesses experience in the informal sector and the structural bottlenecks encountered by them when transitioning into the formal sector” the DG added.
He continued, “It is obvious that the indicators used by the World Bank in the rankings for ease of doing business ignored insecurity which to us stands as a critical element in investment and business decision in any nation. It is pertinent to state that no matter the improvements made in other areas, once a nation is considered insecure or unsafe, investors would naturally look the other way. Also, existing businesses are most likely to suffer losses capable of destroying their businesses. We therefore urge the government to put more efforts at ensuring that the country is safe enough for businesses to be conducted by all.
“There still exists a huge infrastructural gap in Nigeria as it concerns doing business. Many major roads are not motorable preventing movement of goods and services across the nation. Epileptic power supply continues to increase production cost, telecoms companies are still grappling with right of way issues, impeding the growth of broadband infrastructure, while investments in technology far below the expected standard. We strongly believe that the government’s efforts going forward should be focused on addressing infrastructural gaps as it concerns the ports, railways, roads and others that will aid the development and survival of MSMEs in the country.
“We do not agree with the claim of improvement in trading across borders. International trade processes are still fraught with daunting challenges to importers and exporters. Investors are still grappling with lingering fundamental issues poor ports infrastructure, excessive documentation, lack of technology deployment to facilitate cargo clearance, institutional issues, bureaucracy and volatile trade policy regime. All these are issues that need to be fixed to improve our international trade processes.
“The investment environment is still characterised by unstable and unfavourable government policies as well as the regulatory issues impeding private sector development. Regulatory and policy risks had heightened in the past few years. Government should stimulate growth with favourable policies and avoid constant policy summersault that impacts negatively on the business environment
“As noted by the World Bank’s report on Doing Business for 2019, efficient design and poor implementation are just two factors that explain why some reforms succeed while others fail. It stated further that there is a significant positive association between the availability of training programs for public officials and streamlined business regulation. Therefore, there is need for government to ensure constant training of public officers as improved understanding; clarity and trust in regulatory requirements are associated with more efficiency in the regulatory framework.”
While describing the ranking as Nigeria’s best performance since 2011, Yusuf however noted that their analysis of the report showed Nigeria climbed four spots higher to snatch the 17th position in the Sub-Saharan Africa and jumped two spots higher to claim the 5th spot in West Africa.
“We commend the government on the attainment of this feat which also reflects the efforts of the Presidential Enabling Business Environment Council (PEBEC). With this report, Nigeria has moved 39th places in five years, from 170th position in 2015 up to 131st position. However, Nigeria’s ranking in the West African sub region is 5th position. We can do much better as the economic powerhouse of the region.
“In conclusion, the present administration has disclosed intention to be among top 70 countries on the ranking by 2023. This goal is laudable but would only be achieved when the government addresses the major issues around infrastructure, policy, regulation, quality of institutions and insecurity”, he concluded.
Photo: LCCI Director General, Mr. Muda Yusuf.
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