Towards Improving Nigeria’s Investment Climate.
Undoubtedly, Nigeria is one of the fastest growing economies in the world, the largest in Africa, 26th largest in the world and 4th worldwide in terms of returns on investments and coupled with her large population, estimated to be presently over 170 million people, [projected at 250 million by 2050] and the attendant huge consumer market, the country has enormous investment opportunities and business potentials which global investors cannot ignore but explore. It is estimated that Nigeria, with an average annual GDP growth rate of 6% between 2010 and 2013, could achieve an annual GDP growth rate of over 7%, boosting the Gross Domestic Product to $1.6tn by the year 2030, while the industrial/manufacturing sector which contributed $35 billion to the economy in 2013[which is about 7% of the GDP] could expand rapidly to reach $144 billion a year by the year 2030.
However, for Nigeria to unlock and unleash her vast economic potentials there is the need to substantially improve the investment climate and business environment, in order to make it more friendly, alluring, attractive and conducive to local and foreign investors, especially in terms of the ease and cost of doing business. In this regard, it is worrisome and regrettable that the current World Bank Doing Business Report 2016 stated that Nigeria remains one of the poorest business destinations in the world, improving marginally by just one step from its ranking last year! Out of 189 countries surveyed, Nigeria moved from 170th position with 43.56 per cent points in 2015 to 169 with 44.69 per cent points.
The World Bank said it was more difficult to do business in Nigeria in 2016 than it was last year. The country equally improved by just one step in 2014 to the previous position last year. While Nigeria’s ranking for starting business dropped eight places from 131st position in 2015 to 139th; dealing with construction permits remained unchanged at 175th spot as last year. Getting electricity became more difficult in 2016, as the country fell in ranking from 181st position to 182nd, while registering property improved by four places from 185th to 181st, and getting credit gets is becoming tougher with a seven place drop in ranking from 52nd ranking to 59th. Other rankings included protecting minority investors, which recorded the highest improvement of 13 steps up the ladder from the 33rd position last year to 20th in the current ranking, with paying taxes, trading across and borders enforcing contracts remaining unchanged at 181st, 182nd and 143rd positions respectively.
Against the foregoing backdrop, in order to enhance the ease and cost of doing business in Nigeria and overcome the challenge of ‘multilaterisation’[multi-layers] of investment decisions and approvals, especially in terms of overlapping functions by multiple government agencies at local, state and national levels, which is hampering the smooth operation of many businesses, there is a necessity for the setting up of a ‘one stop shop’ government Agency, Department, bureau or Ministry, staffed with multi-disciplinary professionals, including, lawyers, accountants, economists, administrators, project managers, engineers, architects, surveyors, IT specialists, etc.
This ‘one stop shop’ government agency should be designed and structured to specifically promote and oversee the interests of business organisations and potential investors, as well as coordinate, cater and deal solely with all matters, activities and approvals relating to the business/ industrial sector from start to finish; beginning with the ease of registration/incorporation process and documentation procedure[including streamlining the panoply of forms and documents] for setting up, establishing and operating business firms, manufacturing and industrial concerns to regulatory/monitoring issues, including harmonising issues relating to land acquisition, taxation, especially streamlining of the payment of multiple taxes/levies/duties/tariffs[and the overall cost of doing business, which is generally perceived as exorbitant], obtaining various relevant business permits[at local, state and federal levels], policy and project coordination, including the provision of infrastructural support[especially, electricity, roads, security measures etc.], access to funding/equipment leasing, global competiveness,/international best practices, industrial property[including registering property, proprietary rights/interests and protecting investors], quality assurance measures and compliance procedures, trade facilitation/ conduct of international trade, immigration issues, including expatriate quota, rule of law/ enforcement of contracts and other trade/business laws, judicial/ legal reforms, winding up and resolving insolvency, as well as a whole gamut of other relevant business issues[bureaucratic, institutional, policy etc.] and challenges affecting the real, productive sector of the economy. The investment promotion council or the Corporate Affairs Commission may be restructured or both merged to perform this role of a “one stop agency”.
Going forward, in order to improve the investment climate and ensure a conducive business environment, policies, rules, regulations, standards, procedures and guidelines (i.e. the rules of engagement) must be clear, precise, unambiguous, transparent, consistent, reasonably stable and effectively and explicitly communicated to business operators, entrepreneurs and investors, so that they will not only play by the rules, but also have clear expectations as to the performance of their investments by being able to know, evaluate and measure approximately the relationship between the potential risks vis-à-vis the potential returns on their investments {input/output analysis}. In addition to providing a transparent and consistent policy environment, there must also be a workable and effective regulatory framework to monitor and ensure compliance as well as protect local and foreign investments. There must be prompt issuance of licenses and other relevant business permits to investors with proven capacity and financial plans, while other incentives such as tax holidays and duty-free regime should be put in place to attract and encourage local and foreign investors.
Finally, government should take concrete steps to ensure that existing free trade/export processing zones in the country are more active, efficient and functional, while creating new ones, where manufacturing industries can be exempted from excise/import duties and commodity taxes on locally produced and imported inputs/raw materials are subsidized by the government, through specific financial credit schemes (e.g. Domestic and offshore waivers and special concessions), in addition to being exempted from corporate tax [for a specific period of time], in form of tax holidays, especially for pioneer industries, to enable them recoup their investments in good time. If, through the free trade/export processing zones and industrial parks, companies are permitted reasonable freedom to export their products and import production inputs with minimal restrictions, then I foresee great potentials for the manufacturing and export industries which are sine qua non in our drive towards economic diversification and industrial revolution.
Kayode Oluwa.
OLUWA, a Leadership and Change Management Expert and former Secretary-General of Nigerian Council of International Chamber of Commerce, wrote in from The Executive Business School, Lagos, via kooluwa@ebsng.com
