The Ease of Doing Business (EODB) index is a ranking system established by the World Bank Group. It ranks countries against each other based on how the regulatory environment is conducive to business operations and stronger protections of property rights. It is a yearly ranking that assesses the business environment in 190 countries using various indicators including paying of taxes, starting a business, protecting minority investors and trading across borders. Economies with a high rank, that is, between 1 and 20 have simpler and more friendly regulations for business.
Nigeria is currently ranked 131 among 190 economies according to the latest annual ranking of the World Bank – World Bank’s Doing Business 2020 index, which was released on the 24th of October 2019.
Nigeria is Africa’s most populous country with abundant natural and human resources; this easily makes it attractive to foreign investors. However, the state of Nigeria’s economy and its business/economic policies are two key factors that would determine how conducive it is for foreigners to invest, establish and carry on businesses in Nigeria.
The closure of Nigeria’s land borders in August 2019 is seen as a counter productive business/economic policy which has affected the ease of doing business in Nigeria because it has adversely affected trading across its borders; it has also heightened the apprehension of investors (and potential investors) due to sudden change(s) in the country’s economic policies which may negatively affect their businesses. Even though the aim of closing Nigeria’s borders with Chad, Benin, Niger and Cameroon is to protect Nigeria’s economy from the activities of smugglers, the closure has erased trade worth millions of Dollars. It has also affected Nigerian businessmen in neighbouring countries especially in Ghana. Recently, the Ghanian government through some regulatory policies have made it difficult for Nigerians to establish and carry on businesses in Ghana. The Ghanaian government has cited the closure of Nigeria’s borders as the major reason behind its actions; this could also result to Ghanian businessmen and companies (as well as those of other neighbouring countries) being sceptical about doing business in Nigeria.
In July 2016, the Federal Government established the Presidential Enabling Business Environment Council (PEBEC) with the aim of minimising the constraints that come with running businesses in the country. The council is chaired by Nigeria’s Vice President, Prof Yemi Osinbajo SAN, GCON; other members of the council are ten (10) ministers, the Head of Civil Service of the Federation, the Governor of the Central Bank of Nigeria (CBN), representatives of: Lagos and Kano State Governments, the National Assembly and the private sector.
In 2017, the Nigerian Immigration Service (NIS), reviewed the requirements for Nigerian visas to make them more user-friendly. This was done as part of plans to improve the country’s business climate.
One of the key indices for assessing the ease of doing business in Nigeria is “how to start a business” in Nigeria; therefore, the Federal Government has undertaken some business reforms which are geared towards removing some of the bottlenecks that hitherto prevented the ease of establishing businesses in Nigeria. This has come in the form of the repealing of the Companies And Allied Matters Act (CAMA)1990, a piece of legislation that has regulated business affairs in Nigeria for over there decades. It has been replaced with the Companies And Allied Matters Act (CAMA) 2020, which is supposed to address the challenges of doing business in the 21st century whilst ensuring adherence to international best practices. Under the CAMA 2020, new provisions have been introduced to promote business development and a friendly business climate (for investors) in Nigeria.
Some of the new provisions introduced to promote the ease of doing business in Nigeria are as follows:
- Prior to the commencement of CAMA 2020, only two or more persons were allowed to register a company but under Section 18(2) of CAMA 2020, a single person can now register/incorporate a company. This means that, a company can now have a single member/shareholder. This is a huge relief for persons who want to start a new business but do not wish to be forced into an undesired business partnership in order to secure the registration of their company.
- One of the basic requirements for the registration of a company was a form for Declaration of Compliance which must be signed by a lawyer or attested to by a Notary Public confirming that all the requirements of the Law have been complied with. Under the new CAMA – Section 40(1), this has been dispensed with and replaced with a form for Statement of Compliance which must be signed by an applicant or his agent.
- Under Section 27 of CAMA, the promoters of a company are no longer required to pay for shares not needed at a specific time because of the introduction of minimum share capital which has replaced authorised share capital.
- It is no longer mandatory for companies to procure and use a Common Seal – Section 98 of CAMA.
- Mindful of the challenges that have resulted from the current global pandemic and the need to sometimes dispense with physical meetings, Section 240(2) of CAMA provides that a private company may hold its general meetings electronically (virtually) provided that the meetings would be conducted as stipulated in the company’s Articles of Association.
- Another beautiful innovation under the new CAMA is the electronic filing of share transfers. Under Section 176(1) instruments of transfer of shares also include the electronic instruments of transfer. Section 861 provides that, the Certified True Copies (CTC) of electronically filed documents are admissible in evidence with equal validity with the original documents.
- The appointment of a company secretary is no longer mandatory for all companies. Section 330(1) makes the appointment of a company secretary optional for small companies but mandatory for public companies.
- To further encourage small businesses/companies, under Section 402 it is not mandatory for small companies or companies that have a single shareholder to appoint auditors at the annual general meeting to audit their financial records.
- Section 307(1) prohibits multiple directorships in public companies. According to the section, a person cannot be a director in more than five (5) public companies at a time.
- Under Section 223(12) the filing fees for registration of charges has been reduced to 0.35% of the value of the charge.
- To enhance corporate accountability and transparency, under Section 120 there must be a disclosure of persons with significant control of companies in a register of beneficial owners.
- To further promote corporate accountability, private companies are restricted under Section 265(6) from appointing directors to hold the office of Chairman and Chief Executive Officer (CEO).
- Companies that are in distress now enjoy a robust rescue plan under the new CAMA; there are new provisions (Sections 443 – 549 & 718 – 721) to make sure that such companies do not become insolvent by reason of their distress.
- Under Section 849 two or more associations (Incorporated Trustees) which have similar aims and objectives can now merge; the merger will be under the terms and conditions prescribed by the Corporate Affairs Commission (CAC).
- Partnerships have been elevated by the creation of Limited Liability Partnership (LLP) and Limited Partnership (LP) under Section 746.
These innovations will no doubt enhance the growth, management and sustainability of businesses in Nigeria. They will ensure global competitiveness as Nigerian businesses and companies would be managed according to international best practices.
What remains to be seen is how these business reforms would be implemented for the ease of doing business in Nigeria. The bureaucratic bottlenecks that usually frustrate the process of establishing businesses in Nigeria must be removed in order to ensure the effective implementation of these reforms. The registration of companies, incorporated trustees and the novel Limited Liability partnerships must be seamless; all electronic channels must be efficient and accessible 24 hours daily. Mechanism(s) for due diligence must be established where the services of lawyers have been dispensed with under the current reforms.