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What Is It About Ease Of Doing Business In Nigeria? (EDB)

In an earlier write up I gave reasons infrastructure spending was not working for the Nigerian economy. In this article I turn the searchlight on the much acclaimed improvements in the Ease Of Doing Business(EDB) ranking attained by Nigeria. Nigeria has been gaining on the world index of EDB. From 145th position in 2019 it dropped to 131st in 2020. This improvement has been well flaunted by the government as ‘ACHIEVEMENTS’. There has been a consistent progress in our ratings over the last six years considering we were ranked 169 and 170 in the years 2015 and 2014 respectively.

However, economic performance indices such as Foreign Investments, GDP annual growth rate, remittances from diaspora have consistently waned just as our EDB rankings improved. What is responsible for this paradox? Of what use is EDB ranking improvements when businesses are refusing to come to Nigeria or leaving the country for other nearby countries than in the past when our EDB ranking was poorer. The earlier we find out what is responsible for this state of affairs the better.

Thinking about it, I am inclined to believe Nigeria has simply tried to “work to the answer”. Smart alecs they are, they scanned the eleven categories used to assess a nation and sought where immediate changes could be pursued giving immediate results. In other words going for the low hanging fruits! They nit picked rather than address the problem holistically. Therefore when gains in Ease of Doing Business is placed against the new policy directions chosen for Nigerian economy with an administrative change, we start to unravel the paradox.

Our current managers took over an economy that appeared to be failing and they needed to do some things fast to stem the tide. Investors sat out the stretched out process of forming a cabinet and were expectant of policy pronouncements. Unfortunately the first few pronouncements of the regime sent wrong signals hence capital flight ensued. Unfortunately, this administration did not learn from the early missteps and moved from one wrong policy to another. Other analysts have listed these policies but the administration will not budge.

A BRIEF LIST OF SOME OF MISSTEPS THAT NEGATES GAINS IN EASE OF DOING BUSINESS: The nation was primed up for a total deregulation and removal of subsidies on refined petroleum products and there was enough political capital for the move, rather government role  was deepened. Subsidy was given a new nomenclature, under recovery. Secondly, for sixteen years between 1999 and 2015 the value of Naira to the Dollar was determined largely by the market and what was happening in the parallel market. Enter this administration and fiat determination of the value was the new policy. Thirdly ad hoc disruptions of businesses such as border closures, twitter bans, including harassment of prominent foreign businesses (MTN, SHOPRITE, now MULTICHOICE) for perceived tax infractions. All these and many others are the real messages investors read, not the pronouncements on better Ease of Doing Business.

By their various actions this regime have time and again confirmed the philosophies that drive their policies; and it is a DIRIGISME Philosophy that believes government should do it all. I dare to say that until there is a change at the helm of affairs the international business investors are going to be reluctant to come to Nigeria. Underlying economic philosophies drive policies and that is what we have seen playing out in last seven years. A dirigiste attitude is driving STATIST policies that drives away investors in droves. This dirigiste philosophy is so embedded in us that many players view the government as ‘The Economy’ and whenever government revenue go down they assume the economy is down and so for the economy to rise government revenues must rise, not knowing that in many circumstances the rising of government revenues means the economy/businesses is faltering. This being the mindset of our bureaucrats and politicians in government we might understand the lacklustre performance of the economy despite rising government interventions.

Needing something to cheer, this administration has brought in EDB; but is EDB an economic advancement tool? It is more a reflection of the economic philosophies that has driven a nations business environment over time. What do I mean, a culture that views government office and regulations as means of aggrandizement will struggle with ranking while those countries that believe businesses must thrive for economy, nation and citizens to thrive are doing well. Hence we see the first ten positions on the EDB ranking occupied by very business friendly countries with liberal economic policies. When liberal economic policies were the order of the day in Nigeria, Nigeria had it’s best ranking at 120 in 2008 before lapsing to the 169 position in 2014.

SO WHAT IS KEEPING BUSINESSES AWAY AND WHAT TO DO ABOUT IT: While improving the ranking on EDB index is good it should be viewed as the icing on the cake. The foundation being sound usually liberal rather than statist policies. It includes lowering taxes, fees, duties, tariffs etc due government rather than increasing the rates( could not VAT increase been postponed till we had a booming economy).

A change in bureaucratic mentality is also a must, from bureaucrats being anti business (a hang over from our pro socialist past). Bureaucrats love more regulations, politicians love taxes but these two drive businesses away to where there is less of them. With AFCTA the time of believing our relatively huge market would keep investments coming is over, meaning it’s time for real mental change.

Important to note that a move from 145 to 131 on the ranking is not going to change perceptions of the investing world about doing business in Nigeria because of our very pathetic bureaucratic corruption image from our inception as an independent country. To change perceptions we have to go way down to below 60 or 50. Ghana is at 60, Rwanda at below 40 and Botswana at 86. Only a quantum jump can change world perceptions about us.

This will need a sociocultural change from our Dirigisme mentality to a more Laissez faire philosophy that would permeate society especially government bureaucracy. This is what can deliver this quantum gains required. An example of such a mentality change that fathered a system change is that by Deng Xiaoping that changed the fortunes of China, not a cosmetic dressing of issues.

Again, would better EDB ranking on its own have delivered much needed sustained economic growth? No, I don’t believe it would. It has to be premised on other sound business friendly policies. I am afraid that has been the missing circumstance for years now and Nigeria’s dysmal economic performance indices cannot be argued with.

Time is running out for Nigeria, those directing the economy have to mend their ways and change direction. The thought that instituting a new Economic Advisory Committee in December of 2019 would have brought a change of course but it did not. There is a saying that, never allow a crisis to go to waste, but the crisis of 2014/2015 that brought on oil price crashes has been wasted. Rather than address core structural and sociocultural challenges of the economy we play to the gallery for the Nigerian citizenry while investors both foreign and local vote with their feet.

One is not averse to growing government revenues but it should not be achieved at the expense of businesses. To achieve it we have to grow the economy especially the manufacturing sector. We have to achieve it by reducing taxes and many other government fees not by increasing them. This attracts more businesses into Nigeria and makes up for the lower taxes while increasing employment. This has been shown to work elsewhere. Ghana adopted this policy a few years back and droves of businesses moved into Ghana.

Until lately, not in any quarter since 2015 has economic growth exceeded population growth despite all manner of government interventions. We have had EDB improvements, Economic Recovery and Growth Plan (ERGP) Economic Sustainability Plan(ESP) etc. It’s time to change course, what ever has been tried has simply not worked including ‘infrastructure expenditures’. The maxim of a doctor is to do no harm and not make a patient worse than they met him or her. I am not sure this can be said of the current managers of our economic development. Neither should we allow gains in EDB divert us from failings elsewhere.

A CRY ON BEHALF OF MILLIONS BEING IMPOVERISHED IN LAST TEN YEARS! DON’T LET US MAKE THE NEXT TEN YEARS WORSE!

Dr Olugbenga Jaiyesimi writes from Sagamu, Ogun state.

 

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