Ease of Doing Business in Nigeria

Sorting the total ease of doing business ratings for a country gives an idea of its business friendliness. If the regulatory environment receives a high grade (a low numerical rank), it is favorable for business activity.

The Ease of doing business index ranks countries against each other based on how the regulatory environment is conducive to business operation and stronger protections of property rights. Economies with a high rank (1 to 20) have simpler and more friendly regulations for businesses.

Nigeria is ranked 131 among 190 economies in the ease of doing business, according to the latest World Bank annual ratings. The rank in Nigeria improved to 131 in 2019 from 146 in 2018. This indicated that Nigeria was improving in the steps to ease business operations in the country.

However, recently, Economists have hinted that the ease of doing business is rather deteriorating than improving and this is also worsening the productivity of the private sector, which has been declining progressively since the second quarter (Q2) of 2021.  The GDP report of the National Bureau of Statistics (NBS) between Q2, 2021, and Q1, 2022 vividly illustrated how the degenerating ease of doing business is putting a strain on the productivity of the country’s economy.

 According to the NBS, Nigeria’s growth rate declined from 5.01 in Q2, 2021 to 4.03 in Q3, 2021. It further declined to 3.98 and 3.11 in Q4, 2021, and Q1, 2022 respectively. This has wiped out the gains initially made in 2019 when Nigeria moved to 131 in the global ranking.  Nigeria was also named among the top 10 most improved economies in the world in terms of doing business. However, this is no longer the situation.

Currently, operators in the private sector are daily lamenting the deteriorating ease of doing business in Nigeria due to poor infrastructure, multiple exchange rates, multiple taxations, policy inconsistencies, scarcity of foreign exchange, unfavorable port tariffs, discouraging actions of public servants who interface with businesses, palpable insecurity level, and the dearth of useful incentives for businesses.

Also, the Hostile Business Environment, Difficulty Finding Competent Staff, Lack of Market Information and Data, bureaucracy with changing government policies, and the high cost of business financing are other factors impacting the ease of doing business in Nigeria.

These whittle away growth potentials, crush underlying business profitability, and diminish investor confidence in the economy. The Purchasing Manager Index (PMI), a report of the Stanbic IBTC for June 2022, for instance, showed that the productivity of the Nigerian private sector declined from 53.9 in May to 50.9 in June 2022

The government herself is well in the know of these challenges as Nigeria’s Vice-President, Yemi Osinbajo, had earlier decried how regulatory requirements and elongated certification processes are killing Nigerian businesses. “There are too many regulatory requirements. Too many regulations kill output. We must take a second look at how we regulate. Over-regulation is killing businesses. It kills investments. An Agric exporter can’t export perishable produce after months,” he said.

Indeed, it is a serious matter that the government should actively investigate and act accordingly. Investors are massively closing their businesses in Nigeria and relocating to other African countries due to the hostile environmental conditions in Nigeria. While young men and women are struggling to start a business of their own, Small, and medium-scale businesses already functioning, are finding it very difficult to survive. All these contribute to a high unemployment rate which in the long run results in a high crime rate.

An enabling business climate is critical for the economic growth of any nation and our government must sincerely act now to remedy the situation before it becomes too late. We are very good at making policies and strategies but putting them into action and following through is the problem. We must summon the courage and willpower to arrest the situation as quickly as possible to save the already collapsing businesses and provide hope for those intending to start.

Nichonline