Nigeria dropped a notch lower on the World Bank’s latest Ease of Doing Business rankings, slipping from 145th out of 190 countries surveyed in 2017 to 146th in 2018. This dampened any hopes rekindled after the country rose on the rankings from 170th in 2015 to 169th in 2016. The report is another distressing confirmation of how the Muhammadu Buhari government has failed to reverse the failures of the past and reform the economy for growth. With so much poverty in the land, so many jobless people and an economy on the cusp of recession, the federal and state governments need to do much more, and with a proper sense of urgency, to improve the operating environment and attract investments.
However, in its recent sub-national series on Doing Business in Nigeria that covered the 36 states and the Federal Capital Territory, the World Bank had noted improvements in the ease of doing business for small and medium scale enterprises. It said that since the last report, 29 states had, combined, implemented 43 reforms, majority in the area of starting a business, and with Kaduna emerging most improved. Analysing business regulations in starting a business, dealing with construction permits, registering property and enforcing contracts, the report noted improvements in a combination of these four parameters, stating that Enugu, Abia, Lagos and Anambra also improved business regulations.
At the national level, Nigeria had also moved 24 places up in 2017, the result of a slew of Executive Orders signed in May 2017 by Vice-President Yemi Osinbajo, who was acting President while Buhari was on medical vacation, to untangle red tape and graft at the ports; reduce the number of agencies there from 14 to seven and simplify financial transactions. Local and foreign investors had welcomed these measures with the United States-based Centre for International Private Enterprise reporting that the multiplicity of state agencies at the ports added to the bottlenecks and corruption through which Nigeria lost over $3 billion annually.
But the 2019 result has exposed once more the unintelligent approach to the economy by the federal and state governments. Given the country’s potential and the reality of 70 per cent poverty, youth unemployment of over 50 per cent and an economy that is barely off the floor after a recession, there is so much still to be done to open up the economy to local and foreign investment and foster competition. Nigeria is nowhere close to where it should be economically. The Bretton Woods institutions recommend policies to open up the economy for investments – improving governance, pro-business regulations, removing inhibitive provisions at the local level and easing access to abundant, cheaper sources of finance. But the country is making very little progress.
Our peers are not waiting for us: India rose 23 places on the rankings from 100th in 2017 to 77th place in 2018, after placing 130th in 2016, the result of policies it formulated and implemented. Malaysia also moved nine places up to No.15 in 2018, the result of six business reforms. Ghana moved up six places to 114th as the West African country continues to reform; Singapore retained its No.2 spot.
Buhari needs to be shaken from his complacency: since his return, the Executive Orders have been obeyed in the breach, reflective of his distracted, un-focused style. Mo Ibrahim Foundation’s Index of African Governance 2018 now rates Nigeria 33rd out of 54 (African) countries. Insecurity prevails, enforcing contracts is dicey and the private sector is weak. The country ranked 171st out of 190 in paying taxes; 179th in registering property, and 172nd in access to electricity in 2017. Infrastructure is pitiable and the states and local governments stubbornly refuse to run their territories as productive economic units.
The President should vigorously enforce the Executive Orders, liberalise all economic sectors to facilitate private sector capital, identified by the World Bank as the key to unlocking the vast potential of the economy. Competition among private investors and among the states should be an integral part of our growth strategy. Corruption must be tamed.
Transparent privatisation of commercial assets targeting established global players is one way to open the floodgates to Foreign Direct Investment, without which the economy will not fly. Running governance rationally should translate to selling off the loss-making, idle refineries and the Ajaokuta Steel plant and handing over the airports and seaports to the world’s best operators by concession agreements that protect national interest and meet global standards.
Our states should compete for investments; in other federal polities, competition by the units drives development. India’s federal initiatives to attract investments and prepare Indian workers for employment in high-skilled and high-tech jobs are complemented by healthy competition among its 29 states and seven union territories: seven of these account for 60 per cent of national economic growth and its top nine states account for 75 per cent of the total FDI that reached $61.96 billion in 2017. Fostering greater competition among the states is a major programme of the pro-business Prime Minister, Narendra Modi.
Even the frontrunners are unrelenting. China, for instance, has outlined 28 reforms to be adopted by its regions and local governments to improve the investment climate and achieve wider geographical spread in investments. Its commerce ministry said 35,652 foreign-funded firms set up shop in 2017, while FDI in 11 free trade zones rose 18.1 per cent to $16 billion out of the total $135 billion FDI in 2017 when FDI to Nigeria dropped 21 per cent to $3.5 billion.
Priority should be given to infrastructure like India that invested $1 trillion in infrastructure between 2012 and 2017, 40 per cent of which was private sector-funded. Unless serious efforts are put in place without further delay, the economy, and with it, the fragile Nigerian union may implode sooner than later.