Doing Business Index (DBI) despite an improvement in ease of doing business score from 51.52 to 52.89. A score not enough to move up or maintain Africa’s largest oil producer in its previous ranking. The country moved up 24 places in the 2017 edition of the report from its 2016 spot of 169 to 145. However, the country has failed to up the scale, falling to 146 despite a 1.37 basis point improvement in its score; a situation analysts say may cause foreign investment to the country to fall more.
“The poor ranking goes to show the structural challenges that Nigeria is going through regarding poor infrastructure, difficulty of doing business around property rights and contract enforcement,” said Omotola Abimbola, a fixed income and currency research specialist at Ecobank. “It also explains why the rallying oil prices that Nigeria has witnessed have not had major impact on the country because the private and the non-oil sector were not able to grow as it should and attract investment. Hence it is a wakeup call to policy makers that there needs to be a lot more work to be done.”
The Doing Business Index is an annual ranking that objectively assesses prevailing business climate conditions across 190 countries based on 10 ease of doing business indicators.
The index captures ease of doing business reforms that have been validated by the organized private sector, and offers comparative insights based on private sector validation in the two largest commercial cities in countries with a population higher than 100 million. The report consequently features Lagos and Kano for Nigeria. “Governments have the enormous task of fostering an environment where entrepreneurs and small and medium enterprises can thrive,” said Jim Yong Kim, World Bank Group president.
“Sound and efficient business regulations are critical for entrepreneurship and a thriving private sector. Without them, we have no chance to end extreme poverty and boost shared prosperity around the world.”
In July 2016, the Nigerian government inaugurated the Presidential Enabling Business Environment Council (PEBEC), as the administration’s flagship initiative to reform the business environment.
The PEBEC, chaired by Vice President Yemi Osinbajo was also to attract investment and diversify the economy to reduce the nation’s reliance on oil. The big picture was to make it easier for micro, small and medium enterprises to do business, grow and contribute to sustainable economic activity, and provide the jobs essential to improving social inclusion. Ayodeji Ebo, MD/CEO, at Lagos based Afrinvest said the drop may not be a surprise because some of those gains are being reversed due to poor monitoring on some of the policies that were earlier introduced.
“Things like the visa on arrival, are not as effective as they were when they were introduced which has affected our ranking,” Ebo said.
Data from the National Bureau of statistics showed that the total value of capital importation into Nigeria stood at $ 5.5 billion in the second quarter of 2018.
This is a decrease of 12.53 percent when compared to Q1 2018. The decline recorded in the second quarter was as a result of a decline in Portfolio and Other Investments, which fell by 9.76 percent and 24.07 percent respectively
“This ranking would continue to limit the extent to which we can attract investment into the country while smaller African countries would generate more.
We have also seen this on corporate earnings with most of them loosing revenue like Dangote sugar as a result of the complexity in the Apapa port,”
Ebo said on phone. The economies that ranked the highest in the ease of doing business were New Zealand, Singapore and Denmark.
According to the report, these economies have consistently well designed business regulation with friendly business environment. Meanwhile, Mauritius, the United Arab Emirates and Malaysia joined the top 20 economies this year. Sub-Saharan Africa recorded one-third (about 36) of all business regulatory reforms with a total of 107 reforms while the BRIC economies-
Brazil, Russia, India and China- introduced 21 reforms with getting electricity and trading across borders as the most common areas of improvement. More so, the report stated some benefits of improved business regulation, “for companies, greater access to new equipment and a larger scale of operations, which can lead to increased competitiveness and productivity; clearly defined regulation and equal access to property rights are essential for enabling businesses to expand their operations.”
Also, protection of small investors is important as greater protection helps promotes trust and confidence and in turn spurs greater access to finance for entrepreneurs.
Commenting on the Report, Jumoke Oduwole, the Secretary of the Presidential Enabling Business Environment Council (PEBEC) and Senior Special Assistant to the Vice President on Industry, Trade & Investment, said: “The feedback from the World Bank has reaffirmed the commitment of the PEBEC to remove bureaucratic bottlenecks faced by businesses in Nigeria as we work towards improving the country’s competitiveness.”
“The response from the private sector has also underscored the need for increased engagement between reform-implementing organs of government and the private sector players to ensure we are able to record sustainable progress. We strongly believe that while Nigeria did not increase in the rankings, the country has indeed witnessed an improvement in the enabling business environment in the past year. This will be reflected as more reforms are accepted for Nigeria by the World Bank Index in subsequent years” she further stated.
Earlier this month, the World Bank had separately released its 2018 report on the ease of doing business reforms across the 36 states of the federation and the Federal Capital Territory based on four indicators. A major highlight of the report was that 32 out of 36 states recorded improvements in their ease of doing business scores, recognizing that states are increasingly working towards removing the constraints faced by businesses.