Appraising the 60-day Action Plan on Ease of Doing Business in Nigeria
The laudable plan would have to overcome implementation challenges.
The Presidential Enabling Business Environment Council (PEBEC) on February 21, 2017, approved a 60-day National Action Plan on Ease of Doing Business in Nigeria. The Action Plan is an inter-ministerial, inter-governmental plan that will be implemented by various Ministries, Departments and Agencies (MDAs) across Nigeria. The mandate of the Action Plan is to: “remove critical bottlenecks and bureaucratic constraints to doing business in Nigeria” and “move Nigeria 20 steps upwards in the World Bank Ease of Doing Business Index.” This article will consider the implementation strategy of the Action Plan based on a comparative analysis of the business and regulatory practices across jurisdictions such as New Zealand and Singapore (which are ranked high on the World Bank's Ease of Doing Business Index).
1. The Strategy
The Action Plan has eight focus areas, namely: Starting a Business, Construction Permits, Getting Electricity, Registering Property, Getting Credit, Paying Taxes, Trading Across Borders and Entry and Exit of People. However, the Action Plan only provides initiatives to be implemented across six of the eight focus areas, which are highlighted below:
A. Starting a Business
Nigeria is currently ranked 138th out of 190 countries with respect to “Starting a Business” on the World Bank Ease of Doing Business Index (DB Index). This is because starting a business in Nigeria can be difficult and usually requires twice as many procedures, and three times the amount of time, as it takes to do a similar activity in developed economies. In New Zealand for instance, registration of a business is an online procedure that takes less than one day. (http:// www.doingbusiness.org/data /exploreeconomies/new-zealand) The Action Plan therefore seeks to streamline the process of starting and registering a business in Nigeria from ten to two days by introducing the following initiatives: Enable online submission of registration documents; Improve reliability of Corporate Affairs Commission (CAC) online portal; Consolidate incorporation forms into one form; and Integrate Federal Inland Revenue Service (FIRS) e-payment solution into CAC’s online portal.
B. Construction Permits
Nigeria is ranked 174th out of 190 countries with respect to “Dealing with Construction Permits” on the World Bank DB Index. In view of the fact that construction contributed 3.20% to nominal GDP in the fourth quarter of 2016, lower than the rate of 3.36% it contributed a year earlier, and real estate in turn contributed 8.48% in the same quarter (lower than the 9.40% reported in the corresponding quarter of 2015) (National Bureau of Statistics); it is important that the timelines for obtaining construction permits are reduced. Singapore, for example, made dealing with construction permits easier by streamlining procedures and improving the online one-stop shop for this process. In Nigeria, individual states issue construction permits. Therefore, it is imperative that each state buys into the objectives of the Action Plan to reduce the number of days required to procure construction permits from 42 to 20 days. Lagos State, for example, plans to launch an e-planning platform, which will make the planning approval process more efficient. This initiative should be modelled across the 35 other states in Nigeria.
C. Registering Property
Nigeria is currently ranked 182nd out of 190 countries with respect to “Registering Property” on the DB Index. The Action Plan seeks to reduce the number of days required to register property from 77 to 30 days by the introduction of the following initiatives: Consolidation of several payments into one; Consolidation and publication of a complaint mechanism as it is currently difficult to provide constructive feedback on the title registration process; Reduction in time required for obtaining Governor's consent; and Elimination of the requirement for sworn affidavit in land's registry search. These initiatives are comparable to those of Singapore where transfer of property was made easier by the introduction of an independent mechanism for reporting errors on titles and maps. In view of the fact that the Nigerian situation is a little different and property registration is obtained at the state level, it is important that these initiatives are operational in each state of the federation to ensure consistent implementation of the Action Plan objectives in this regard.
D. Getting Credit
Nigeria is currently ranked 44th out of 190 countries with respect to “Getting Credit” on the DB Index. The Action Plan is specifically targeted at enabling Micro, Small and Medium Scale Enterprises have better access to credit, ultimately at cheaper rates. To achieve this, the following initiatives have been introduced: National Assembly (NASS) passing relevant legislation (NASS is considering two priority bills to ease access to credit: Secured Transactions in Movable Assets (Collateral Registry) Bill and Credit Bureau Services Bill); Support of credit bureaus to expand coverage across Nigeria and provide credit scoring to increase credit information sharing between credit bureaus and lenders; and Enable online searches for movable assets to enable online registrations, amendments and cancellations by lenders. The Action Plan initiatives on getting credit are centred around improving credit data and information sharing, efforts that are comparable to other jurisdictions such as New Zealand, which improved access to credit information by beginning to distribute both positive and negative credit information.
E. Trading Across Borders
Nigeria is currently ranked 181st out of 190 countries with respect to “Trading across Borders” on the DB Index. The Action Plan seeks to reduce export and import time by 50%, by mandating the use of pallets to enable quicker physical examination of imports; providing advance cargo manifest to terminal operators; ensuring that the Nigeria Customs Service (NCS) schedules examination of cargo; and optimising pre-shipment process for exports. In view of the fact that the Action Plan seeks a substantial reduction of export and import time, initiatives specifically targeted at streamlining documentation processes in this regard may be required. In France, for example, (which ranks 1st with respect to “Trading Across Borders”) customs clearance procedures were made faster by the introduction of electronic customs declaration and eliminating the need to submit certain documents. Such initiatives may prove useful towards curtailing the current bureaucracies associated with trading across borders in Nigeria.
F. Entry and Exit of People
Part of the objectives of the Action Plan is to achieve a 48-hour visa processing timeline and all-round improved traveller experience with regards to the entry and exit of people in Nigeria. As such, the Action Plan seeks to introduce the following initiatives: Simplification of visa on arrival and submission processes; Consolidation of arrival and departure forms; Elimination of manual baggage searches; and Upgrade of Lagos and Abuja airports.
2. Critical Success Factors
Laudably, a number of the initiatives proffered in the Action Plan are centred around streamlining processes by employing online platforms to reduce physical interface and in turn curb corruption and the bureaucracies currently associated with doing business in Nigeria. From our review of the above implementation strategy, we have identified the following critical success factors to help deliver the mandate of the Action Plan.
A. Need to Focus on the use of Information Communication Technology:
It is very critical that the Government takes cognisance of the fact that substantial investment in Information and Communications Technology (ICT) infrastructure would be required if these initiatives are to be effective. Experts have asserted that Nigeria needs a staggering $25 billion annually over the next ten years to build and develop the necessary infrastructure to take Nigeria's ICT to the next level. (Thisday Newspaper, November 24, 2016) The Federal Government Economic Recovery and Growth Plan (2017-2020) (ERGP) may respond to this issue as the Plan provides for accelerated infrastructure development in the area of broadband.
In New Zealand and Singapore (where a number of processes have been streamlined using e-portals), there is an estimated 91.2% and 81.3% internet penetration respectively compared to Nigeria's estimated 51.1% internet penetration (Internetworldstats.com). The Government of New Zealand has also planned a total of $2 billion investment into major initiatives that will deliver quality internet connectivity to New Zealanders, including those in rural communities. (New Zealand's Ministry of Business, Innovation and Employment)
The above example buttresses the fact that an improvement in the World Bank DB Index cannot occur in isolation and the Government must be ready to partner with private sector participants to invest in critical ICT infrastructure such as submarine cable systems, and fibre optics network, not only in Nigeria's urban cities, but also in rural communities in Nigeria.
B. Need to Sensitize and Educate Government Agencies and Parastatals:
In view of the fact that the Action Plan is intended to be an inter-ministerial, inter-governmental plan to be implemented by various MDAs, it is very important that these institutions are properly sensitised to expunge unnecessary administrative bottlenecks. In order to ensure that the Action Plan does not merely pay lip-service to the World Bank's expectations on ease of doing business in Nigeria, it is important that MDAs that continually interface with potential foreign and local investors, are adequately sensitized to execute the aims and objectives of the Government vis-à-vis the Action Plan.
C. Adherence to the Aims, Objectives and Mandate of the Action Plan by Each State in Nigeria:
A critical success factor is ensuring that each state in Nigeria signs a protocol of adherence to the Action Plan. This is because certain indicators such as procurement of construction permits and registration of property will be operationalised at the state level. Each state government is therefore critical to ensuring that the initiatives of the Action Plan are enforced to the letter. It is imperative that each state, and the Federal Capital Territory collaborate with the Federal Government to ensure that the well-thought-out strategies of the Action Plan are implemented.
3. Need to Focus on Other Indicators Critical to Nigeria's Ease of Doing Business
As previously highlighted, although the Action Plan identifies eight focus areas on ease of doing business, it only provides initiatives to be implemented across six of the eight focus areas, which have been elucidated in Section 1 above. The following indicators still need to be addressed as highlighted below:
a. Paying Taxes:
Nigeria's rank of 182nd out of 190 countries with respect to “Paying Taxes” on the DB Index indicates that more work is required in this area. Simple initiatives such as promoting public awareness on the use and advantages of the currently under-utilised e-Tax Pay Solution system (this system was introduced by the Federal Inland Revenue Service (FIRS) in 2015) may be useful towards improving Nigeria's ranking in respect of tax payment. We, however, note from a presentation by the PEBEC Coordinator (Dr. Jumoke Oduwole, Senior Special Assistant to the President on Industry, Trade and Investment) to the Nigerian American Chamber of Commerce, that the government intends to introduce the removal of in-person requirements for Tax Identification Numbers with company registration and also E-filing and E-payment processes are to be introduced to improve tax adherence and ease of payment.
b. Getting Electricity
Notably, Nigeria ranks 180th on the DB Index. In view of the current over-reliance on on-grid generation, and its attendant role in stifling the growth of business in Nigeria, initiatives which encourage the use of off-grid solutions, including creating an enabling environment for decentralised energy generation, through distributed generation and mini-grids in the short and medium term, whilst the challenges with on-grid generation are still being resolved, need to be expedited in order to improve the ease of doing business in Nigeria.
In the on-grid space, the ERGP provides for other solutions such as greater use of renewable energy as a means to improving electricity. The Government has also unveiled a power sector recovery programme specifically to boost electricity supply in the country. The plan intends to address the viability of electricity distribution companies and improvement of power sector governance. We also note from the PEBEC Coordinator's presentation that the Government intends to reduce the procedures required to get connected to the grid and a shorter time for Lagos and Kano's electricity distribution companies to get connected.
c. Enforcing Contracts and Resolving Insolvency
Nigeria currently ranks 139th and 140th respectively in respect of “Enforcing Contracts” and “Resolving Insolvency” on the World Bank Ease of Doing Business Index. These indicators are particularly important as investors often seek out jurisdictions that not only safeguard the sanctity of contracts but also provide speedy recourse in the event of insolvency. Recognising this, Singapore for instance made enforcing contracts easier by introducing a new electronic litigation system that streamlines litigation proceedings. It is also imperative that the National Assembly considers the enactment of legislation specifically tailored to insolvency and insolvency proceedings in Nigeria. The provisions of the Companies and Allied Matters Act (CAMA), as they relate to insolvency, are inadequate and outdated. There is a need for a proper regulatory framework for insolvency. In Macedonia, for example, resolving insolvency was made easier by changing voting procedures and allowing creditors greater participation in insolvency proceedings. Simple measures such as these will also go a long way in providing incentives that will boost the ease of doing business in Nigeria.
The Action Plan is a laudable initiative of the Federal Government to ensuring that Nigeria removes critical bottlenecks and bureaucratic constraints to doing business in Nigeria and move Nigeria 20 steps upwards on the World Bank Ease of Doing Business Index. However, a consistent and efficient implementation of the Action Plan is heavily dependent on (a) investment in critical ICT infrastructure, (b) sensitisation of the MDAs involved in actual operationali-sation of the Action Plan, (c) adherence to the aims and objectives of the Action Plan by each state and (d) developing the Action Plan further to focus on critical areas such as paying taxes, getting electricity, solving insolvency and enforcing contracts.
An enabling business environment will not only encourage domestic investment in different sectors of the economy, it will also go a long way in significantly improving Nigeria's foreign direct investment, currently recorded as 1,348.23 USD million between 2007 and 2016. (www.tradingeconomics.com/ nigeria/foreign-direct-investment)
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