What hope for Nigeria’s ease of doing business?

Despite the hype and propaganda that hallmarked the work of the Presidential Enabling Business Environment Council (PEBEC) under the President Muhammadu Buhari administration, there has hardly been any significant improvement in Nigeria’s business environment in recent years. PEBEC was set up in July 2016, with the specific mandate to make Nigeria a progressively better place for businesses to thrive by collaborating with state governments, the National Assembly, the judiciary and other regulatory partners. The output of this partnership is expected to reflect in generally lowering cost of doing business, simplified regulatory provisions as well as shortened time for obtaining statutory approvals from the appropriate agencies.

However, during his inaugural address on May 29, 2023, President Bola Ahmed Tinubu said: “I have a message for our investors, local and foreign: our government shall review all their complaints about multiple taxation and various anti-investment inhibitions.” This renewed promise by the new president undoubtedly shows that not much really was achieved in the efforts at improving the ease of doing business in the country by the previous administration. In fact, to reinforce the persistence of the inclement business environment, President Tinubu in his address also had to assure that “electricity will become more accessible to businesses…, power generation should nearly double and transmission and distribution networks improved.” All these obviously portray the persisting lack or shortage of the basic needs of business (in Nigeria) for sustainable operations.

Apparently, via propaganda and some stakeholder engagements, PEBEC presented purported reforms in Nigeria that earned her some ‘upgrade’ in the World Bank’s ‘Ease of Doing Business’ ranking in 2020. But the big questions still remain. For instance, what is now on ground for prospective and existing businesses? Has the work of PEBEC led to “removing of the bureaucratic constraints being experienced by a large number of stakeholders” as directed by President Buhari while inaugurating the Council? The immediate past vice president, Yemi Osinbajo, a month before exiting his office, also raised a number of germane questions at ‘PEBEC Awards’ ceremony in Abuja. Osinbajo, who spoke as the chairman of PEBEC, said the initial concerns were: “…how were we going to remove the bottlenecks and obstacles, while delivering the reorientation of regulatory authorities and civil servants who deal with businesses on a daily basis? How were we to address the significant trust deficit from the private sector towards the government, and correct the pervading negative perceptions, by ensuring that our policies and regulations are enablers to micro, small and medium-sized enterprises (MSMEs)?”

Pertinent as these Osinbajo questions are, the truth is that the PEBEC efforts being celebrated at the ‘Abuja Awards Nite’ and similar outings haven’t yielded the desired results. With what ease can business thrive in an environment where multiplicity of taxes and levies remain the order of the day? Which is why for upwards of seven years since the Presidential Council was set up, President Tinubu still had to flag duplicity of taxes as part of his core issues to deal with. Also, within those seven odd years, has electricity supply improved, whether for households or businesses? The answer is No. Instead, the national economy has remained a “generator economy” in which all economic agents use power generating sets of various types and sizes for their daily operations. This obviously shoots the cost of doing business through the roof, especially in the current milieu of liberalised Premium Motor Spirit (PMS) importation where prices of fuel have gone up multiple folds.

Beyond self-adulation, what is there to celebrate in a business environment where hyper-inflation, very high interest rate and high exchange rate persist. At the latest count, Nigeria’s inflation rate stood at 22.41 percent (end-May 2023). The Monetary Policy Rate (MPC) of the Central Bank of Nigeria (CBN) is pegged at 18.5 percent, while the Naira exchange rate against the dollar (officially) moved from N465/$1 early in June to now about N750/$1. All these in no way make things easy for businesses. If anything, the lingering trends present businesses with uncertainty, rising operating costs and render them generally uncompetitive vis-à-vis their competitors located elseWhat impact has PEBEC made on the worsening insecurity in Nigeria? Has the efforts of the Presidential Council in the past seven years impacted on insecurity in the land to the advantage of businesses? In point of fact, the security situation rather than improving has deteriorated, becoming an existential threat to life and property. And which businesses thrive in an insecure environment? Coincidentally, in the past three years or so, socio-political tension as concomitant to the build-up to the 2023 general elections also added to the scare for businesses. In many cases, rather than thrive, a number of businesses had to relocate to other climes — especially to Nigeria’s neighbouring West African countries. This trend persists till date.

Nigeria’s legal and judicial environment has hardly ever been clement for businesses. Many potential/existing investors over the years have had raw deals in the hands of bureaucrats or been victims of stifling judicial processes. A number of reputable multinational companies (Virgin Airlines, for example) have had their hands burnt in their attempts to set up in Nigeria. Terms of agreements and/or Memorandum of Understanding (MoU) are hardly kept by the agencies and officers that represent Nigeria in the making of such business deals. What all the foreign airlines have been going through with respect to the repatriation of their revenues in Nigeria in the past couple of years amply illustrates how tough and stifling the Nigerian business milieu has remained. Close to one billion dollars legally earned by these airlines are still ‘trapped’ in Nigeria, even under the Tinubu administration.

Even as PEBEC claims to be improving the ease of doing business in Nigeria, the federal government has continued tinkering with the Companies Income Tax (CIT) and other levies, to extort more money from businesses. In this regard, part of the highlights of the Finance Act 2023 (signed into law on May 28, 2023 by President Buhari) is a new compliance obligation for shipping and air transport operators in Nigeria. These companies are now required to file income tax returns accompanied by certified copies of their detailed gross revenue statement, covering their Nigerian operations, clearly stating the sum earned during the relevant period, in lieu of audited financial statements. This is under the new rubric: ‘Income Tax Returns by Non-Resident Shipping and Air Transport Companies.’ There is also an increase in Tertiary Education Tax rate from 2.5 percent to three percent of assessable profits (of every taxable business).

Unfortunately, the creation of the Finance Act has become an annual affair, meaning that every New Year will have a brand new Finance Act — with all the uncertainty it heaps on businesses. These, and many others, really stifle and/or scare away businesses rather than attract them. Nigeria therefore has a long way to go in creating an attractive environment for businesses to thrive!