The World Bank Ease of Doing Business Index “indicates better, … simpler, regulations for business, and stronger protections of property rights,” usually for the benefit of Foreign Direct Investors, who will like to guarantee conducive environment for their businesses.
The thrust of the Ease of Doing Business idea involves: enforcing contracts; resolving insolvency; starting (new) businesses; registering property rights; paying taxes; and facilitating business across borders (for repatriation of profits across borders without legal or operational constraints).”
The finer details are, procedures, time, cost, and paid-up minimum capital to start a limited liability company; and to complete all formalities to build warehouses, and install quality control and safety mechanisms.
Others are: processes, time and cost to get connected to the electricity grid; reliability of electricity supply, and transparency of tariffs; to transferring properties; and the quality of the land administration system.
Yet others are collateral laws and credit information systems; minority shareholders’ rights in interrelated transactions and in corporate governance; and lag between transactions and payment time; total tax regime, including when a firm is expected to comply with tax regulations, and the implications of the post-filing processes.
There is more: consideration for time and cost, to export manufactured products, and to import plant and machinery parts; to resolve commercial dispute, and quality of the judicial processes; outcome, recovery rate, and legal framework for commercial insolvency; and flexibility in employment regulations.
On these parameters, Nigeria improved by 15 places, in October 2019, moving from 146th, to 131st, position, out of 190 countries, in the usually North American– and Europe-centric measurement scheme, done to the advantage of the multinationals and their global brands.
While all these are good, a friend, a former Editor of The PUNCH newspaper, expressed what you might describe as a sceptical attitude to the matter so dear to the hearts of the denizens of the commercial wing of the metropolitan powers, labelled the international monopoly capitalists by ideological heirs of leftist Karl Marx and Frederick Engels.
This former editor’s opinion is hinged on a theory that the real restructuring that Nigeria needs, is not quite the political, but in the way of doing business. He seems to think that the real knee that the Nigerian state places on the necks of the people is in dysfunctional economic policy omissions– or commissions.
He avers that with these economic policy restructuring, there may be little or no need for the political restructuring that the Yoruba Afenefere and the Ohanaeze Ndigbo advocate. The following are some of the dysfunctional omissions or commissions.
First is the Land Use Act, introduced by the military government of General Olusegun Obasanjo in 1978. The obnoxious law appropriates all lands within states, and vests them in state governors, who can, in turn, grant use of the land to the owners by way of a Certificate of Occupancy that is usually slow and cumbersome to obtain.
The tragedy is that if you don’t have a C-of-O for a landed property that you hope to present as collateral for a bank loan, you might as well kiss the proposition good bye. Lack of a C-of-O has put the dreams of many potential entrepreneurs on hold.
Even if your family had owned the land for centuries, you will never be able to use it as bank collateral without a C-of-O. That is an extremely dysfunctional policy if ever there was one. Worse is that it has become a tool that state governors use to get even with political opponents.
Besides, the vestiges of the economic Structural Adjustment Programme, introduced by Military President Ibrahim Babangida’s regime in 1986, are another set of booby-traps that militate against Nigeria’s economic well-being.
SAP is a set of harsh economic reforms implemented by a country in order to secure a loan from Bretton Woods institutions’ World Bank and International Monetary Fund. SAP has a slew of economy-constricting conditionalties.
Some of these are, setting up a mechanism of the so-called realistic exchange rate for what then Minister of Finance, Chu Okongwu, described as the correction of the overvalued naira, through the setting up of a Second-Tier Foreign Exchange Market.
SFEM is a second window of foreign exchange market that auctions forex, whereas the parallel forex market remains. The promised final merger of the two is increasingly becoming a mirage, as the government, through the Central Bank of Nigeria frustrates its own intention by coming up with multiple foreign exchange rates.
SAP also sought to alter the relative pricing in order to promote non-oil exports and other domestic products, and to improve efficiency of resource allocation to liberalise external trade, exchange rate, and price controls. Well, Nigeria remains a net importer, and government subsidy is the major distortion to the economy.
With the continuous slide of the naira, the argument that foreign reserves are held to strengthen the currency no longer holds. Its proponents should just stick to the admission that foreign reserves are accumulated to finance import. After all, Nigeria runs an import-oriented economy.
You can laugh all you want at the cheeky Nigerians who ask why Nigeria’s foreign reserves are not kept in the vaults of the country’s embassies abroad, (but with the investment banks of North America and Europe), or why America and Britain do not keep their foreign reserves in naira.
The promise to stop controlling the interest rate by government fiat has been observed more in the breach. Whereas the Bank of England set its Monetary Policy Rate at 0.1 per cent, the CBN sets its own at 12.5 per cent.
And if the Nigerian National Petroleum Corporation, that vicariously exports crude oil, (through the International Oil Companies), and imports petroleum products, is not one of the commodity boards that SAP intended to scrap, you need to redefine a commodity board.
The deluge of Chinese loans defeats the promise that SAP will relieve Nigeria’s debt burden, by placing a lid on foreign debts and attracting foreign capital. SAP actually created a need for more debts.
So, you see why you get no prize for guessing correctly that SAP failed woefully, not only in Nigeria, but also in other African countries, like Angola and Zambia, where it was literally forced down their throats.
You will also understand why failing European economies, like Greece, vehemently rejected the severe economic measures proferred by the IMF on behalf of the European Union, despite their acute need for funds.
If Nigeria’s Federal Executive branch, the legislature, and the CBN, will critically interrogate these SAP measures, and make appropriate adjustments, homegrown businesses will be on the road to recovery.
Imagine how many manufacturing plants and machineries, and infrastructure can be acquired with a naira that is relatively stronger than the so-called hard currency in which these equipment are sold.
Also, imagine the advantage to the local business that took a bank loan at an interest rate in the lower single digits, and has to sell its industrial manufactures or farm produce to countries with higher bank interest rate.
While the President, Major General Muhammadu Buhari (retd), has done well by assenting the reviewed company and Allied Matters Act into law, he should apply a fine tooth-comb to the Land Use Act and the Structural Adjustment Programme.
If not, both will continue to constrict Nigeria’s flailing economy.
END
Be the first to comment