Business Environment Reforms: Can Nigeria Regain Initial Steam?

This week, we turn our attention to the ongoing business environment reforms started by the President Buhari administration in 2016. The Presidential Enabling Business Environment Council (PEBEC) is the institution tasked with the reforms that make it easier to do business in Nigeria. The improvements are expected to come in the form of a reduction in cost, time and procedures in starting and running a business. The overall target at the commencement of the reforms was to improve Nigeria’s ease of doing business rank to the top 100. Since 2016, PEBEC has implemented reforms in three phases (National Action Plans — NAP), mainly along the eight core focus areas of the World Bank’s Ease of Doing Business ranking (EoDB).

The results from the actions taken — three cycles of actions so far — have been mixed. We observed that the largest improvements were in the earlier phases of the programme, as the initial momentum seems to have waned. In the first phase, PEBEC hit the ground running by achieving c.82.0% of its reform targets over a 60-day period from February 2017. This led to an improvement in Nigeria’s EoDB ranking by 24 places to 145 out of 190 countries. The second 60-day National Action Plan expanded the scope of the reforms to include such areas as Selling to Government, Trade Within Nigeria and Trading Across Borders. The reforms achieved a poor success rate of c.52.0%. Between February and April 2018, the third phase of reforms covered nine indicators and the success rate marginally improved to c.62.0%. These reforms improved Nigeria’s score from 52.03 to 52.89 in the 2019 EoDB rankings, but the country slipped one place to 146 out of 190 countries. We suspect that the slow pace of reforms in the second and third phases had a negative impact on the 2019 ranking.

Business Environment Reforms Necessary but Insufficient to Attract FDI
The fourth National Action Plan has been set in motion by PEBEC, and it is intended to cover ten reform areas from March to April 2019. Since the target is to achieve a ranking within the top 100 when the 2020 EoDB ranking is published in October 2019, we make the case for faster and more effective implementation to achieve a better success rate. This is because strong upward movements in the EoDB rankings require that the pace of reforms is faster in Nigeria than in other countries. We also believe PEBEC must look past implementing reforms on paper, the processes must be institutionalised to generate gains. Anecdotal evidence reveals that Nigerian institutions are slow in transitioning to new processes, thus perpetuating inefficiency and corruption, which have always made doing business difficult. We posit that helping institutions attain quicker transition and monitoring their processes post-reforms is necessary for sustainable improvements.

We are yet to see strong improvements in FDI in Nigeria due to the business environment, which remains unaccommodating despite reforms instituted of late. This is because a higher EoDB ranking is not sufficient for increased investment. To attract investment, we believe PEBEC and the FG have to look beyond gains in the ranking as business environment reforms must be complemented by pro-business regulations, accommodative monetary and fiscal policies, and the opening up of sectors to private investment.


Afrinvest

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