W’Bank, others list obstacles to business growth in Nigeria
A
REPORT on the investment climate in Nigeria undertaken in 26 states
spread across the six geo-political zones has indicated huge constraints
that negatively affect start-up and growth of business.
The revelation came as the Federal Government intensified effort to attract more foreign direct investments and encourage local entrepreneurs to invest in Nigeria as a way of diversifying revenue sources and boosting the economy.
Topmost on the list is epileptic power supply and corruption in form of bribes demanded by government officials responsible for licensing businesses and other necessary frameworks to commence businesses, according to the report officially launched in Abuja yesterday by the Governor of Anambra State, who is also the Deputy Chairman of the Nigerian Governors’ Forum, Mr. Peter Obi.
But the Trade and Investment Minister, Mr. Olusegun Aganga has said initiatives are already at advance stage to enthrone a more transparent regime of processing business start-up in Nigeria where entrepreneurs would begin to apply for registration or file their tax returns from the comfort of their homes without interfacing with officials.
Governor Obi yesterday declared that the objective of economic diversification initiative in Nigeria would remain a ruse if governments at all tiers continue to show preference for imported goods that have alternatives produced locally. He called on administrators at all levels to embrace made-in-Nigeria goods as a way of boosting industrialisation in the country.
The Investment Climate Analysis Report reviews the experiences of over 3000 surveyed business owners in the 26 states about the aspects of the business climate that affect their businesses. It complements a similar study in 2007 that covered 11 other states. The survey asks business owners about both their perceptions and the actual costs of selected constraints. The analysis benchmarks Nigeria against comparator countries, and provides detailed data for each state.
The report reads in part: “ Nigerian firms have low productivity, as measured by their output in relation to their labour and capital inputs. Firms in Kenya are about 40 per cent more efficient, firms in Russia almost twice as productive, and firms in South Africa almost four times as productive. Nigerian firms that export are about 90 per cent more productive than non-exporters. Although labour in Nigeria is inexpensive, it is not inexpensive enough to compensate for this low productivity. The poor performance of Nigerian firms reflects many factors. This study focuses on constraints in the business climate and the serious costs they impose on Nigerian firms. Taken together, the total indirect costs of poor quality infrastructure, crime and security, and corruption amount to over 10 percent of sales for Nigerian firms. This is twice as high as in South Africa, Brazil, Russia and Indonesia.”
According to the report, “ Nigerian businesses’ biggest reported problem is the unreliable power supply. About 83 per cent of all managers surveyed considered electricity outage to be a serious problem—more than any other constraint. Firms of all sizes, in all states and sectors, report average power outages equivalent to eight hours per day. The average firm reported that outages lost them money equivalent to more than four per cent of sales. No comparator country experiences such severe business losses related to the power supply.”
The findings also indicate that “business owners’ second biggest obstacle is financing. About half of all firms reported that access to finance and its high cost constitute a serious problem. Only about 12 per cent of surveyed firms have an overdraft facility and only about 14 per cent have a line of credit or loan—about one-half or one-third the shares in comparator countries like Kenya and South Africa. About 60 per cent of firms that applied for loans in the previous year had their applications rejected - far more than in most of the comparator countries.”
“Collateral requirements are high in Nigeria: fully 89 per cent of loans required collateral, and the average collateral amount was 160 per cent of the loan, compared to say, 100 percent in South Africa. Loan duration is relatively short, as well. This suggests that even firms that have loans might not be able to get as much credit as they want and may not be able to finance cost, especially for exporters and larger firms.’’
The survey under the Federal Government’s Growth and Employment in States (GEMS), an initiative of the Nigerian Government, UK Department for International Development (DFID) and the World Bank aims at reducing poverty in the country through reform of the business environment and increased competitiveness in selected industry clusters.
In a comment at the launch yesterday, the Country Director, World Bank, Nigeria, Ms. Marie Francoise Marie-Nelly, said that despite the current infrastructure challenge facing Nigeria, the country remains the most attractive place for both local and foreign investors.
She, however, said there was need for the country to improve its business environment in order to maximise the hugely untapped investment opportunities that exist across the country.
“The basic lesson from the World Bank Assessment Report titled “ Nigeria, An Assessment of the Investment Climate in 26 states”, is that there are critical constraints in Nigeria that impede the development of the non-oil sector. Some of the critical issues include electricity, which affects the productivity and competitiveness of enterprises.
In his keynote address, Aganga said his ministry had already embarked on far-reaching investment climate reforms in order to improve the county’s competitiveness ranking and attract more Foreign Direct Investment into the country.
Specifically, Aganga stated that his ministry was partnering the Ministry of Power for the provision of uninterrupted electricity to nine industrial cities by the first quarter of 2013.
The revelation came as the Federal Government intensified effort to attract more foreign direct investments and encourage local entrepreneurs to invest in Nigeria as a way of diversifying revenue sources and boosting the economy.
Topmost on the list is epileptic power supply and corruption in form of bribes demanded by government officials responsible for licensing businesses and other necessary frameworks to commence businesses, according to the report officially launched in Abuja yesterday by the Governor of Anambra State, who is also the Deputy Chairman of the Nigerian Governors’ Forum, Mr. Peter Obi.
But the Trade and Investment Minister, Mr. Olusegun Aganga has said initiatives are already at advance stage to enthrone a more transparent regime of processing business start-up in Nigeria where entrepreneurs would begin to apply for registration or file their tax returns from the comfort of their homes without interfacing with officials.
Governor Obi yesterday declared that the objective of economic diversification initiative in Nigeria would remain a ruse if governments at all tiers continue to show preference for imported goods that have alternatives produced locally. He called on administrators at all levels to embrace made-in-Nigeria goods as a way of boosting industrialisation in the country.
The Investment Climate Analysis Report reviews the experiences of over 3000 surveyed business owners in the 26 states about the aspects of the business climate that affect their businesses. It complements a similar study in 2007 that covered 11 other states. The survey asks business owners about both their perceptions and the actual costs of selected constraints. The analysis benchmarks Nigeria against comparator countries, and provides detailed data for each state.
The report reads in part: “ Nigerian firms have low productivity, as measured by their output in relation to their labour and capital inputs. Firms in Kenya are about 40 per cent more efficient, firms in Russia almost twice as productive, and firms in South Africa almost four times as productive. Nigerian firms that export are about 90 per cent more productive than non-exporters. Although labour in Nigeria is inexpensive, it is not inexpensive enough to compensate for this low productivity. The poor performance of Nigerian firms reflects many factors. This study focuses on constraints in the business climate and the serious costs they impose on Nigerian firms. Taken together, the total indirect costs of poor quality infrastructure, crime and security, and corruption amount to over 10 percent of sales for Nigerian firms. This is twice as high as in South Africa, Brazil, Russia and Indonesia.”
According to the report, “ Nigerian businesses’ biggest reported problem is the unreliable power supply. About 83 per cent of all managers surveyed considered electricity outage to be a serious problem—more than any other constraint. Firms of all sizes, in all states and sectors, report average power outages equivalent to eight hours per day. The average firm reported that outages lost them money equivalent to more than four per cent of sales. No comparator country experiences such severe business losses related to the power supply.”
The findings also indicate that “business owners’ second biggest obstacle is financing. About half of all firms reported that access to finance and its high cost constitute a serious problem. Only about 12 per cent of surveyed firms have an overdraft facility and only about 14 per cent have a line of credit or loan—about one-half or one-third the shares in comparator countries like Kenya and South Africa. About 60 per cent of firms that applied for loans in the previous year had their applications rejected - far more than in most of the comparator countries.”
“Collateral requirements are high in Nigeria: fully 89 per cent of loans required collateral, and the average collateral amount was 160 per cent of the loan, compared to say, 100 percent in South Africa. Loan duration is relatively short, as well. This suggests that even firms that have loans might not be able to get as much credit as they want and may not be able to finance cost, especially for exporters and larger firms.’’
The survey under the Federal Government’s Growth and Employment in States (GEMS), an initiative of the Nigerian Government, UK Department for International Development (DFID) and the World Bank aims at reducing poverty in the country through reform of the business environment and increased competitiveness in selected industry clusters.
In a comment at the launch yesterday, the Country Director, World Bank, Nigeria, Ms. Marie Francoise Marie-Nelly, said that despite the current infrastructure challenge facing Nigeria, the country remains the most attractive place for both local and foreign investors.
She, however, said there was need for the country to improve its business environment in order to maximise the hugely untapped investment opportunities that exist across the country.
“The basic lesson from the World Bank Assessment Report titled “ Nigeria, An Assessment of the Investment Climate in 26 states”, is that there are critical constraints in Nigeria that impede the development of the non-oil sector. Some of the critical issues include electricity, which affects the productivity and competitiveness of enterprises.
In his keynote address, Aganga said his ministry had already embarked on far-reaching investment climate reforms in order to improve the county’s competitiveness ranking and attract more Foreign Direct Investment into the country.
Specifically, Aganga stated that his ministry was partnering the Ministry of Power for the provision of uninterrupted electricity to nine industrial cities by the first quarter of 2013.
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