Starting business in Nigeria getting more difficult – World Bank

By Yinka Kolawole

STARTING a business in Nigeria has become more cumbersome over the last one year, according to “Doing Business”, an annual report by the World Bank Group measuring the regulations that enhance business activity in 189 economies and those that constrain it.

business-bottleneck

According to the “Doing Business 2016”, the 13th in the series of the annual reports,  ranking by ease of starting a business  moved the country  down 8 places from 131 to 139; access to credit also moved down 7 places from 52 to 59; while access to electricity moved 1 place down from 181 to 182.

The report claims that the process of starting a new business in Nigeria is hampered by government bureaucracy, with people resorting to third party agents to help them facilitate the process of business registration. The World Bank report also highlighted unstable power supply and lack of access to credit facility as major drawbacks for a business start-up in Nigeria.

Nigeria was rated as the 21st worst country to do business in the world, meaning there are only 20 countries where it is harder to do business than Nigeria. The report ranks Nigeria 169 out of the 189 countries considered in the survey. Nigeria’s position is virtually unchanged from that of 2014 when it was ranked 170 globally.

Worse still, Nigeria is placed 39th among African countries listed in the report which puts Mauritius top on the log as the best country in the continent to do business. Mauritius is promoted as a tax haven in the continent with excellent ratings in enforcing contracts and paying taxes.

Procedures

The World Bank report indicated that 8 procedures are required, over a period of 28 days for starting a business in Nigeria, using Lagos as a case study. The procedures include: Reserving a unique company name at the Corporate Affairs Commission [CAC], taking average of 5 days to complete; preparing the requisite incorporation documents and paying the stamp duty, 7 days; signing the declaration of compliance [Form CAC 4] before a Commissioner of Oaths or notary public, 1 day and;

registering at the Corporate Affairs Commission and paying the fees at the bank desk of CAC, 11 days on average. Others are: Making a Company seal, 1 day [simultaneous with previous procedure]; registering for income tax and VAT at Federal Inland Revenue Service, 4 days; registering for personal income tax, PAYE, at state tax office, 2 days [simultaneous with previous procedure] and; registering business premises with Lagos State government and paying the business premises levy at a designated bank, 1 day [simultaneous with previous procedure].

Though the report indicated that some improvements were recorded in few areas where some reforms made doing business easier, it however noted that the general business atmosphere in the country remained grim.

Improvements

The country’s ranking for ease of registering property moved up 4 places, from 185 to 181. In particular, the report indicated that the Lagos State government made property transfer less costly by reducing fees for property transactions. Also, the report noted that Nigeria strengthened minority investor protections by requiring that related-party transactions be subject to external review and to approval by disinterested shareholders.

This reform applies to both Kano and Lagos.  However, all other indices showed that the country’s ranking either remained unchanged from the previous year or even got worse.

Methodology

Doing Business 2016 presents quantitative indicators on business regulations and the protection of property rights that can be compared across 189 economies. It measures regulations affecting 11 areas of the life of a business.

Ten of these areas are included in this year’s ranking on the ease of doing business: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency.

The report  also measures labour market regulation, which is not included in this year’s ranking. Data in  Doing Business 2016  are current as of June 1, 2015. The indicators are used to analyse economic outcomes and identify what reforms of business regulation have worked, where and why.

This year’s  Doing Business  report continues a two-year process of introducing improvements in 8 of 10  Doing Business  indicator sets – to complement the emphasis on the efficiency of regulation with a greater focus on its quality.

Findings

The report  finds that entrepreneurs in 122 economies saw improvements in their local regulatory framework last year. Between June 2014 and June 2015, the report documented 231 business reforms. Among reforms to reduce the complexity and cost of regulatory processes, those in the area of starting a business were the most common in 2014/15, as in the previous year. The next most common were reforms in the areas of paying taxes, getting electricity and registering property.

Parameters

Parameters used in the report include: data on starting a business, ease of obtaining construction permits as well as property registration, stable power supply, access to credit and enforcing contracts. Others are: protecting minority investors, trading across borders and resolving insolvency.