Nigeria drops in Doing Business rankings

09 November 2010

Nigeria has slipped from to 137th place from 134th last year among 183 global economies ranked in the World Bank's 2011 Doing Business report released in November. The ranking was affected by the country failing to enact any regulatory reforms to make it easier to start and operate a business in the country.

Nigeria is also not included among those sub-Sahara African countries the report commends for improving business regulation in the past year.  Analysts fear it might affect the country's quest for investment.

The report finds that between June 2008 and June 2009, governments in 117 global economies carried out 216 regulatory reforms focused at making it easier to start and operate a business, strengthening transparency and property rights, and improving the efficiency of commercial dispute resolution and bankruptcy procedures. 64 percent of economies measured by the survey have reformed this year, focusing on easing business start-up, lightening the tax burden, simplifying import and export regulations and improving credit information systems.

Singapore, for the fifth year running, leads globally in the ease of doing business category, followed by Hong Kong SAR China, New Zealand, the UK and the US. Among the top 25 economies, 18 made improved their business environment over the past year. China and India are among the top 40 most-improved economies.

The report says 27 economies in sub-Sahara Africa implemented 49 regulatory reforms to improve their business environment between June 2009 and June 2010. In Nigeria, no major reform was recorded. By comparison, three other sub-Sahara African countries, Rwanda, Cape Verde, and Zambia, were among the 10 economies worldwide that most improved in the ease of doing business for local firms in the past year.

Nigeria's ranking was negatively affected in most of the indicators used. In the area of procedures to start a business, where it took the 11th position among ECOWAS economies, it takes 31 days to start a business as against 8 days in Mali, 11 in Cape Verde, and two in New Zealand which is used as the benchmark. The cost of starting a business in Nigeria is put at 78.9 per cent (percentage of income per capita) as against 18.5 per cent in Cape Verde and 0.0 per cent in Denmark.

Again, the report indicates that it takes 18 different procedures, 597.5 percent of income per capita and 350 days to deal with construction permits, the second longest in the region after Cote I'voire at 592; while in Singapore, it takes only 25 days.

While it takes just a procedure to register a property in Norway, it takes 13 in Nigeria, the highest in the ECOWAS region and also costs 20.9% of property value to register a property; the highest in the region and a venture which is done free in Saudi Arabia, for instance. The rankings present indicators of the time and cost of meeting government requirements for business start-up, operation, trade, taxation, and closure.

Rwanda was the second most improved country in the report, moving up 12 places in the global rankings from 70th to 58th, while Cape Verde inched 10 places forward from 142nd to 132nd. "Since 2005, Rwanda has implemented 22 business regulation reforms in the areas measured by Doing Business. Starting a business in Rwanda required nine procedures and cost 223 percent of income per capita in 2005. Today, it takes two procedures and three days—and costs 8.9 percent of income per capita. "Cape Verde, the region's second-most-improved economy in the past year, made starting a business easier by computerizing its licensing system, eased property registration, and abolished some stamp duties. Zambia eliminated its minimum capital requirement, computerized customs declarations, and introduced an electronic case-management system in the courts," the report notes. Zambia rose eight places from 84th to 76th, while Ghana led the entire world in making it easier for businesses to obtain credit. Malawi led in improving contract enforcement.

For the third year in a row, Mauritius ranks highest in the region on the overall regulatory ease of doing business for local firms. Globally, it ranks 20th among 183 economies. Many of Africa's economies made it easier to import and export, a trend driven in part by regional trade integration efforts.

The report finds that global economies are improving business regulation and empowering entrepreneurs, although past reports indicate that doing business remains easiest in the high-income economies of the Organisation for Economic Co-Operation and Development, and most difficult in sub-Sahara Africa and South Asia.

"Governments worldwide have been consistently taking steps to empower local  entrepreneurs. The economies most affected by the financial crisis—especially in  Eastern Europe—have been targeting regulatory reforms over the past year to make  it easier for small and medium-size enterprises to recover and to create jobs," Neil Gregory, acting director, Global Indicators and Analysis, World Bank Group, said.

But according to the new report, developing economies are increasingly active. For instance, 66 percent reformed business regulation in the past year, up from 34 percent six years earlier. It further notes that many of Africa's economies made it easier to import and export, a trend driven in part by regional trade integration efforts.

Janamitra Devan, vice president, Financial and Private Sector Development, World Bank Group, said; "About 30 percent of global trade facilitation reforms in the past year took place in sub-Sahara Africa alone."

Kazakhstan improved business regulation for local entrepreneurs the most in the past year. This year's list of the 10 most-improved economies also includes three in sub-Sahara Africa—Rwanda (a consistent reformer of business regulation), Cape Verde, and Zambia—as well as Peru, Vietnam, Tajikistan, Hungary, Grenada, and Brunei Darussalam.

Among economies of the ECOWAS region, while Nigeria did not carry out any regulatory reforms during the period under review, Benin created a new municipal commission to streamline construction permitting and set up an ad hoc commission to deal with the backlog in permit applications.

The report finds that Burkina Faso made dealing with construction permits easier by cutting the cost of the soil survey in half and the time to process a building permit application by a third.

"It also reduced the statutory tax rate and the number of taxes for business and introduced simpler, uniform compliance procedures. Burkina Faso reduced documentation requirements for importers and exporters, making it easier to trade. The country made enforcing contracts easier by setting up a specialized commercial court and abolishing the fee to register judicial decisions".

Cape Verde made start-up easier by eliminating the need for a municipal inspection before a business begins operations and computerizing the system for delivering the municipal license, and eased property registration by switching from fees based on a percentage of the property value to lower fixed rates. It also abolished the stamp duties on sales and checks.

Côte d'Ivoire eased construction permitting by eliminating the need to obtain a preliminary approval.

Ghana enhanced access to credit by establishing a centralized collateral registry and by granting an operating license to a private credit bureau that began operations in April 2010.

While Guinea increased the cost of obtaining a building permit, Guinea-Bissau established a specialized commercial court, speeding up the enforcement of contracts.

Mali eased construction permitting by implementing a simplified environmental impact assessment for non-complex commercial buildings and eased property transfers by reducing the property transfer tax for firms from 15% of the property value to 7%. It further eliminated redundant inspections of imported goods, reducing the time for trading across borders, the report notes.

Niger reduced its corporate income tax rate and Sierra Leone made dealing with construction permits easier by streamlining the issuance of  location clearances and building permits.

Sierra Leone lifted a moratorium on sales of privately owned properties. It replaced sales and service taxes with a goods and service tax.   (Business Day Nigeria)