Nigeria mustn’t gloat over modest progress on ease of doing business

The Buhari government is exultant about the improvement in Nigeria’s ranking in this year’s World Bank’s Doing Business index. The Federal Ministry of Industry, Trade and Investment (MITI) tweeted excitedly that “Our target was 20 places … We moved up 24 places. Congratulations Nigeria!!!” The Presidency added, “Here are the reforms that made it possible”, tweeting a list of government’s measures. The government’s mood is palpably celebratory. One newspaper described it as “rhapsodic self-congratulation”!
Of course, credit where credit is due. When a country has languished on a global index for so long, and then, suddenly, within a year, moves up 24 places from 169th to 145th, it is hard to belittle that achievement. However, it is important not to lapse into over-exaggeration or “give an appearance of solidity to wind”, as George Orwell puts it in Politics and the English language. Sadly, Nigeria has a tendency to do this; to present minimalist reforms as root-and-branch transformation.
But Nigeria is a laggard on countless governance issues, and can’t afford to tinker at the edges of reforms. It needs bold and comprehensive programme of radical reform. This is the context in which I assess the country’s performance in this year’s World Bank’s Doing Business Index. My aim here is to look beyond the headlines and analyse the substance of the results.
First, though, the policy context: “the reforms that made it possible”, as the presidency put it. In political economy terms, there are four steps needed to translate ideas into practical policies. First, rules; second, institutions, that is, capable teams; and third, a critical mass of informed citizens; in this case, staff of the Ministries, Departments and Agencies (MDAs),without whom reforms would fail. And, finally, what Professor Paul Collier, of Oxford University, calls “the authorising environment”, that is, leadership.
The first critical success factor is leadership. Although the Buhari government is generally lethargic, it has been laser-focused and joined-up on the ease of doing business issue. The linchpin in the agenda is, of course, the brilliant and reform-minded minister for industry, trade and investment, Okechukwu Enelamah, who, in his inaugural speech in February last year, invited the world to regard MITI as “the Ministry of Enabling Environment”, promising to “dismantle the many obstacles that stand in the way of business and business innovation in Nigeria”. A bold commitment that would require heroic actions, I wrote at the time. But, as a critical step, he secured political commitment at the highest level of government, with both President Buhari and Vice President Osinbajo relentlessly championing the ease of doing business agenda.
Following the cohort of dedicated leaders and political will are institutions. Red tape and regulatory barriers are intractable. You need robust institutions to gnaw away at them. For instance, the UK set up the Better Regulation Executive (BRE) to tackle regulatory barriers created across government, and the Regulatory Policy Committee (RPC) to scrutinise new regulations and ensure they meet stringent impact assessment criteria. The US has the Office of Information and Regulatory Affairs (OIRA) that performs similar functions. In 2016, President Buhari inaugurated the Presidential Enabling Business Environment Council (PEBEC), chaired by Vice President Osinbajo, with the president’s senior special assistant on industry, trade and investment, Jumoke Oduwole, as secretary. PEBEC brings together heads of key MDAs to tackle regulatory impediments to doing business in Nigeria.
But how? Well, this is where rules come in. From the “60-day national plan” to the executive order, both aimed at the ease of doing business, the government introduced rules to implement some regulatory reforms. The passage of two laws, the Secured Transactions in Movable Assets Act and the Credit Reporting Act, was also crucial in driving forward the agenda. The last element, a critical mass of informed citizens, is often the hardest to secure. But, surely, Nigeria would not have improved its ranking on the Doing Business index without the MDAs and their staff playing a pivotal role in it.
So, then, the combination of leadership, institutions, rules and a critical mass of informed public servants produced the reforms behind Nigeria’s Doing Business achievements. But what are these achievements? Well, to reiterate, Nigeria has moved up 24 places from 169th last year to 145th this year, and it is one of the 10 most improved economies. Of the ten areas tracked by the index, Nigeria improved in 5; strikingly, in one of these five, getting credit, the country is ranked 6th in the world! The other four categories where Nigeria has improved are starting a business, dealing with construction permits, registering property and paying taxes. It is crucial, though, to note that Nigeria has not improved on its previous performance in the other five categories, namely, getting electricity, protecting minority rights, trading across borders, enforcing contracts and resolving insolvency.
What conclusions can we draw from these results? Well, one seemingly obvious conclusion is that Nigeria has mainly improved its performance with respect to simplifying procedures, ensuring greater transparency and facilitating access. These are hugely important, of course, but the challenges in, for instance, getting electricity, trading across borders and enforcing contracts go well beyond issues of process; they relate to substantive issues, such as costs, efficiency of service delivery, the quality of legal infrastructure, the density of regulation and proportionality of enforcement. As I wrote recently in this column, “publishing the requirements for processing an application and sticking to the timelines are fine, but it makes little difference if the requirements are disproportionate and unnecessarily burdensome to businesses in the first place”.
The ease of doing business shouldn’t just be about process but also substance. To appreciate this, consider some of the areas where Nigeria has improved in this year’s index. Take getting credit, only 0.1% of adult Nigerians are covered by credit registry. Or take registering property, Nigeria scores 8 out of 30 on the quality of land administration index, 2 out of 8 on reliability of infrastructure, and 0 out of 8 on geographic coverage. This is not to mention getting electricity, where Nigeria scores 0 out of 8 on the “reliability of supply and transparency of tariff index”, or paying taxes, where there are 59 number of payments per year, compared to an average of 37 in sub-Saharan Africa. What about trading across borders? Excessive regulation and transport costs remain huge barriers to trade.
Of course, there is the overarching problem of the absence of strong legal infrastructure and institutions to engender a strong market economy. In February last year, a DfID-sponsored report said “54 Nigerian laws are obsolete”. How many of these laws have since been revised? And is Nigeria a good place to litigate on commercial matters? Well, not according to many foreign investors. Sometime ago, a US Trade Representative (USTR) report on Nigeria said that “the sanctity of contracts is often violated, and Nigeria’s court system for settling commercial disputes is weak and sometimes biased”. That assessment remains almost valid today. Indeed, under the enforcing contracts category of the 2018 Doing Business index, Nigeria scores 8 out of 18 on the quality of judicial process, 1 out of 6 on case management, and 0 out of 4 on court automation!
It’s also worth noting that, as the World Bank points out, the Doing Business index has a narrow scope; it doesn’t cover the wider issues affecting a nation’s competitiveness, such as the quality of the public sector, level of corruption, infrastructure development, incidence of protectionism, and commercial law regime. The fact that Nigeria ranks 125th out of 137 in the 2018 Global Competitiveness Index, and is classified in the “worst” category, shows that the reforms that earned it a 24-place rise in the Doing Business Index are not enough to improve its competitiveness.
Nigeria must aim not just to ease doing business, but also to improve the quality of its business environment and national competitiveness. This requires deeper and far-reaching market economy reforms. So, yes, well done Nigeria for improving your Doing Business ranking, but it’s not time for gloating. The more challenging, yet rewarding tasks lie ahead!

Olu Fasan