Nigeria needs a bonfire of the quangos to tackle red tape
In his inaugural speech as minister of industry, trade and investment, Dr Okechukwu Enelamah said: “We would like Nigerians and the world to regard MITI as the ministry of enabling environment”. He promised several initiatives aimed at “dismantling the many obstacles that stand in the way of business and business innovation in Nigeria”. This was, of course, an audacious attempt to signal to the world that Nigeria was open for business. Yet, as I wrote at the time, nothing could disguise the herculean nature of task or the heroic actions needed to achieve it. But a commitment to “dismantle the many obstacles” that have, for so long, impaired the business climate in Nigeria was absolutely right. It’s what you would expect from an industry, trade and investment minister, especially one with a strong private sector experience, who understands the danger of red tape to business growth.
Well, over a year on, the minister has demonstrated leadership on the issue, elevating it on the policy agenda. Crucially, he enjoys political support at the highest level of government, with the president and the vice president also championing the cause. Indeed, in August last year, President Buhari launched the Ease of Doing Business Committee and the Presidential Enabling Business Environment Council (PEBEC). Earlier this year, the Council, chaired by the vice president, Professor Yemi Osinbajo, announced the “60-day national plan” to improve the business climate in Nigeria. And almost immediately, a government agency, the Corporate Affairs Commission, said it had consolidated seven business registration forms into one! Perhaps more significantly, Nigeria ratified the WTO Trade Facilitation Agreement, signalling, as the minister put it, a commitment to “rapidly implement the government’s initiative on creating an enabling environment for business”.
All of these are commendable. They are positive steps in the right direction. The trouble is that, like most policy actions in Nigeria, they are not radical steps, and would do little to transform the business environment. Red tape is like corruption. It is intractable, and can’t be tackled with cosmetic actions. Given the major obstacles that regulatory burden poses to competition, innovation and growth, what is needed are systematic and tough actions to “dismantle” them, as the minister promised in his inaugural speech.
The red tape challenge in Nigeria is, to be sure, characterised by three chronic and acute problems. The first is that most of Nigeria’s business-related laws predate its independence and are complete out of date in today’s business world. For instance, a study sponsored by the UK Department for International Development said last year that “54 Nigerians laws and obsolete”. The second problem, apart from obsolete laws, is that there are too many regulations at different levels of government that put unnecessary burdens on businesses. Then, thirdly, there is the problem of multiple business-facing regulatory agencies, with corrupt, inefficient and overbearing employees that exercise excessive enforcement powers, and constantly invade or shutdown business premises for alleged regulatory breaches.
Surely, when a country is faced with the problems of obsolete laws, excessive regulation and multiple agencies with draconian enforcement powers – all of which create costs for business – its regulatory environment can’t enable or facilitate business and investment. Yet, these are the challenges in Nigeria; the country has a regulatory culture that stifles business competition, innovation and growth. So, here is the question: which of these problems is “the 60-day plan”, or the Buhari government’s regulatory reform agenda, seriously designed to address? Is it the obsolete laws, the over-regulation or the multiple and overbearing agencies? The answer is none, at least not credibly!
Take the law-making, for instance. Nigeria’s federal legislators are some of the highest paid in the world, as the Financial Times recently pointed out in an editorial. Yet, they probably have the worst legislative performance. For instance, how many of the 54 obsolete laws listed in the DfID-sponsored report have been repealed and replaced? What about the problem of excessive regulation, what is the government doing to tackle it? And, of course, what about the multiple agencies that make lives difficult for people doing business in Nigeria? Isn’t it time for what the British would call “the bonfire of the quangos”, that is, the equivalents of Nigeria’s agencies and parastatals? The oft-cited Oransaye report recommended the consolidation of several ministries, department s and agencies (MDAs). This would significantly address the cost of governance problem in Nigeria, but also tackle the red tape challenge. But where is the political will to merge the MDAs? None so far!
The truth is that Nigeria has the tendency to tinker at the edges of reforms, rather than take tough and radical decisions. The government is complacent, always celebrating minor achievements, instead of aiming for step changes. Take the ratification of the WTO Trade Facilitation Agreement, which was trumpeted as a major achievement. Every trade lawyer knows that a WTO agreement is only relevant to the extent of the commitments that a country accepts under it. But, as I wrote recently, Nigeria’s Category A commitments under the TFA, that is, those that it should be implementing now, given that the agreement has come into force, are pretty shallow. And unless the country designates substantive commitments in Category B, that is, those it would implement at a future date, and actually brings that date forward, Nigeria’s ratification of the TFA would do little to improve its business climate. Although the government could argue that it would implement trade facilitation measures unilaterally, but accepting legally binding commitments under the agreement would lock in reforms at home and send signals to the outside world about Nigeria’s credible commitments to reduce trade transaction costs.
Now, every country has a red tape challenge, but some are more determined than others to tackle it. In the UK, the government introduced legislation to ensure that regulations and enforcement are proportionate, accountable, consistent, transparent and targeted. Enforcement must be risk-based and not driven by tick-box inspections and audits. The UK also set up the Better Regulation Executive (BRE), with powers to ensure that regulations are made and enforced in accordance with the above principles. Over the years, the merger of regulators has also been critical to tackling regulatory burden in the UK. The US has similar approach to tackling red tape and regulatory burden, with the existence of the powerful Office of Information and Regulatory Affairs (OIRA), previously led by Professor Cass Sustein, a behavioural economist. And, of course, President Donald Trump has taken an even more radical approach. He recently signed an executive order to cut business regulation dramatically and to curtail the overzealousness of agencies in enforcing regulations.
As I said, red tape is like corruption; it won’t go away unless tackled frontally. And the lessons from the international examples is that to tackle red tape effective a government needs the right legislative framework and the right institution, such as the BRE in the UK and the OIRA in the US, with the mandate and power to monitor, scrutinise and reject unnecessary regulations and curtail disproportionate enforcement. What’s more, in the UK, the issue of tackling red tape is mainstreamed across the government, with every department having a better regulation minister, a board-level better regulation champion and a better regulation unit. In Nigeria, the Ease of Doing Business Committee doesn’t have sufficient teeth; it must be to red tape what the EFCC is to corruption. And similar institutions should exist at the state levels. But above all, red tape spreads with multiple agencies, which is why, apart from the cost of governance problem, Nigeria needs the bonfire of its quangos!
Olu Fasan