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World Bank Study Identifies Problems in Doing Business in 11 Nigerian states


A recent World Bank survey ranks how easy or difficult it is to do business in 11 of Nigeria’s 36 states. It also explains some of the business practices that can be adopted by Nigeria and other countries to improve foreign investment and increase growth in the private sector. Voice of America English to Africa Service reporter Isyaku Ahmed in Abuja says the report found business transactions the easiest in Kaduna State, followed by Abuja, Bauchi, Kano, Sokoto and Abia. Ogun State was found to be the most difficult – followed by Enugu, Lagos, Anambra and Cross River.

The report bases its findings on a number of procedures for doing business. It includes the cost of transactions, and the time it takes for companies to comply with business regulations. And it measures the ease of starting a business, dealing with construction licenses, registering property, and enforcing contracts.

The World Bank reports it’s easier to start a business in the north of Nigeria, where building permits are a bit less expensive than in other parts of the country. The study finds that a permit for a warehouse would cost 25 percent of a businessman’s income in the northern city of Sokoto, whereas the same permit would be more than what an average businessman would earn. The report says it’s easiest to buy a permit in the northern town of Kaduna.

The study found that states differed in the amount of time and cost it takes to enforce a commercial contract if one of the parties defaults, which affects the recovery of commercial debts. States that performed best in this category – including Abuja, Kaduna, and Lagos -- have implemented new High Court rules regarding contract transactions.

Overall, private businessmen perceive Lagos as the best place for doing business because it’s the gateway for imports. The city also has a thriving business culture, a large consumer market and ready access to financial institutions, and infrastructure such as ports and roads.

The World Bank also identifies barriers to doing business in Nigeria. Among them fees and business taxes from the federal, state, and local government. The World Bank and the Investment Climate Program of the UK’s Department for International Development are encouraging the coordination or elimination of these taxes. They are also asking state and local governments to be more transparent in how they collect taxes and spend revenues.

The study also says most businesses have not registered with the Corporate Affairs Commission. Registration is compulsory under the Company and Allied Matters Act of 1990. Without it, not only is a business operating illegally, but it’s also losing certain advantages, like easier access to credit.

Steven Dimitriyev is senior economist with the Bank in Abuja. He says it’s working with the International Finance Corporation and the UK’s Department for International Development, DFID, to improve the business environment, “We are working with authorities at the Central Bank to improve access to finance as well as setting up some funds to [help meet] power and other needs of the country.”

For example, the effort will help small and medium-size businesses reach larger markets by providing credit to commercial banks that lend them money. Loans will also be made available for investments in agriculture. The bank believes that Nigeria can grow enough food to feed itself and to export it at a profit.

Dimitriyev describes a program for doing this called the Growth Enterprises and Markets in States, or GEMS:

“This program will actually be a very large operation, which we hope will be approved next year and it will last over three to five years. It will provide direct investment through loans as well as very large amount of trust funds.”

He says money from the trust funds, which come from Britain, will help finance local capacity building and technical assistance.

Dimitriyev says the World Bank has invested over two billion dollars in regional projects across several sectors, including trade, infrastructure, and energy. One of the most import initiatives will harmonize financial regulations among countries in The Economic Community of West African States (ECOWAS.) The effort should make it less risky to do business and help companies and operate banks across borders.

He also says regional investment can be improved by reducing the complexity of rules governing transportation, taxes, and transaction costs by coordinating accounting standards and rules for starting businesses.


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