According to Acting President Yemi Osinbajo, the world is a much, much smaller place and gets smaller by the day. So I think that there is very little today and I like the point that was made by the DG of the Nigerian Investment Promotion Commission, NIPC that anyone who doesn’t invest in Africa or Nigeria in 10 years’ time, they would be queried by their establishment, by their businesses that “you just missed out on the best possible opportunity” and you know that it is easy to miss out on the best possible business opportunity.
Nigeria has overtaken South Africa as Africa’s largest economy. And with over 200 million people, it is the largest market in the continent, its population nearly twice the size of Ethiopia (110 million) or Egypt (102 million). Yet among many companies, there is a great deal of nervousness around investing in Nigeria. One business development officer of a large company told me recently: “We’re not in Nigeria; one of our guys heard you can’t go there.” This kind of second hand hearsay is a risky way to make proper business decisions. When firms make what we refer to as accidental decisions—those based on media reports or anecdotal evidence—it is hard to effectively quantify and manage risks. Nigeria is definitely a challenging place to operate. But ultimately, the nation is too important to ignore.
Foreign direct investment stock from the United States into Nigeria was $5.8 billion in 2017, up 32.8 percent since 2016, according to the U.S. Trade Representative. However, a significant chunk of U.S. FDI in Nigeria and the continent goes into the resources sector. The Commercial and Investment Dialogue with the Nigerian government, originally recommended by President Obama’s President’s Advisory Council on Doing Business in Africa, is now in full force, and earlier this year, the U.S. Commercial Service hosted the USA Trade Fair in Lagos, Nigeria—attended by more than 4,000 delegates. Many of America’s biggest firms were out in force, as were smaller names in the agribusiness, aviation, consumer, energy, industrials, and security sectors. Now, other countries are starting to catch America’s lead—notably the Chinese.
China is using all of its political, industrial, and financial might to build deep connections in Africa. Engagement is strategic, multilateral, and well-organized under the biennial Forum on China-Africa Cooperation and the Belt and Road Initiative. Chinese construction firms are building road, rail, port, communications, mining, and energy projects funded by loans from The Export-Import Bank of China or state-owned banks, using Chinese machinery, and with Chinese operators often operating the asset after completion.
Chinese business development teams visit Africa’s toughest neighborhoods to establish relationships—often long before most American executives have even considered an investment in the country in question. Headlines trumpet Chinese “investment” in Africa, but much of this is actually lending, rather than equity investment. International experience is helping Chinese firms improve their product quality, service delivery, and technological capabilities every day, making them ever-stronger global competitors. The key to China’s success on the continent is that designing “good enough” equipment for the price their customers will pay. A Chinese-made truck starter will fail after a fraction of the starts a North American truck operator considers normal—but it will also cost a fraction of the price. Likewise, a Chinese-designed smartphone will work on local networks, enjoy long battery life, run the right apps—and come at an affordable price. Despite recent political hiccups, Huawei is the dominant supplier of communications and networking equipment on the continent. Africans benefit from the firm’s low-cost vendor financing, ultra-advanced technology, and turnkey service for modern network installations.
Nigeria is famous for its power shortages. With only about 5GW of grid power available (on a good day), it’s no surprise that there is an estimated 20GW of captive, backup, and household-level power installed by the private sector. But this isn’t just a risk. It’s also a business opportunity. In 2011, Nigeria privatized the power generation and distribution portions of its electricity industry. Performance is well below expectations so far, thanks to gas supply shortages, below-contract tariffs, and poor cash collection. The opportunity? Most manufacturers run their own captive power plants—and they’re investing in advanced gas-fired turbines, high-efficiency production equipment, and renewable energy capacity. Households need prepaid electric meters, energy-efficient appliances, and more cost-effective standby generators.
The continent is becoming a big beneficiary of China’s large-scale investment in renewables—which are now vastly cheaper than they were just a decade ago. In Nigeria, solar, wind, and mini-hydro are rapidly filling in the gaps where grid power is unavailable. Local micro- or mini-grids can deliver power to light homes, charge phones, refrigerate medicines, preserve harvested produce, and bring the internet to schools. In Nigeria, as elsewhere in Africa, the financial services sector is undergoing a transformation. Mobile money accounts are increasingly popular, led by M-PESA in Kenya. Mobile money has boosted economic activity and brought millions into the financial services sector.
African financial-technology entrepreneurs are testing innovative—and potentially disruptive—services. Where regulations allow, entrepreneurs and mobile operators are introducing low-cost mobile payment, investment, insurance, savings, loans, and cross-border money transfer services using the latest technology. According to the World Bank, small- and medium-sized enterprises create an estimated 4 of every 5 new jobs in emerging markets, yet traditional corporate banks are still focused on serving large corporate customers.
This isn’t a simple question, but it has to be asked as part of any long-term growth and risk analysis. Public capital markets are relentless in pushing for short-term earnings and returns. Set aside today’s imperative to meet quarterly earnings expectations, ignore for a minute the potential for activists to disrupt your investment programs because they don’t see an immediate ROI on your long-term strategic investments. The long-term survival of a business depends on its ability to adapt, grow, and participate in the global economy of the future—and countries like Nigeria are part of this story.
The Lagos Chamber of Commerce & Industry (LCCI) has commended the Federal Government on efforts to improve the business operating environment. Its President, Mrs Nike Akande commended the creation of the Presidential Enabling Business Environment Council (PEBEC), chaired by the Ating President, Prof Yemi Osinbajo and the Minister of Trade and Investment, Dr Okechukwu Enelamah as Vice Chairman. In a statement, she said the profile of the council, underscored the importance that the government attaches to business environment issues and by extension private sector development. Improvements in the business environment will impact positively and significantly on productivity, prosperity, and progress of the private sector she stated. Akande said LCCI expect that the PEBEC initiative will remove the numerous obstacles and barriers, which have been a source of frustration to entrepreneurs and would reposition the private sector to play a much more important role in the economic recovery process.“We commend the 60-day national action plan for ease of doing business as articulated by government. The specifics of this action plan include: reduction in the time required for business registration at the Corporate Affairs Commission (CAC); reduction in the period it takes for product registration by relevant regulatory agencies of government and transparency and inclusiveness in the procurement processes among others,” she said.
The Presidential Enabling Business Environment Council (PEBEC) has approved a 60-day national action plan with the aim of aiding business in the country. This resolution was made during the sixth meeting of the Presidential Enabling Business Environment Council (PEBEC) at the State House in Abuja. The meeting was presided over by Vice President, His Excellency, Professor Yemi Osinbajo. The Council, at the meeting, which lasted for hours, approved a national action plan to be implemented across its three priority areas – Entry and Exit of goods; Entry and Exit of people and Government Transparency and Procurement – over the next 60 days to deliver tangible changes for SMEs in Nigeria. The reforms will also help improve Nigeria’s rankings in the World Bank Doing Business Index 2018. According to the resolution reached during the meeting, the reforms are to be implemented by the Enabling Business Environment Secretariat (EBES) which became operational in October 2016 and has Dr. Jumoke Oduwole, the Senior Special Assistant to the President on Industry, Trade and Investment (OVP) as its coordinator. A statement issued at the end of the meeting stated that the Council was also briefed on the forthcoming EBES Stakeholders Engagement Forum scheduled for Kano and Lagos on February 23rd and 24th respectively. The forums are part of steps being taken to receive feedback and ensure widespread adoption of the PEBEC reforms. The statement added that “One of the reforms to be implemented to ease the process of starting a business is the upgrade of the CAC online portal to ensure document upload capabilities that will make it possible for new businesses to be registered online from start to finish without having to visit the CAC office. “Also, work is ongoing to streamline the number of agencies operating at the nation’s ports to just six. Council also listened to updates on the proposed Single Window Initiative at the ports which is expected to become operational by Q4 2017. “On entry and exit of people, PEBEC observed that the Visa on Arrival and 48-hour Visa processing procedures of the Nigeria Immigration Service (NIS) are already operational with various levels of compliance.” Senate President, Bukola Saraki and the Speaker of the House of Representatives, Yakubu Dogara attended Tuesday’s meeting. Also in attendance are: Attorney-General of the Federation Abubakar Malami as well as the Ministers of Information, Laid Mohammaed, Trade and Investment, Kayode Fayemi Power, Works and Housing, Babatunde Fashola.
Nigeria has always ranked significantly lower in the ease of doing business index. Empirical research funded by the World Bank to justify their work show that the economic growth impact of improving these regulations is strong. Nigeria has always ranked in the lower end when it comes to the ease of doing business. In 2017, Nigeria was number 169, ranking even below Sudan. According to the World Bank and other economic experts, the ease of doing business had to be improved for Nigeria to prosper economically. Therefore, according to the Nigerian Bulletin, President Muhammadu Buhari in August 2016 approved the Constitution of the Presidential Enabling Business Environment Council (PEBEC). The council is chaired by Vice President Yemi Osinbajo, and Okey Enelamah, the Minister of Industry, Trade and Investment is the vice chairperson. According to the council the body will improve ease of doing business in Nigeria, with the following steps:
1. Improving entry and exit of goods
This would mean improving the Nigerian customs service and removing some sanctions of imports needed by the Nigerian people. It will also mean improving exportation and transport services throughout the country.
2. Improving entry and exit of people
Legal immigration and emigration will be allowed by the Nigerian government and the PEBEC will see to it that the Nigerian Immigration Service (NIS) rund efficiently and without any corrupt practices that would jeopardize international relations.
3. Government transparency
The war on corruption by the Buhari-led federal government will also spread to businesses, both in the private and public sector, to ensure transparency and a dearth of harmful or fraudulent business practices.
4. Improving government procurement process for small businesses
Many believe that Small and Medium scale Enterprises (SMEs) will be the driving force to bring the Nigerian economy out of recession, and so the government aims to make it easier for these businesses to access loans and make the procurement processes easier for them. The President also approved the establishment of the Enabling Business Environment Secretariat (EBES) as the operational arm of PEBEC. EBES will be domiciled in the Nigerian Investment Promotion Council-NIPC.
According to President Buhari, these are challenging times for the Nigerian economy. The problems had accumulated. Over a long period, from the 1970s, the economy had become dependent on oil receipts and the rent from oil. In 2014, the commodity market collapsed. Oil receipts declined by over 60%. The economy experienced a systemic shock. We are undergoing a necessary and overdue process of painful adjustment. Vital lessons have been drawn. We have a plan that is work in progress, across all sectors of the economy, based on coherence between monetary, fiscal and structural policies to improve productivity and competitiveness and sustained long-term growth. In response to the current challenges, domestic structural reforms are underway for a modernized, integrated and diversified 21st Century Nigerian market economy that is pro-competition, wealth-creating, regulated for the benefits of private and public interests and, re-balanced to insulate it from external and domestic shocks. As President, I believe that leaders must neither surrender nor backload the challenge of institutional domestic policy reforms to diversify and lay the foundations for such an economy. The Government of Nigeria accepts this responsibility.
Such an economy would promote inclusiveness. In the on-going implementation of the Plan for Diversification and Reform by the Ministry of Industry, Trade and Investment, several areas are priority in the objective to achieve diversification, inclusiveness and foster growth. These are:
• Creating an enabling environment for business;
• Infrastructure development;
• Attraction of investment;
• Building a platform for the digital economy;
• Support for Micro, Small and Medium Enterprises (MSMEs); and,
• Expanded market access for Nigerian manufacturers and service providers into regional and global value chains, through ambitiously negotiated Free Trade Agreements (FTAs).
An enabling environment for business will level the playing field through reduction of costs, elimination of bottlenecks and inefficiencies. Transparency will be improved and inclusiveness for all promoted. This is critical. The Presidential Enabling Business Environment Council (PEBEC) has been established. Institutionally, the Enabling Business Environment Secretariat (EBES) is being set-up. Immediate work in this area include entry process for issuance of visas upon arrival in Nigeria; expedited business registration to spur growth and reduce the propensity for informal businesses; elimination of domestic restrictions; trading across borders –to help improve the ability of Nigeria businesses to export more easily; land registration reforms –to increase access to capital and promote growth and development; and, transparency and digitization to simplify processes and create efficiency for both foreign and domestic investors. In the overall Plan, Investments are being made in the sectors of agriculture and infrastructure. An industrial plan is being implemented. Agriculture remains the largest employer of labour. It holds the key to employment, poverty reduction, food security, reducing inequality and inclusion in the first stage of the market economy. Efficient infrastructure for power, roads, railways, ports, transportation and telecommunications are the foundations for a modernized and inclusive economy.