Nigeria’s Low Hanging Fruit

Reading the Tea  Leaves By Obinna Chima

obinna.chima@thisdaylive.com   

08152447875 (SMS only)

Welcome to ‘Reading the Tea Leaves,’ a weekly column where I shall explore a variety of topics ranging from economic trends, policy and political analysis, financial market, as well as social and cultural trends through different perspectives. As I share my ideas and viewpoints, I intend to stimulate conversations that will keep you informed and engaged.

Today, we are diving headfirst into the topic which is about one element that if fixed, can significantly transform the state of the Nigerian economy.

Indeed, Nigeria has enormous economic potential due to its abundant resources and growing population. The country has the potential to manufacture many products that are currently being imported. Its investment appetite is huge and driven by many opportunities and the level of return on investment in the country. However, economic growth and investment over the years have been hampered by its persistently low ranking on international measures of ease of doing business and it keeps punching below its belt.

It is well documented that Nigeria has a difficult business environment. In 2023, the country ranked 131st out of 190 economies in the World Bank’s annual ease of doing business ratings as it faces challenges in areas such as getting electricity, registering property, paying taxes, and resolving insolvency. Also, Nigeria was ranked ninth in Africa for investment opportunities in 2024, according to the Rand Merchant Bank’s ‘Where to Invest in Africa’ report, and Nigeria ranked 113th out of 133 economies in the 2024 Global Innovation Index (GII). Nigeria ranks 127th for infrastructure, 125th for institutions, and 121st for market sophistication, knowledge, and technology outputs.

Likewise, the manufacturers’ confidence in the country dipped by 1.7 points in the third quarter of 2024, to 50.2, from the 51.9 points recorded in the preceding quarter of 2024, according to data from the Manufacturers Association of Nigeria’s (MAN) CEOs Confidence Index. According to the report, all indices recorded a decline and stood below the 50-point standard due to the harsh business-operating environment occasioned by high energy prices, exorbitant exchange rates, soaring interest rates, persistent inflation, and unstable fuel supply. A reading above 50 points indicates the expectation for economic expansion, while an index score of less than 50 suggests deterioration in the operating environment. It also showed that the confidence levels of operators within sectoral groups were heavily dampened by inflationary pressure, increase in imported products, low government patronage, and high cost of raw materials.

Additionally, Nigeria’s economic growth is severely hampered by corruption, which both local and foreign investors frequently point to as a major deterrent to conducting business in the country.

The harsh business environment has been largely attributed to lack of government’s commitment to policy execution, among others, as successive governments would always declare their intention to support business operators, but end up, in most times, not living to their promise.

Without resolving the power sector crisis and guaranteeing that Nigerians have access to reasonably priced energy, the country cannot hope for significant national economic development as businesses are forced to produce a sizable amount of their electricity due to challenges in the power sector. This acts as a barrier to widespread economic development, as many companies run their operations using generators that run on costly diesel, which drives up prices even more.

President Bola Tinubu was clearly aware of this when he was campaigning for office. In his 80-page action plan for a better Nigeria tagged ‘Renewed Hope,’ he had pledged that if elected he would create an enabling environment for businesses to thrive.

Therefore, improving the country’s business environment to support domestic businesses, and enthrone a friendlier business environment that attracts foreign direct foreign investments is the low-hanging fruit for the Tinubu-led administration.

Today, the country’s ability to attract domestic and foreign investment remains low compared to its peers. The Presidential Enabling Business Environment Council (PEBEC) set up in 2016 by President Muhammad Buhari to develop policies aimed at supporting small and medium-sized enterprises to make Nigeria a progressively easier place to do business, in collaboration with all arms and levels of government, as well as the private sector, should be tasked to do more.

Interestingly, the Minister of Industry, Trade and Investments, Dr. Jumoke Oduwole, was the pioneer Executive Secretary of PEBEC and it is believed that she has a full grasp of factors making it difficult for businesses to flourish. Oduwole must understand the fierce urgency to increase investment and expand trade in the country. It is the primary responsibility of the government to create an enabling environment where people can do business and investors would find it attractive to invest. If she can execute this successfully, businesses will thrive and the government would benefit in terms of revenue generation.

Simplifying regulations, streamlining bureaucratic processes, and fostering a more predictable business environment are not just desirable goals, but essential for Nigeria to reach its full potential.

Creating a more business-friendly climate would signal to international investors that Nigeria is open for business and would encourage the growth of small and medium-sized enterprises, which are the backbone of any economy. Additionally, it reduces opportunities for corruption, promotes a level playing field for businesses, increases public trust in government, and enhances the country’s global competitiveness by making it more attractive for trade and investment in the long term.

Improving the ease of doing business in Nigeria is not just a technical exercise; it’s a strategic imperative for the country’s economic future. The achievement of double-digit growth, which is the target of the government, achieving a drop in inflation and a friendly macroeconomic environment would also require a shift in policy focus. Monetary policy must be supported by a robust fiscal framework and comprehensive structural reforms. Policy reform can impact positively on the environment for ordinary Nigerians and contribute to stimulating FDI. By addressing these concerns, it would be easier for domestic and foreign investors to do business in the country.

With this, Nigeria can unlock its vast potential, attract investment, create jobs, and improve the lives of its citizens. The time for action is now.