By Uzoma Erondu
A lot has been said about how Government needs to create an ‘enabling environment’ and this has become a cliché in Nigeria. So what exactly is ‘an enabling environment’? I will give a quick analogy of how inefficiencies by government officials comes back to affect its citizenry.
A country right here in Sub-Saharan Africa will have its citizenry buy electricity from a solar plant for 6 cents/kwh, this is approximately (NGN12/Kwh at an exchange rate of N200/$1). For better understanding of this metric, a Kwh is the equivalent of one thousand watts available for one hour; so imagine that the LED electricity bulb you have at home which is 12watts, multiplied by 83 i.e. assuming all you have in your apartment are 83 LED bulbs, then having them being powered for one-hour and all you get to pay is NGN12/hour. This does not resonate with an average Nigerian, until you compare that to how much on average a Nigerian citizen will pay for the same solar-generated electricity.
Of note, according to the World Bank, is that this amount will not be increased over the next 25 years. What an interesting time to live in Zambia, when you contrast that with the inevitable increase in the Nigerian electricity tariffs. So something has to be wrong with Nigeria, right? Well not really, something is just wrong with the way we do things, and for me, it is the way we make business hard to work in Nigeria, and that needs to change.
According to the World Bank’s Doing Business 2016 Report, Nigeria ranks 169, while Zambia is placed on No. 97. In essence, there are things that make it easier for a foreign entrepreneur to want to set-up his business in Zambia, rather than in Nigeria if given the choice. The costs (notional and actual) of these administrative bottlenecks inevitably gets passed down to the consumer. These are costs we all need to strive in eliminating or at best, reducing to a minimum.
Some of the major areas we need to fix which will ultimately reduce the cost of doing business will include inter alia:
- Dealing with permits/licenses: On average, you need not less than 20 permits to obtain in Nigeria for a company interested in generating power above 1 MW. From the generating licence, the building/ construction permits to the local and state government environmental approvals. The Corporate Affairs Commission also needs to critically re-examine its modus operandi. It should not take more than 24 hours to register a business in 2016, if it does, then someone-somewhere will bear the ultimate cost. Most times in the power sector, it turns out to be the consumer, through an above-average tariff.
- Registration of property: Obtaining a certificate of occupancy in any state in Nigeria can span years, this often leaves any potential investor wary and scarred. If given an option to move to another country such as Zambia, your guess is good as mine. The Land-use act in Nigeria which vests ownership of all lands in the hands of the Government does not allow for the private ownership of land by individuals without the cumbersome and costly procedures for obtaining Certificates of Occupancy, Consent to Mortgage, Assignments and leases which inevitably affects timelines and costs.
- Enforcing contracts: Litigation in Nigeria can take forever. Business contracts, though financial in nature are usually governed by legal frameworks; and situations wherein it takes decades to secure a judgement in Nigeria can be a tall order for foreign investors. Arbitration needs to be heavily supported and in cases where due to bankability issues, foreign investors opt for overseas location as seats of arbitration, in the interest of the parties funding the transaction, this should be understandable.
- Regulatory efficiency: Regulatory institutions in Nigeria need to be strengthened and assisted in the development of both human and institutional capacity. Power projects usually involve some level of government interface. Instances such as the Board of governmental agencies e.g the electricity regulator in Nigeria, the Nigerian Electricity Regulatory Commission (NERC) which is yet to be reconstituted, gives rise to legal loopholes and regulatory vacuum which investors or lenders try to shy away from. Over-lapping of governmental agencies should also be discouraged. An example can be found in the power sector in Nigeria between the National Electricity Regulatory Commission (NERC) and the Nigerian Electricity Management Services Agency (NEMSA). Already negotiated documents or agreement can be later subjected to another round of negotiation with a separate agency with overlapping mandate.
In addition, a partisan civil service, not isolated from the political structure, as evidenced in Nigeria during the run-off of the 2015 general elections wherein government parastatals were largely redundant due to their ties to political office holders also caused inefficiencies which ended up being paid by the consumers.
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Uzoma Erondu is a finance professional with a bias for energy and infrastructure. He writes from Lagos.
Op–ed pieces and contributions are the opinions of the writers only and do not represent the opinions of Y!/YNaija
