The Economist’s doing business ranking: Whither Nigeria?

By Marcel Okeke

The Economic Intelligence Unit (EIU) of the London-based ‘The Economist’ has just published “assessing the best countries for doing business”, in order to “discover which countries have climbed or fallen in our ranking.” Unsurprisingly, no African country featured among the “Top 10 geographies by business environment score” that is topped by Singapore (with a score of 8.70 out of 10), followed by Canada (8.45), Denmark (8.45) and USA (8.37). Switzerland, Sweden, Hong Kong, Germany, New Zealand and Finland followed in that order respectively, among the top ten.

According to the EIU report, “Middle East and Africa (MEA) is the lowest-ranking region.” It said the ranking for the MEA region continues to be weight down by poor governance and endemic insecurity, including the spill-over from the conflicts in Syria, Yemen and Libya, alongside political unrest in a number of countries, including Iraq and Lebanon. The EIU further said that cuts in capital spending in the context of post-pandemic fiscal tightening have constrained the region’s macroeconomic score, adding “but on the positive side, this has pushed countries to support business-friendly reforms, such as improved frameworks for public-private partnerships and foreign investment.”

The EIU noted that “Israel and Gulf states are the highest-ranked countries in the region, with the latter’s scores improving in recent years in line with rising oil prices and growing absorptive capacity for new investments.” The EIU went further to say that “Qatar, Saudi Arabia and the UAE will improve further in 2023-2027,” adding that “both the Middle East and Africa typically suffer from weak corporate governance and regulation as well as poorly trained labour forces and, in countries such as Angola, Nigeria and Gulf states, and overreliance on hydrocarbons.” Overall, the EIU declared that: “no countries in MEA saw improvements in our ranking of the scale recorded in order regions in the world.”

Notwithstanding whatever biases went into the EIU’s assessment and ranking of the global ease of doing business, the verdict or placement of Nigeria and the rest of African countries is not far from reality. The world is a ‘global village’ and whatever is going on within the domestic economy of any nation is ‘open’ to the rest of the world. Propaganda apart, astute investors (local and foreign) see through the veil of ‘marketing gimmicks’ to know where and when to invest, safely and profitably. And as the EIU pointed out, most swathes of African countries (and the Middle East) are either directly immersed in interminable internecine wars or are neighbours to many warring nations—and bear the spill-over effects of these conflicts.

In Nigeria in the past one decade or so, insecurity in the land has assumed an existential threat, so much so that many notable multinational organizations have had to relocate to the country’s more serene neighbouring nations. As EIU put it: “poor governance and endemic insecurity, including the spill-over from the conflicts in Syria, Yemen and Libya” all foul up business environments. Specifically, in the past couple of months, Nigeria and other African countries have been pre-occupied with ways and means of evacuating hundreds of thousands of their citizens that got ‘trapped’ in the civil war-torn Libya. When all diplomatic entreaties and manoeuvres failed, it cost Nigeria enormously to fly home all its nationals via airports in Egypt and other neighbouring nations.

In point of fact the number of internally displaced persons (IDP) camps in Nigeria today is very widespread and harbour millions of ‘homeless’ citizens. These IDP residents were chased out of their ancestral homes by marauders: gun-wielding herdsmen, ISWAP warlords, terrorists (in various guises), kidnappers for ransom, armed bandits, ‘unknown’ gunmen, ritualists, name them. Teams of peace missions from WHO, the UN, EU and other humanitarian organizations have either been scared away or had some of their key personnel killed by the marauders. Even with all these, the legal environment of business in Nigeria is also nothing to write home about; our judicial system and its processes are a nightmare to foreign investors. Terms of (contractual) agreements are usually observed more in breach, even when so-called top public officials are party to the deals.

This habit of reneging on original contractual agreements had in the past got the fingers of well-meaning and reputable investors burnt. The case of Virgin Atlantic Airlines comes to mind: when, against the original intendments of the Airline to become Nigeria’s National Carrier, the officialdom in Nigeria at every step of the way frustrated the deal and rendered it ‘stillborn.’ Other major global investors have been similarly frustrated out of the country—and they relocated their investments to calmer and more rewarding jurisdictions. The ‘trapped’ revenues of many foreign airlines in Nigeria in the past couple of years does not augur well in attracting investment to Nigeria. Millions of dollars of these airlines have since been due for repatriation to their (home) headquarters, but Nigeria’s foreign exchange shortage and its management could not meet the needs of the airlines. Indeed, many of those airlines have since ceased flights to Nigeria—and shot down their businesses here!

It is pertinent to reckon that the EIU’s ranking criteria are not outlandish; but are based on indices that any disciplined polity can apply and the world will certainly reckon with it. For instance, the EIU considers political environment; but unfortunately, in the past two years or so, Nigeria’s political atmosphere has remained palpably charged and turbulent due to planned elections. Unsurprisingly, the elections came and turned out very controversial, and the outcome now riddled with petitions and lawsuits across the land. Another criterion considered by the EIU is the macroeconomic environment. In truth, Nigeria’s macro-economy had been practically in tatters in recent years: virtually every indicator is moving in reverse direction.

Specifically, inflation had gone haywire—standing at a 17-year high of 22.22 per cent at end-April 2023; exchange rate of the Naira against the dollar has gotten to a pitiable state that (in the parallel market) one thousand Naira can only get one dollar. Public debt (outstanding) is conservatively put at about N77 trillion; while almost 100 per cent of Government revenue now goes to servicing the loans. Unemployment (especially of youths) is in the region of 45 per cent—and now stoking all manner of social ills and upheavals. EIU also considers policy towards private enterprise and competition in its rankings; but neither does Nigeria fair better in these regards. The multiplicity of taxes and policy summersaults in Nigeria are a dread to most private sector operators. Indeed, at the very local level, many companies have had to flee from Lago to Ogun and other states because of these anti-business policies in the metropolitan state of Lagos.

It must also be said that the state of infrastructure (which the EIU also considered) in Nigeria is not in the best shape to be an attraction to serious investors—local or foreign. If anything, they have for years been in very dilapidated shape. Investors normally have to build their roads, dig their ‘bore holes’ for water supply, buy and install generators as their power source, arrange and maintain private security outfits, etc. Red tapes at the sea-, airports and land borders (routes) are points of frustration for importers and exporters. The situation has since been such that most genuine importers now route their cargoes through the ports of Nigeria’s neighbouring countries.

So, whither Nigeria in this 21^st century business environment scale? As it is, a number of internal and external factors have conspired to de-industrialize the country; it is becoming increasingly difficult for existing businesses to thrive and too harsh and unsafe for potential ones to establish. Nigeria really needs to be pulled out of the woods!

• Mr. Okeke, an economist, sustainability expert and consultant on business strategy is a National Daily Columnist and lives in Lagos. He can be reached at: [email protected]