Rotimi Fawole: Creating A Dis-enabling Environment

One of the very best places to learn about the nature of Nigeria’s business environment is at a professional services firm when providing business establishment advice to a wide variety of comers. Even better, when you have to provide said advice to foreign professional services firms helping their clients set up subsidiaries in Nigeria, because it puts your reality in stark relief to theirs.

As a greener lawyer, when I first started working with a leading commercial law firm (shout out to the old office at Marble House), I would get slightly irritated about the due diligence questions we frequently had to answer before these advisors could give their clients the green light to proceed with their investment in Nigeria. “Can parties contract freely? How enforceable are contracts? How easily can I disengage an employee who isn’t performing? Are there any rules limiting how much the government can interfere with my business? Section XYZ of ABC law says 123 – is it true?” We are a civilised country; I would think to myself with righteous indignation. Of course, contracts are enforceable. However, I quickly began to see a pattern emerging in the answers we were sending back. Yes, the law says this, but in practice, it varies a little/these are the additional things required. Yes, contracts are enforceable, but it can take up to 3 years to get a judgement in the first instance, as it is possible that it will be appealed.

It isn’t much easier providing advice to Nigerian clients. Yes, I can help with incorporating your company but it will take about a month. Trademark registration? Ah, that can take up to three years o, because they don’t publish the Trademarks Journal regularly, but at least when the application passes one stage like that, you can begin to enjoy a measure of protection ‘sha’. Taxes you have to pay? “Ah! well, it depends; for sure there are these Federal and State ones and your local government may impose a few additional ones but don’t worry we will be here to guide you through the process.”

This is the state of our investment environment – just enough uncertainty to make its degree of unpredictability concern you as an investor. Investment advisors charging considerable fees for valid but somewhat imprecise advice, because you have ‘Pastor’ at the Lands Registry or ‘Alhaji’ at the regulatory office on speed-dial, to “run” your application for you.

Creating an enabling environment for business has been touted so much by so many successive governments with extremely little being done to actualise it, that it’s a very warranted suspicion that they have every intention of keeping things this way. It’s happened a few times in recent years – only to the extent that it was announced, mind you – that after several weeks of very high-powered deliberations at the public’s expense, a government committee will yet again recommend business visas on arrival and 24-hour company incorporation. Bleh.

The CAC will tell you that it already carries out same-day incorporation at a premium anyway, which is technically true, but as paying stamp-duty (on share capital, which is a prerequisite to presenting incorporation forms at the CAC) simply does not happen quickly enough for you to make the dash to CAC on the same day. It is, in practice, more of a 72-hour process. Heck, even reserving the name you want to give your company takes 72 hours before that, so, really, what is the definition of “same-day”?

We will need more than quick fire, fly-by-wire, let’s-just-do-some announcements to address our decline from 120th to 169th, between 2008 and 2006, on the World Bank’s Ease of Doing Business Rankings. We will need process-changing reforms, probably backed by legislation, that addresses the fundamental obstacles we have when it comes to doing business in the elusive ‘enabling environment’ that all administrations promise. We will also need focused attention from the government as it faces the business of implementing the reforms, because there is quite a lot to do.

After fixing the registration process, the government also needs to fix the surrounding architecture of running a business. Fix power, so that spending N2m on a standby generator is no longer compulsory, so that money can be used to grow the business. Fix the economy, so that businessmen and women aren’t taking loans at 26% interest rates. Fix education, so that businesses don’t incur costs in re-training entry-level staff. Keep the playing field level and stop distorting the market by tacitly steering government policy(ies) in favour of its preferred [benevolent] monopolist. Streamline taxes and make the regime more precise, so that authorities stop using the opaqueness to shake down honest, hardworking people.

Stop flippantly reversing or changing policy as the government of the day changes; let there be policy consistency, thorough transparency and credibility in any process of revamping it. Stop being vampires and seeking to levy the life out of greenfield ventures – consider instead how you can help them flourish, so that they can pay you bumper corporate taxes. Reform the judiciary and abridge the litigation life-cycle, so that it does not take 18-36 months in the first instance to resolve commercial disputes. Improve on the electoral process; stop rigging or threatening to unleash dogs and baboons in the event of a loss, thereby raising the political risk profile of the country (which makes the cost of access to foreign money higher).

It’s a long and complex list and matrix of things that must be done to make the business environment more enabling. Many are long-term objectives and will simply not happen overnight. So we must be somewhat patient. But Government has to be visibly and methodically taking the steps to sort the system out. Platitudes are not steps.

Oh, and for crying out loud, government officials have to stop talking like unlettered people, trying to guilt foreign investors into not repatriating their profits. Every week in the papers, there’s the populist lamentation, “XYZ company took out $500bn in profits out of Nigeria.” Everyone in government reading this, turn to your fellow government official and say after me: “Neighbour, it is not our money. So far as XYZ company has paid its taxes in full, XYZ Company can do as it pleases with its profits. We promised them 100% foreign ownership and 100% repatriation of profits when we were enticing them to come and invest. It. Is. Not. Our. Money.” Amen?

This piece was originally published in The Guardian of 27th September.