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NEW EXECUTIVE ORDER ON EASE OF DOING BUSINESS

NEW EXECUTIVE ORDER ON EASE OF DOING BUSINESS-MEASURES FOR COMPLIANCE TO ENHANCE GROWTH OF SMEs IN NIGERIA

       By

        IKPONG  UMOH

Chairman /Managing Director, Stellarchem Nigeria Limited

Chairman, Toiletries & Cosmetics Manufacturers Group of M.A.N

Date: August15,2017

PROTOCOLS:

On Thursday 18 May 2017, the Acting President Prof Yemi Osinbajo signed an executive order on ease of doing business in Nigeria. In principle, the order sought to address certain shortcomings in Government circles and position Nigeria as the preferred investment destinations. The order can be broken down and treated under the following heading:

Transparency in MDAs

The Order seeks to promotes transparency in the dealings of Ministries, Departments and Agencies (MDAs) by directing them to publish a complete list of all requirements for obtaining permits, licences and approvals, including fees and timelines, in their premises and on their websites within the next 21 days.

Default Approvals

To further deal with lack of openness and backhand deals MDAs must communicate with applicants by at least two methods, and any approvals for applications not received within the specified period will be assumed to have been granted to the applicant by default. Similarly, any rejections must be communicated immediately  to the applicant with valid reasons.

One Government Directive

The Order promotes a “One Government” policy. No private applicant will be asked to produce or submit a document issued to it by the FGN as part of an application process if an original of the document is in the possession of another FGN MDA. A photocopy will be sufficient. Instead, FGN MDAs are now required to bear the responsibility of seeking verification or certification directly from the issuing MDA.

Entry Experience of Visitors and Travellers

Visas request for persons travelling to Nigeria from other countries will be issues within 48 hours and the processing of issuance of visas on arrival shall be carried out in a transparent manner.  Our airports and sea ports are not excluded. There will now be only one centrally located interface for agencies and touting has been strictly prohibited.

Any official caught soliciting or receiving bribes from passengers or other port users shall be subject to immediate removal from post and disciplinary as well as criminal proceedings commenced in line with extant laws and regulations.

Ports Operations

All agencies currently physically present in Nigerian Ports have been directed to harmonise their operations into one single interface station in one location in the port and implement as a single joint task force at all times.

The Apapa Port shall resume 24-hour operations within 30 days from today and each Port in Nigeria shall assign an existing export terminal to be dedicated to the exportation of agriculture produce within 30 days of this Order in order to jumpstart our international trade and economic activity.

DRIVING FACTORS FOR THE EXECUTIVE ORDER.

1.Our economy slipped into recession in Q1,2016 at -0.36% and has not recovered fast enough as was predicted and trumpeted by Government. Its currently standing at -0.56% as at Q1,2017

2.Macroeconomic indicators point to disequilibrium. Inflation figure in December, 2016 was 18.6%, decreasing to 17.2% in May 2017.  Inflation from a layman’s point is the general increase in prices and the fall in the purchasing power of the Naira (money). this translates into the fact that the higher the inflation in the economy the less goods and services the money you have at hand can purchase and vice versa. The ideal would be a single digit inflation hovering between 4-8%

3.increasing Poverty Level and unemployment in Nigeria is alarming. The recent UN reports says “Nigeria, with a population of about 185 million, is the most populous nation in Africa and the seventh most populous in the world. Her population will be approximately 200 million by 2019 and over 400 million by 2050, becoming one of the top five populous countries in the world.

“Nigeria is one of the poorest and most unequal countries in the world, with over 80 million or 64% of her population living below poverty line. The situation has not changed over the decades, but is increasing. Poverty and hunger have remained high in rural areas, remote communities and among female-headed households and these cut across the six geo-political zones, with prevalence ranging from approximately 46.9 percent in the South West to 74.3 percent in North West and North East.

The Federal Bureau of statistics(FBS) confirmed that about 4.85 million jobs were lost between 2015 and 2016.The Manufacturers association of Nigeria has determined from its current survey that about 226 companies have either closed shops or downsized within the same period.

4. Nigeria’s loss in Global competitiveness is a source of worry. The Global Competitiveness Index (GCI) 2016-2017 measures and ranks competitiveness of 138 economies. In the recently released report, Nigeria, the giant of Africa dropped three notches from 124th in 2015-2016 to 127th in 2016-2017.on the other hand, other countries in Sub-Saharan Africa, like Mauritius (ranking 45th) and South Africa (47th) remain the region’s most competitive economies, climbing two places and one place, respectively. Rwanda (52nd) comes third in the region.

5.Closely related to Global competitiveness is the ease of doing business (EODB).Based on the latest ranking released by the World Bank, Nigeria is ranked 169 among 190 countries. Some analyst see this rank as being an improvement on the previous position of 170 out of 189.When compared with other countries in the sub-region like Ghana (108),Mali (141) and Togo (154),there is nothing to cheer about.

SCORE CARD OF COMPLIANCE BY MDAs

Barely three months after signing the EODB into law, what has changed for all to see that we are moving forward or not.

Some agencies of the government have convened stakeholders meeting and activities in a bid to carry out the executive order and to try to prove their readiness to help achieve the EODB.

I have had the opportunity to participate in two workshops, one organized by the Nigeria customs service (NCS ) and another by Standards organization of Nigeria (SON)

NCS acknowledged that Nigeria’s low ranking of  14th out of 15 Economic Community of West African States (ECOWAS) economies and 182nd out of 190 economies worldwide in the ‘Trade Across Borders’ indicator must be changed .To this end they have introduced some reforms to achieve 24-hour cargo clearing like  a shift system for its officers and men in order to achieve a round the clock operation and scheduling  and coordinating the Mandatory Joint Examinations and Sign-off Form to ensure that there is only one point of contact between importers and officials.

They were quick to admit that they had some problems like inadequate power supply, bad roads, gridlock and faulty scanners might truncate the shift system.

Some port users alluded to the fact that the low ranking is caused by avoidable delays occasioned by cumbersome documentations, Nigeria customs required about 14 documents to clear goods while in Rwanda you require only 5. NCS however denied any wrong doing, opining that no delay whatsoever is caused by Customs. Most of the delays are actually caused by importers’ false declaration and lack of integrity. When your declarations are correct, within six hours, your goods are released.

Our experience as importers of chemical raw material is that not much has changed. There are still cases of being cleared at one point and by a group of officers only to move to the gate and an order comes from above that you have to come back for reexamination. The point here is that custom has three major functions namely, trade facilitation, anti-smuggling and revenue generation. Of these three, revenue generation remains the most attractive.  Given a Revenue target of about 1.1Trillion Naira for 2017, their other mandate of trade facilitation, which would help SMEs do business with ease has to wait while the men and officers make money for the government and for themselves.

In the case of SON,the stakeholders were intimated with the repealed act now called Standards  Organisation  Of  Nigeria   Act,   2015 ,Act   No.  14.

This act now empowers them to become a full-fledged regulatory agency and enforce the following  regulatory requirements :

• The mandatory SONCAP PROGRAMME (Offshore Conformity Assessment Programme) for imported goods.
• The mandatory MANCAP Programme (Mandatory Conformity Assessment Programme) for locally manufactured products.
• The Mandatory Products Registration Programme etc.

In addition, they are empowered to charge fees as they deem fit and appropriate.

It would appear that every Agency of Government interprets ease of doing business as they understand it. From the few seminar and fora, I have attended, the common denominator of ease of doing business translates into ease of making money for the government agencies and some don’t mince words telling the participants as such.

On the issue of compliance with the executive order, some agencies are said to be defaulting by providing telephone lines and emails that are not working. The Vanguard Newspaper investigation listed NCS, the Nigerian Immigration Service, Nigerian National Petroleum Corporation among others as some Government agencies with dysfunctional contact telephone lines. I recently had an encounter with an agency that gave me 10 lines to contact them if I experience any problems on their website. None of the lines is working ,so how have they complied with EODB These agencies should come clean and rectify  those avenues of communication.

HOW WILL SMEs FARE IN THE EXECUTIVE ORDER?

According to the world Bank Group, EODB sheds light on how easy or difficult it is for a local entrepreneur to open and run a small to medium-size business when complying with relevant regulations.

This index measures and tracks changes in regulations affecting 11 areas in the life cycle of a business: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts, resolving insolvency and labour market regulation.

In this definition, the SME is the focus not the multinationals or the foreign investors. while the Executive order can ease the registration of a new business name ,the other areas that disadvantage the SMEs are not addressed.

These areas with particular reference to Cosmetic SMEs are

1. MULTIPLICITY OF REGULATORY AGENCIES

Incidence of multiplicity of regulatory agencies has always resulted in high cost and difficulty of doing business. The cosmetic industries in all over the world is statutorily regulated by a Food and Drug Agency as FDA in the United states and by The National Agency for Food and Drugs Administration (NAFDAC) in Nigeria. The recent empowerment of Standards organization to regulate industries already regulated by NAFDAC is a double regulation and needs to be addressed by the executive order. We have the impression that the repeal of the recent SON act 14 ,2015 did not have wide consultation and implementing as is definitely will wipe out our fragile SMEs.

1. UNFAIR COMPETITION TACTICS/MANUPULATED TARIFF

Some basic and bulk Raw Materials for manufacturing quality cosmetic products not sourced locally and classed under HS Code 3402 are currently levied 20% +5%VAT as if they were finished products, in gross violation of CET rules, which stipulates 0% for Essential Social goods;5% for Raw Materials;10% for Intermediate goods;20% for Final consumption goods & 35% for Specific goods for Economic Development. This high duty was a conspiracy between some multinationals among us who advised government through MAN to impose that duty in order to protect their investment as they suspect that some unscrupulous people hid under that tariff heading to bring in finished soaps.

With the duty regime in effect, there is acute scarcity of the basic materials and the wheels of T&C industries slowly grounding to a halt. The executive order on ease of doing business should look into this anomaly and save our members business from eventual collapse

1. LACK OF GOVERNMENT PROTECTION.

The imports prohibition list was introduced by the Federal Government before the advent of CET and aimed at preventing the importation and dumping of products which can be manufactured in Nigeria.

In Government’s thinking all the companies will be able to increase their capacity utilization and achieve good market share.

T&C companies in Nigeria have the capacity to produce finished cosmetics products sufficiently for local consumption and for export just as they did in the 90s. We need government protection by prohibiting the importation of all kinds of cosmetic products into Nigeria, other bilateral agreement entered into notwithstanding.

d). HIGH COST OF FUNDS/ACCESS TO LOANS

Interest rates in Nigeria is hovering between 18% to 25% and yet it’s not easy to raise capital for investment in agriculture or in industry. SMEs need capital to fund their operations. Existing institutions like the BOI and the Commercial Banks, have  short-changed the SMEs in their funding needs by insisting on overbearing collaterals and life-threatening conditions before granting them loans. BOI insist on 250% collateral, while commercial banks prefer to lend to government by investing in government bonds. Nigeria being a country in dire need of development cannot overlook the important role interest rate could play in invigorating SMEs. This is probably the reason The Collateral Registry Act ,2017 was made However the idea is good, but implementation is going to pose a big challenge for the banks.

The ease of business ranking as put together by the world bank group has the SME as its focus not for the fun of it, but because SMEs have the potential to grow a country’s GDP out of recession in a more sustainable way than Foreign Direct Investment (FDI) According to word bank data the percentage contribution of SMES to GDP is as flows.

High income countries :50%-55% GDP (UAE, Singapore, Qatar, Denmark, Germany France,many of the EU countries)

Middle income countries: 35%-40% GDP (china, India, Brazil, Malaysia ,Angola, Thailand ,Ghana)

Low Income countries : about 15% GDP (Cambodia, Kenya, sub Saharan African countries)

CONCLUSION:The executive order, looks and sounds very good but it appears to have missed the focus on SMEs and concentrated 90%  on the convenience of foreign investors. The Presidential Enabling Business Environment Council (PEBEC) need to do wider consultations and involve the genuine SME stakeholders in the council. If our economy is to recover very fast and in a sustainable way then we need an Executive Orders that will take a cue from the World Bank Group and favour the local SMEs 100%.

THANK YOU!!!