Olusola O.

Ease of doing business in Nigeria: Gaps, Benchmarks and recommendations Agenda Introduction Case studies Agenda Ease of doing business PC 1 Ease of doing business 2 Case Countries 4 15 March 2016 2 1 Ease of doing business Agenda Introduction Case studies Introduction to ease of doing business Every country is rated against the highest country (benchmark or Frontier) in a five year period across 10 sub-scales; the benchmark country assumes a value of 100. The country’s score is indicated as DTF = Distance to Frontier scores using the world bank Methodology. Doing business looks at domestic small and medium-size companies in a country and measures the quality and suitability of regulations applied to these companies through their life cycle. This report will compare Nigeria with case study countries: Rwanda, Costa Rica and Zambia Source: World Bank Ease of doing business Report 2016 Ease of doing business March 2016 5 1 Ease of doing business Agenda Introduction Case studies The 10 sub-scales and rankings used to measure the ease of doing business as at 2016 Sub-scale 1 Sub-scale 6 Starting a business Protecting minority investments Costs Sub-scale 2 Sub-scale 7 Dealing with construction permits Paying taxes Sub-scale 3 Sub-scale 8 Number of Procedures Trading across borders Getting electricity Sub-scale 4 Registering property Sub-scale 5 Getting credit Time (No of days) Sub-scale 9 Enforcing contracts DTF= 100 (Max) Sub-scale 10 Resolving insolvency Source: World Bank Ease of doing business report 2016 Ease of doing business March 2016 6 1 Ease of doing business Agenda Introduction Case studies Development case countries Selected countries for the case study are Rwanda, Costa Rica and Zambia based on significant improvement in rankings using 2010 as a base year. Rwanda Capital Kigali Population 11.34 million (2014 est.) GDP per capita 445.6 USD Ranking 2010 101 Ranking 2016 61 Case countries Capital Lusaka Capital San Jose Population 15.72 million (2014 est.) Population 4.76 million (2014 est.) GDP per capita 1,032.8 USD GDP per capita 6,188.1 USD 103 Ranking 2010 106 98 Ranking 2016 58 Ranking 2010 Ranking 2016 Zambia Costa Rica Source:World Bank Ease of doing business report 2016 Ease of doing business March 2016 7 1 Ease of doing business Agenda Introduction Case studies Nigeria at a glance: Related Key Statistics & EOB measurements Age Distribution 5m 65+ years 36m 35 – 64 years 59m 15 – 34 years 11 47% 182 Million Urbanization rate per annum Real GDP growth rate in 2015 0 – 14 years 79m Cities with populations over 1 million 2.8% Largest population in Africa Largest oil producer in Africa Major GDP contributors Agriculture Trade 89 93 million women 1st million men Nigeria is Africa’s most populous country – 1 out of every 6 Africans is Nigerian. Ranking 2010: 158 Ranking 2016: 169 Areas of improvement - 2016 • Protecting Minority Interest –Position 20 • Getting Credit - Position 59 Weak Areas - 2016 • Trade across Borders - Position 182 • Getting electricity - 182 • • • • • • Registering Property – 181 Paying Taxes - 181 Dealing with construction permits – 175 Enforcing Contracts – 143 Resolving Insolvency - 143 Starting a business - 139 Number of Countries compared = 183 Oil & Gas ICT Source: World Bank 2016 Ease of doing business March 2016 8 1 Ease of doing business Agenda Introduction Case studies Nigeria’s EOB performance scores-. 100 Singapore 91.79 87.34 Max Distance to frontier (DTF) =100 Nigeria's Distance To Frontier and Position 2010 -2016 Nigeria’s Position - 48.33 43.97 42.87 44.69 43.74 43.56 42.70 2010 2011 2012 158th 160th 167th Total No. of Countries 183 183 185 2013 2014 2015 2016 172th 162th 170th 169th 189 189 189 189 Source: World Bank Ease of doing business report 2016 Ease of doing business March 2016 9 1 Ease of doing business Agenda Introduction Case studies Nigeria’s poor performance on the EOB rankings is attributed to poor reforms Country Position Reforms Countries showing significant improvement in positions 2010 - 2016 (2010 – 2016) Rwanda Nigeria Position dropped from 158 - 169 Position improved from 102 - 62 Zambia Nigeria Cote de voire 0 4 50 58 62 100 150 Rwanda Costa Rica 101 103 98 106 - 32 142 163 169 2016 Countries that has shown significant growth in Distance to Frontier compared to Nigeria from 2010 - 2016 Costa Rica Position improved from 106 - 58 70 14 60 50 40 Zambia Position improved from 103 - 98 30 10 2010 2011 Nigeria 2012 Rwanda 2013 2014 Costa Rica 2015 2016 Zambia Source: World Bank Ease of doing business report 2016 Ease of doing business March 2016 11 1 Ease of doing business Agenda Introduction Case studies Comparing Nigeria: Need to develop more & sustain reforms to yield desired impact 4 reforms        1 reform in 2010 0 reforms in 2011 0 reforms in 2012 1 reforms in 2013 0 reforms in 2014 0 reforms in 2015 2 reforms in 2016 32 reforms        10 reforms 7 reforms in 2010 3 reforms in 2011 3 reforms in 2012 2 reforms in 2013 8 reforms in 2014 3 reforms in 2015 6 reforms in 2016        Reforms in case countries 1 reform in 2010 3 reforms in 2011 0 reforms in 2012 1 reforms in 2013 1 reforms in 2014 2 reforms in 2015 2 reforms in 2016 14 reforms        1 reform in 2010 0 reforms in 2011 2 reforms in 2012 4 reforms in 2013 2 reforms in 2014 2 reforms in 2015 3 reforms in 2016 Source: World Bank Ease of doing business report 2016 Ease of doing business March 2016 12 1 Ease of doing business Agenda Introduction Case studies Comparing Nigeria with case countries across the EOB scale for 2016 only. Starting a business Dealing with construction permits Getting electricity Registering property Getting credit Protecting minority Rights Paying taxes Trading across borders Enforcing contracts Resolving insolvency Rwanda 83.1 76.3 60 87.8 95 53.3 81.5 45.2 51.2 47.8 Nigeria 77.1 49.6 30.9 31.4 60 68.3 32.2 18.1 48.6 30.7 81 74.6 85 73 85 35 75.7 79.9 52.4 44.1 86.7 66.3 59.1 45.1 75 53.3 81.7 49 49.9 39 Costa Rica Zambia Best case within the group Nigeria’s performance Ranking of Problems areas for Nigeria • Trading across Borders • Resolving Insolvency • Getting electricity • Registering property • Paying Taxes • Enforcing contracts • Dealing with Construction permits Positive Indicators for Nigeria • Starting a business • Protecting minority rights • Getting credit EOB: Ease Of Business Source: World Bank Ease of doing business report 2016 Ease of doing business March 2016 13 2 Case Countries Agenda Introduction Case studies Country Case studies: Ease of doing business  Rwanda  Costa Rica  Zambia March 2016 15 2 Case Countries Agenda Introduction Case studies Rwanda at a glance Starting a business Dealing with construction permits Getting electricity Registering property Getting credit Protecting minority rights Paying taxes Trading across borders Enforcing contracts Resolving insolvency Rwanda is relatively small country in terms of population with about 11.34 million people in 2014 - 27th in Africa. 7.0% 11 Million Real GDP growth rate in 2014. Major GDP contributors Kigali Largest City > 1 Million Services Urbanization rate per annum Trade Agriculture 38% 1.2 Million Ranking 2010: 101 Ranking 2016: 62 Areas of strength -2016 • Getting Credit -Position 2 • Registering Property – 12 • Dealing with Construction Permits -37 • Paying Taxes – 48 Weak Areas - 2016 • Trade across Borders - Position 156 • Enforcing Contracts – 127 • Getting electricity - 118 • Starting a business – 111 • Protecting Minority Investors - 88 • Resolving Insolvency - 72 Number of Countries compared = 183 Source: World Bank Ease of doing business report 2016 Ease of doing business March 2016 16 2 Case Countries Agenda Introduction Case studies Rwanda in comparison to Nigeria (1/2) Starting a business Dealing with construction permits Getting electricity Registering property Getting credit Protecting minority rights Paying taxes Trading across borders Enforcing contracts Resolving insolvency Dealing with construction permits (DTF 2016 Scores: 76.34/ Nigeria- Kasama 1. Eliminated the notarization requirement 1. Decentralized the construction permit system—which reduced the time for 2. Introduced Standardized Memorandum of Association getting a building permit and an occupancy permit—and by reducing the time 3. Put Publication online for obtaining an electricity connection Mansa 4. Consolidated name-checking, registration fee payment, tax 2009 registration and company registration procedures 2. Combined the procedures for obtaining a location clearance and a building Solwezi 2012 permit in a single application form—and by introducing a single application 5. Reduced Business registration fees form for water, sewerage and electricity connections Noala- Chipata regulations at the end of April 2010, set new time limits 6. Reduced time to obtain a registration certificate 3. Passed new building 2015 and implemented them for the issuance of various permits 7. Launched a free mandatory online registration 2014 Mongu Lusaka 2016 4. Implemented an electronic platform for building permit applications and 8. Eliminated the need for new companies to open a bank account in streamlining procedures order to register for VAT 5. Reduced the building permit fees 2015 Summary 6. Eliminated the fee for obtaining a freehold title and by streamlining the • Eliminated procedures,(not domiciled in same unit) process for obtaining an occupancy permit and adopted a new building code Livingstone • Consolidated stand-alone procedures (Notary, bank account to register and new urban planning regulations in 2016 for VAT Summary • Digitization: Mandatory online registration & Checking from publication put online • Decentralization, Reduced number of application forms by centralizing in one. New regulations & set time limits. Electronic application, Reduced fees Output Output • Reduced Number of days from 18 days to 5.5 days from 2004 - 2016 respectively Time to complete: 277 in 2004 to 77 days in 2016 • Reduced Cost by 77% (Assuming income per capital is constant between 2004 – 2015 Source: World Bank Ease of doing business report 2016 Starting a business (DTF 2016 Scores: 83.05/ Nigeria 77.12) Zambia Ease of doing business March 2016 17 2 Case Countries Agenda Introduction Case studies Rwanda in comparison to Nigeria (2/2) Starting a business Dealing with construction permits Getting electricity Registering property Getting credit Registering property (DTF 2016 Scores: 87.80/ Nigeria-. Replaced 6% of property value registration fees with a flat rate regardless of property value 2. Created a centralized service in the tax authority to speed up issuance of certificate 2010 Solwezi 3. Reduced time to transfer property to on-going improvements in the property registration process. 2014 4. Eliminated the requirement to obtain a tax clearance certificate 5. and Implemented the web-based Land Administration Information System for processing land transactions Zambia Summary • • • Mongu Replaced with flat fees: Fees based on property value with a flat rate Created a Centralized service Digitization: Implemented the web-based Land Administration Information System for processing land transactions Livingstone Output • • • Reduced Number of days of processing property from 370 days to 32 days from 2008 - 2016. Reduced Cost (as % of property value) from 9.4% in 2008 to 0.1% of property value in 2016. Reduced Number of Procedures from 5-3 in same period Protecting minority rights Paying taxes Trading across borders Enforcing contracts Resolving insolvency Getting credit (DTF 2016 Scores: 95.00/ Nigeria- & 2011 Kasama Rwanda strengthened its secured transactions system 1. by allowing a wider range of assets to be used as collateral 2. Permitted a general description of debts and obligations in the security Mansa agreement (2010) 3. Thus allowing out-of-court enforcement of collateral(2010) 4. Granting secured creditors absolute priority within bankruptcy (2010). 5. Creating a new collateral registry (2010) Noala 6. Borrowers the right to inspect their own credit report and mandating that loans of all sizesChipata be reported to the central bank’s public credit registry - Credit information system was improved Lusaka 7. Private credit bureau started to collect and distribute information from utility companies and also started to distribute more than 2 years of historical information, improving the credit information system 2014 - 2016 8. Provided more flexibility on the types of debts and obligations that can be secured through a collateral agreement (2014) 9. Established clear priority rules outside bankruptcy for secured creditors and established clear grounds for relief from a stay of enforcement actions by secured creditors during reorganization procedures (2015) 10. Credit bureau started to provide credit scores to banks and other financial institutions while the credit registry expanded borrower coverage, strengthening the credit reporting system Source: Analysis, World Bank Ease of doing business report 2016 Ease of doing business March 2016 18 2 Case Countries Agenda Introduction Case studies Costa Rica at a glance Starting a business Dealing with construction permits Getting electricity Registering property Getting Credit Protecting minority rights Paying Taxes Trading across borders Enforcing contracts Resolving insolvency Costa Rica is relatively small country in terms of landmass and population with about 4.78 million people in 2014. 3.5% Real GDP growth rate 76% Urbanization rate per annum Ranking 2010: 106 Ranking 2016: 58 4.78 Million Major GDP contributors Trade Services Manufacturing Areas of strength - 2016 • Getting Credit -Position 7 • Getting electricity– 23 • Dealing with Construction Permits 49 • Registering Property – 53 • Trading across borders - 67 Weak Areas - 2016 • Protecting Minority Investors -166 • Enforcing Contracts – 124 • Starting a business – 111 • Resolving Insolvency - 87 Number of Countries compared = 183 Source: World Bank 2014, CIA Factbook, Transparency International CPI 2015, Ease of doing business March 2016 19 2 Case Countries Agenda Introduction Case studies Costa Rica in comparison to Nigeria (1/2) Starting a business Dealing with construction Permits Getting electricity Registering property Getting credit Getting electricity (DTF 2016 Scores: 85.0/ Nigeria- Improved the time to getting electricity by: 1. Improved the coordination between different departments at the utility. 2. Attendant regulatory monitoring. 3. Communication of tariffs and tariffs changes. 2016 1. Reduced the time required for preparing the design of the external connection works and for installing the meter and initiating the electricity supply. 2. Developed mechanisms for monitoring outages and restoring service. Protecting minority rights Paying taxes Trading across borders Enforcing contracts Resolving insolvency Trading across borders (DTF 2016 Scores: 79.9/ Nigeria-. Improved its electronic data interchange system and allowing electronic submission of cargo manifests before arrival of the goods. Other strengths: 1. 2. Reduced time to export (Border compliance)=20 hours compared to 159 hours in Nigeria, 97 hours in Rwanda & 78 hours in Zambia all in 2015, Zambia deteriorated in 2016 to 136 hrs Time to export (Documentary compliance) was 24 hours in 2015 compared to 131 hours in Nigeria, 42 hours in Rwanda and Zambia 72 hours which deteriorated to 130hrs in 2016 and similar time range in importing Other strengths: High scores in Reliability of supply and transparency of tariff since 2015 Total duration and frequency of Output Time taken to get electricity: 62 to 45 days in 2014 -2016 Costs: 40% reduction in costs from 2010 – 2016 (Costs as a % of income per capital)outages per customer a year since 2015 Output Improvement in position on this sub-scale from 30th in 2015 to 23rd in 2016 compared to Nigeria in 181st position in 2015 to 182nd position in 2016 Source: World Bank Ease of doing business report 2016 Ease of doing business March 2016 20 2 Case Countries Agenda Introduction Case studies Zambia at a glance Starting a business Dealing with construction permits Getting electricity Registering property Getting credit 15.7 Million 6.0% Capital: Lusaka City>1m Million Real GDP growth rate in 2014. 41% Urbanization rate per annum Major GDP contributors Trade Agriculture Services 1.2 Protecting minority rights Paying taxes Trading across borders Enforcing contracts Resolving insolvency Zambia is African 22nd most populous country with an estimated population of 15.7 million people in 2014 with growth rate of 3.1% Ranking 2010: 103 Ranking 2016: 98 Areas of strength - 2016 • Getting Credit -Position 19 • Paying Taxes– 46 • Starting a business - 78 Weak Areas - 2016 • Protecting Minority Investors -88 • Resolving Insolvency – 107 • Dealing with Construction permits 110 • Getting Electricity - 123 • Enforcing Contracts – 134 • Trading across borders - 152 • Registering a property - 157 Number of Countries compared = 183 Source: World Bank 2014, Transparency International CPI 2015 Ease of doing business March 2016 22 2 Case Countries Agenda Introduction Case studies Zambia in comparison to Nigeria (1/2) Starting a business Dealing with construction permits Getting electricity Registering property Getting credit Registering property (DTF 2016 Scores: 86.7/ Nigeria-. Revamped the company registry and created a one-stop shop reducing time spent 2011 2. Eliminated the minimum capital requirement 2014 3. Raising the threshold at which value added tax registration is required Output • • Protecting minority rights Paying taxes Trading across borders Enforcing contracts Resolving insolvency Paying taxes ( DTF 2016 Score: 81.7/ Nigeria-. Updated and reduced ambiguities in the income tax law making administration more effective. 2. Changes reduced the depreciation allowance of Capital expenditure. 3. Introduced ring-fencing for capital expenditure on new projects. 4. Reduced the value added tax rate 2015 5. Introducing an online system for filing corporate income tax. 6. Abolishing the medical levy and some labour taxes. 2016 7. Implemented electronic filing and payment for VAT Output Paid minimum capital was reduced from 1.5% of Minimum capital to ZERO. Reduced Number of Procedures from 18 days in 2010 - 7.5 days in 2016. Source: World Bank Ease of doing business report 2016 Ease of doing business March 2016 23 2 Case Countries Areas Nigeria should focus on to improve EOB rankings 1 Sub-scales (Areas) Ranking Notes Getting Electricity 182/183 Doing Business records all procedures required for a business to obtain a permanent electricity connection and supply for a standardized warehouse {Applications, Inspections clearances and final internal and external connections works. Reliability of supply and transparency of tariffs are also factored in. Observations for Nigeria. • Higher number of procedures, a total of 9 for Nigeria, 4 for Rwanda and 4 Singapore. • It takes 181 days to connect in Nigeria, against 34 in Rwanda and 31 in Singapore. • Power outages exceed 100 hours per average customer or 100 outages in a year. • Nigeria has no data on power outages. Costa Rica –case study on Getting Electricity: Improved the coordination between different departments at the utility, regulatory monitoring, communicated tariffs and tariffs changes, developed mechanisms for monitoring outages and restoring service and made supply reliable. 2 Trading across Borders 182/183 Doing Business captures the time and cost (excluding tariffs) associated with two sets of procedures in trading across borders—documentary compliance and border compliance in the overall process of exporting or importing a shipment of goods within the country. Although it captures data for time and cost of domestic transport, this is not factored into the EOB. Observations for Nigeria. • Higher number of hours utilized in Border compliance in time to Export = 159 hours as compared to 97 hours in Rwanda and 12 hours in Singapore in 2016 • High cost to export (Border compliance) was put at $786 compared $183 in Rwanda and $335 in Singapore. • Time to import (Border Compliance) was 298 hours compared to 20 hours in Costa Rica and 32 in Singapore for 2016. Costa Rica –case study on trading across borders have implemented electronic data interchange system and allowing electronic submission of cargo manifests before arrival of the goods. Ease of doing business March 2016 24 2 Case Countries Areas Nigeria should focus on to improve EOB rankings 3 Sub-scales (Areas) Ranking Notes Registering Property 181/183 Observations for Nigeria • Higher number of procedures, 12 for Nigeria as compared with 3 in Rwanda and 4 in Singapore. • Cost as % of property value is high in Nigeria- aprox. 18% as compared with 0.1% in Rwanda and 2.9% in Singapore in 2016. Rwanda reduced cost from 10.3% in 2005 to 0.1% in 2016. • Quality of Land Administration is Poor: • Land titles are not kept in digital form in land registry, no electronic database for checking encumbrances, maps are not kept in digital forms, No full scale GIS, Land ownership agency and mapping agency are not linked or in linked databases. • Transparency of Information • Information on land ownership is not made publicly available and accessible. • List of documents or Fees schedule required for completing any type of property transaction is NOT made publicly available. • Maps of land plots are NOT made publicly available. • Mapping agency does not update map regularly within a specific time frame. • Improved Land dispute resolution regulatory environment. • No national database to verify the accuracy of identity documents among others. Costa Rica –case study on Registering Property –revamped their company registry and created a one –stop shop to reduce number of procedures. Ease of doing business March 2016 25 2 Case Countries Areas Nigeria should focus on to improve EOB rankings Sub-scales (Areas) Ranking Notes 4 Paying Taxes 181/183 Observations for Nigeria. • Higher number tax payments per year= 59 as compared to 25 in Rwanda and 6 in Singapore in 2016 • Time to pay tax is higher in Nigeria was 908 hours per annum compared to 109 hours in Rwanda and 83 hours in Singapore for 2016. Zambia –case study on Paying Taxes • Updated and reduced ambiguities in income tax law making administration effective. • Introduced an online system for filing corporate income tax and payment for VAT, Reduced the value added tax rate, • Abolished the medical levy and some labour taxes and introduced ring-fencing for capital expenditure on new projects. 5 Dealing with Construction Permits 175/183 • Ease of doing business Higher Cost of Dealing with Construction Permits (52% of warehouse value in Nigeria compared to 5.9% of warehouse value in Rwanda and 0.3% of Singapore). Poor Quality Control during and after Construction: • Only Government agency is legally mandated to conduct unscheduled inspections who inspects only the safety of the construction site and not the safety of the building itself, or if inspections are mandated by law during construction are not even carried out by appropriate authorities in actual practice. • It is not legally mandated in Nigeria that an in-house supervising engineer, an external supervising engineer or an external inspections firm is legally mandated to oversee the construction of the building throughout the entire construction period to conduct riskbased inspections. • No legally mandated final inspection after construction or does not always occurs in practice in accordance with the approved plans and existing building regulations. Liability and insurance regimes • Parties involved in the construction process are NOT held legally liable for structural flaws or problems in the building once it is occupied OR no insurance policy obtained by parties involved in construction to cover for structural flaws or problems. March 2016 26 2 Case Countries Areas Nigeria should focus on to improve EOB rankings 6 Sub-scales (Areas) Ranking Notes Enforcing Contracts 143/183 Doing Business measures the time and cost for resolving a commercial dispute through a local first-instance court. Quality of judicial process {measuring series of good practices} is also factored in. Observations for Nigeria. • Higher number of days to resolve commercial sale dispute in Nigeria , about 510 days compared to 230 days in Rwanda and 150 days in Singapore. Undeveloped Case Management Capabilities and Court Automation • Applicable laws on civil procedure do not contain time standards for key court events such as Service of process, first hearing , filing of statement of defense etc. • No laws regulating the number of adjournments and continuances that can be granted. • No Performance measurement reports that can be generated about the competent court to monitor the court’s performance, to monitor the progress of cases through the court and to ensure compliance with established time standards. • No electronic case management system for judges to access laws, regulations and case law; to automatically generate a hearing schedule for all cases on their docket; to send notifications (for example, e-mails) to lawyers; to track the status of a case on their docket; to view and manage case documents (briefs, motions); to assist in writing judgments among others • Initial complaint CANNOT be filed electronically through a dedicated platform (not email or fax) within the relevant court or served on the defendant. • Availability of sound alternative dispute resolution mechanism. Ease of doing business March 2016 27 Thank you