All over the world, the business environment (spaces where private and public firms carry out business activities) plays a critical role in ensuring the sustainability of individual businesses (in particular) and the overall development of a nation (in general). Generally, the business environment technically determines not only if new businesses could be easily initiated but also their prospects for survival. Business environment also involves a wide array of areas such as the legal, regulatory, institutional, infrastructural, fiscal and security frameworks in existence. A well-functioning business environment presupposes a thriving investment climate for all and sundry with its attendant positive economic consequences in different forms such as: the creation of especially local investments and employment; poverty reduction and improvements in the standard of living; and drive for innovation and entrepreneurship. On the other hand, a bad business environment is often characterised by: the absence of mechanisms that help businesses thrive; stifled innovation and entrepreneurship; and low levels of foreign businesses.
In Nigeria at present, there is no gainsaying the fact that the cost of doing business is still very high; and that is despite quests over decades to improve the business environment. The slow pace of transforming the Nigerian business environment positively has become a huge obstacle, especially for small businesses. Although large businesses are often better able to cope, they are also better able to transfer the higher costs of doing business to their financially stronger consumers while alienating the large numbers of others who lack the means to buy. Furthermore, people who want to start new businesses in Nigeria are often demotivated from the beginning by the standardisation of factors or facilities that underpin bad business environments such as lack of constant electricity, inadequate road networks, multiple taxation, and lack of policy support. The net effect of the aforementioned impediments is that they stagnate the economy by weakening larger enterprises, slowing investments, smothering startups, increasing unemployment and poverty, and incubating criminality due to the adverse impact.
Though the World Bank Doing Business 2020 ranked Nigeria among the ten (10) countries that made some progress in doing business in 2020 in the World Bank doing business report card, it only managed a ranking of 131 out of 190 countries. Nevertheless, the reality on the ground indicates that the rankings are mere statistics as more action needs to be taken to transform the Nigerian business environment for inclusive economic growth and national development. It is an ongoing battle in Nigeria on how to tackle extreme poverty, the number one sustainable development goal (SDG). Nigeria accounts for about one quarter of Africa’s total number of poor people (Beegle and Christiaensen, eds., 2019). Interestingly, research suggests that there is reduction in poverty in countries with business-friendly regulations, which is manifested through new business creation and thriving entrepreneurship (Djankov, Georgieva and Ramalho, 2018). According to the World Bank doing business 2020, countries ranking high in doing business are more likely to have higher levels of entrepreneurial activities. The implication is that barriers to entry are substantially eliminated, infrastructures are in existence and accessible, taxes are fairly applied and structured (to enable business survival in their early stages), and innovation thrives. Ultimately employment opportunities could be created.
Therefore, there is no denying the fact that a good business environment provides a fertile ground for business growth, development and, eventually, sustainability. How to eradicate extreme poverty is a major concern to many countries, including Nigeria. And the ability to provide employment could be one of the ways to fight extreme poverty, reduce crime, ensure a good standard of living and, ultimately, tackle insecurity in Nigeria. With a good business environment, chances are that some of these social and economic targets can be met.
In line with the advocacy mission of the African Heritage Institution to provide evidenced-based solutions to the socio-economic challenges facing Nigeria and Africa, the BECANS (Business Environment and Competitiveness across Nigerian States) project, which is a flagship entrenched by the institute to promote a sound and competitive business environment in Nigeria, is about to launch its fourth cycle in the series. The first of the series started with BECANS I in 2007, followed by BECANS II in 2010, and BECANS III in 2014. Essentially, BECANS is an encompassing research survey of the Nigerian business environment cutting across the 36 states and the Abuja FCT. Unlike other global business environment assessment tools that benchmark Nigeria against other countries, it provides a sub-national outlook of the Nigerian business environment and gives sub-national authorities (different states in Nigeria) the opportunity for self-assessment and to peer review amongst themselves. The quintessence of the document lies in its critical review of the business environment in Nigeria and more importantly, in providing key recommendations in areas where each state is underperforming.
As a stakeholder, you can learn more by reading the highlights of the BECANS IV Report which was unveiled to the general public on 25th November, 2021.
Chukwuma Okolo
Advocacy Research Associate
References
Beegle, Kathleen, and Luc Christiaensen, eds. (2019), Accelerating Poverty Reduction in Africa. Washington, DC: World Bank. doi:10.1596/978-1-4648-1232-3. License: Creative Commons Attribution CC BY 3.0 IGO
Djankov, Simeon, Georgieva, Dorina and Ramalho, Rita (2018), Business regulations and poverty, Economics Letters, Volume 165, Pages 82-87, doi.org/10.1016/j.econlet.2018.02.002.
World Bank (2020), Doing Business 2020, Washington D.C. World Bank, DOI:10.1596/978-1-4648-1440-2
African Heritage Institution, a not-for-profit, non-partisan and independent organization devoted to economic research, capacity building, and networking. Our history dates back to 2001 when we began operations as the African Institute for Applied Economics (AIAE). Until 2012, our activities were focused mostly on social and economic issues.
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