On August 21, 2019,
President Muhammadu Buhari appointed Niyi Adebayo, a former governor of
Ekiti State, as Minister of Trade and Investment.
He succeeded Okechukwu Enelamah, his predecessor in that office.
Mr Adebayo had the
mandate to lead the promotion of government's policies of Ease of Doing
Business, job creation, poverty eradication and industrialisation.
The minister was
also expected to implement policies and programmes to improve
standardisation of bilateral trade agreements, stimulating growth of
domestic Micro, Small and Medium Enterprises, MSMEs and renewed roadmap
to increase Nigeria's Foreign Direct Investment, FDIs.
When Mr Adebayo
assumed office, there were a number of challenges bedeviling the trade
and investment environment such as multiple taxation, high cost of power
supply, difficulty with access to loan, poor infrastructure, high cost
of doing business, among others. These and numerous other factors
culminate in the inability of Nigerian produce to be competitive in the
export market.
Twelve months afterwards, a number of the problems persist.
FDI slumps
In June, the United Nations Conference on Trade and Development
(UNCTAD) disclosed that Foreign Direct Investment (FDI) into Nigeria
declined by 48.2 per cent to $3.3 billion in 2019 from $6.4 billion in
2018.
According to the report, FDI flows to Nigeria declined due to a slowdown in investment in the oil and gas industry.
There were
projections that the COVID-19 pandemic would severely curtail foreign
investment in Africa in 2020. The downturn would be further compounded
by low oil prices, dragging FDI flows down by 25 and 40 per cent.
European Union Ban
In February, the
Cowpea and Beans Farmers, Processors and Marketers Association of
Nigeria said the ban placed on Nigeria's beans in European countries
would not be lifted until 2021.
In January 2013,
the European Union (EU) placed a temporary suspension of imports of
dried beans from Nigeria for one year. The ban was over the excessive
use of chemicals by Nigerian farmers to control a pest, Maruca vitrata,
from damaging crops on the field.
The ban was
extended by three years from the June 2016 deadline due to the
observation of non-compliances. Although it was supposed to be lifted in
June 2019, it has not been lifted.
Experts felt the
government would put measures in place to ensure that there is
compliance and initiate constructive engagements with authorities in
other jurisdictions to ensure the ban is lifted.
Struggling companies
Aside from the ban by European Union, many manufacturing companies are struggling to remain in operation in Nigeria.
In the first week
of August, South African retail giant, Shoprite, announced the
commencement of a formal process to discontinue its operation in
Nigeria.
The multi-national
retail group announced that it took the decision to discontinue its
Nigeria operation "following approaches from various potential
investors, and in line with our re-evaluation of the group's operating
model in Nigeria."
Although the retail giant did not announce the reason it is leaving Nigeria, a PREMIUM TIMES' analysis
showed that profit repatriation concerns, naira fluctuation, logistics
bottleneck, and sundry other issues related to the Nigerian business
environment may have contributed to the planned exit.
Apart from Shoprite, other companies have since announced their exit from the Nigerian economy in recent times.
Regional trade, border closure
Last year, the
Nigerian government announced the closure of all land borders across the
country. The government explained that closure of the borders was to
protect the economy and to stop cross-border security breaches.
Although the
government has claimed that the policy has effectively helped to check
smuggling and protect Nigerian manufacturers, there have been other
negative aftermaths from the policy.
There have been
massive smuggling of foreign rice into the country from these border
communities, among other illicit activities that harm local industries.
For instance, last
November, the Comptroller-General of the Nigerian Customs Service,
Hammed Ali, placed an embargo on the supply of petroleum products to
filling stations with 20 kilometres of Nigeria's land borders. According
to Customs, the ban was necessary to stop the smuggling of the products
across the borders to neighbouring countries.
But a week-long investigation
by PREMIUM TIMES across the country's land borders in five of the
country's six geo-political zones revealed that the while the
restriction on supply of petroleum products has been effective, it has
exposed inhabitants of the communities within the embargo area to
exploitation from security operatives, and hardship.
Again, many companies have stopped exporting through the land border due to the closure of the border.
For logistics
concerns, quite a number also find it difficult to move their goods
through the sea, hence, stifling trade between Nigerian indigenous
traders and their counterparts in other West African countries.
PEBEC, Ease of Doing Business
In July, Vice
President Yemi Osinbajo noted that business reforms triggered by the
Presidential Enabling Business Environment Council (PEBEC) are an
opportunity to significantly boost local and foreign investments in the
country.
He noted that as a
result of the work of PEBEC, the World Bank has praised the economic
direction of the Buhari administration and ranked the country higher in
its annual Ease of Doing Business Rankings.
Last October, three
months after Mr Adebayo assumed office, the World Bank listed Nigeria
among the economies with the most notable improvement in the Ease of
Doing Business. In the report, the World Bank named Saudi Arabia,
Jordan, Togo, Bahrain, Tajikistan, Pakistan, Kuwait, China, India and
Nigeria.
Overall, Nigeria
emerged 131 out of 190 countries, up 15 places from 146th position last
year, or 56.9 per cent point score. The score is about 3.5 per cent
better than 53.4 per cent point score recorded in the previous year.
High cost of doing business
Despite its
favourable ranking in the Ease of Doing Business category, the Lagos
Chamber of Commerce and Industry (LCCI) in December projected a high
cost of doing business in 2020.
Muda Yusuf, the
LCCI Director-General, made the projection in the LCCI 2019 Economic
Review and Outlook For 2020. He attributed the projections to poor
infrastructure, multiplicity of levies, excessive regulations, among
others.
Mr Yusuf said that
while the nation may have recorded improvement on the Ease of Doing
Business Ranking due to some recent policy measures, realities on ground
would continue to differ if the highlighted challenges were not
properly addressed.
He said the performance of the trade sector in 2020 would be shaped by the direction of government policies.
According to Jide
Ojo, a policy analyst, "since Mr Adebayo assumed office, his efforts
have been complicated by COVID-19 pandemic and its attendant effect on
cost of doing business."
Trade, logistics, NIPOST
In Nigeria's
business environment, logistics is a major challenge. Young Nigerians
trying to ease the concerns have also had their efforts stifled by
government policies.
In July, the
Nigerian Postal Service (NIPOST) announced new fees for courier and
logistic business operators in Nigeria. NIPOST increased the new licence
fees for Municipal operators to N1 million, and annual renewals fees to
40 per cent of new licence fees at N400,000.00 a year.
All licence renewal
fees are pegged at 40 per cent of fees per zone, among other
regulations. The development triggered protests among young Nigerians,
especially on social media, with many attributing it to reasons why
businesses struggle to survive in Nigeria.
Logistics at
Nigerian ports, especially Apapa in Lagos, is another major hurdle for
business owners as consignments spend months with huge cost to the
businesses. No improvement has been witnessed in this area in recent
time.
According to a
report by the LCCI, about 5,000 trucks seek access to Apapa and Tin Can
ports in Lagos every day, even as the ports were built to accommodate
only 1,500 trucks.
AfCFTA
Due to COVID-19 and
the border closure policy, little has been heard about the progress of
the widely applauded AfCFTA agreement.
Earlier in August,
the ministry said it met with executives of the Nigerian Agribusiness
Group (NABG) on the implementation of the African Continental Free Trade
Area (AfCFTA) and access the continent's market worth $659 billion, in
mostly manufacturing goods and services.
AfCFTA is said to
provide Nigeria with a preferential access to African market worth over
$650 billon, in mostly manufactured goods.
COVID-19, taxes and SMEs
Since the pandemic
broke out, forcing countries of the world to declare lockdown orders,
there have been disruptions in the activities of small and medium
businesses.
Although the
government says it is supporting SMEs with funding and other support
scheme (like the Micro Small and Medium Enterprises (MSMEs) support
scheme being rolled out under the National Economic Sustainability
Programme), SMEs groan amid complaints that they are still largely shut
out of access to funds.
There are new
regulations that create relief for small businesses through tax
exemptions, Mr Adebayo said in February. He said the Nigerian government
is considering adding tax incentives for SMEs in prioritised sectors.
MSMEs in the
agriculture, construction, and automotive industries will be getting tax
and regulatory incentives which the ministry had started working on,
the minister claimed.
But many SMEs claim
that the private sector is still being 'crowded out' in capital
allocation, while investors are wary of coming into the Nigerian market
due to policy instability.
"COVID-19 has
disrupted a number of things in investment and trade and so many things
are still not right in that sector. Besides, Nigeria still suffers from
inadequate infrastructure needed to drive trade and investment," Mr Ojo
explained.
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