Business Environment Reforms: Economy Yet To See Improvement in FDI- Afrinvest
In the federal government quest to ensure stability in the business environment through various reforms, initiated or in the pipeline, some investment banking experts have said that the business environment reform has yet to impact foreign direct investment into the nation.
Afrinvest, one of the leading investment banking firm said that business environment reforms, though necessary is insufficient to attract foreign direct investment into the country.
“We are yet to see strong improvements in FDI in Nigeria due to the business environment, which remains unaccommodating despite reforms instituted of late.
“This is because higher ease of doing business ranking is not sufficient for increased investment. To attract investment, we believe PEBEC and the FG have to look beyond gains in the ranking as business environment reforms must be complemented by pro-business regulations, accommodative monetary and fiscal policies, and the opening up of sectors to private investment, Afrinvest added.
It may be recalled that the ongoing business environment reform started by President Buhari administration in 2016 has been adjudged one of the best moves made by the administration.
The Presidential Enabling Business Environment Council (PEBEC) is the institution tasked with the reforms that make it easier to do business in Nigeria.
According to available reports, the improvements achieved with the reform are expected to come in the form of a reduction in cost, time and procedures in starting and running a business. The overall target at the commencement of the reforms was to improve Nigeria’s ease of doing business rank to the top 100.
It would be noted that since 2016, PEBEC has implemented reforms in three phases (National Action Plans — NAP), mainly along with 8 core focus areas of the World Bank’s Ease of Doing Business ranking.
Evaluating the programs, Afrinvest said that the results from the actions taken — three cycles of actions so far — have been mixed.
Afrinvest said; “We observed that the largest improvements were in the earlier phases of the programme, as the initial momentum seems to have waned.
“In the first phase, PEBEC hit the ground running by achieving about 82% of its reform targets over a 60-day period from February 2017.
“This led to an improvement in Nigeria’s ease of doing business ranking by 24 places to 145 out of 190 countries”.
Meanwhile, the second 60-day National Action Plan expanded the scope of the reforms to include such areas as Selling to Government, Trade within Nigeria and Trading across Borders.
The reforms achieved a poor success rate of about 52.0%. Between February and April 2018, the third phase of reforms covered nine indicators and the success rate marginally improved to about 62.0%.
The investment banking firm noted that these reforms improved Nigeria’s score from 52.03 to 52.89 in the 2019 ease of doing business rankings, but the country slipped one place to 146 out of 190 countries.
“We suspect that the slow pace of reforms in the second and third phases had a negative impact on the 2019 ranking. Business environment reforms necessary but insufficient to attract foreign direct investment (FDI)”, Afrinvest reckons.
“The fourth National Action Plan which was set in motion by PEBEC is intended to cover ten reform areas from March to April 2019. Since the target is to achieve a ranking within the top 100 when the 2020 ease of doing business ranking to be published in October 2019, we make the case for faster and more effective implementation to achieve a better success rate”, Afrinvest said.
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The firm added that this is because strong upward movements in the EoDB rankings require that the pace of reforms is faster in Nigeria than in other countries.
“We also believe PEBEC must look past implementing reforms on paper, the processes must be institutionalised to generate gains. Anecdotal evidence reveals that Nigerian institutions are slow in transitioning to new processes, thus perpetuating inefficiency and corruption, which have always made doing business difficult.
“We posit that helping institutions attain quicker transition and monitoring their processes post-reforms is necessary for sustainable improvements”, the firm remarked.
Business Environment Reforms: Economy Yet To See Improvement in FDI- Afrinvest
