Small businesses groan amidst ease of doing business
Justice Nwafor looks at the everyday experience of traders and small business owners vis-a-vis the country’s recent leap on the Ease of Doing Business Index.
The afternoon was lively and the sun beamed with unrestrained elegance but the mien of Gladys Etoniru, 58, a trader at the Dugbe Market in Ibadan, Oyo State, did not reflect the brightness of the day as she answered the reporter’s question.
“Things are no longer the way they used to be. Instead of getting better, business is getting worse,” she stated with a distraught face.
Mrs Etoniru, who sells garri (Nigerian staple made from tubers and roots of cassava), rice, beans, palm oil, melon and other foodstuffs, added, “they said border has been closed and the prices of goods have gone really up. It’s not just rice but many other goods in the market. And it has really affected our business because the profit we make has been reduced. The number of customers I have now is no longer the same because people are complaining that there is little money now. Please help us tell our leaders to help bring down the cost of goods before hunger will kill us all.”
Etoniru and other traders at the market did not know that Nigeria leaped 15 places on the 2020 global ease of doing business index; and that no less a person than President Muhammadu Buhari announced it on his verified twitter account, on 24 October, describing it as another win for his administration and the nation in general.
“Nigeria’s 15-place rise on the World Bank’s 2020 Doing Business Index is welcome news. We‘re now ranked 131st, from 146th last year; and up 39 places since 2016, when we established the Presidential Enabling Business Environment Council (PEBEC). Our goal is a Top 70 position by 2023”, Buhari tweeted.
Annually, the World Bank ranks 190 countries globally, based on a number of factors ranging from paying taxes, trading across borders, starting a business, to protecting minority investors, among others. The new improved ranking now places the country 15th on the index in Africa.
What the ranking implies is that doing business in Nigeria has become better. The report also acknowledges that it is now easier to get access to electricity in the country, while stating that cross border trade has been improved on. Interestingly, enforcing contracts and property registration have also leaped in progress, the report says.
‘Process of running business has been stifled’
Notwithstanding the improvement noted in the report, experts are of the view that small scale business owners are still battling with fundamental challenges which have stifled business growth.
Tunde Leye, a business analyst with SBM intelligence, thinks there are many policies still in place in the country which do not encourage small businesses.
“The ease of doing business may be better, but the actual process of running a business has been stifled”, he said in a CNN report.
Recently, Nigeria shut its land borders against its neighbours, hindering importation of goods. Initially, President Buhari insisted it was in the best interest of the country, primarily to curb smuggling. Then, after some weeks, the federal government revealed it would help check insecurity in the country.
But Leye thinks the closure of the border is already affecting small businesses in terms of revenue. “This closure has erased millions’ worth of trade. It is counterproductive in making business easy. We should not tamper with trade and monetary policy in that manner.”
‘Madam, we will call you back’
Toyin Adebiyi, a lively trader who combines attending to customers who trickle in to buy rice and preparing noodles for her fellow traders on-demand, while speaking on the ease of doing business, said, “there is no money. Everybody is complaining that there is no money. You know what they say that the higher the price, the lower the quantity demanded. The prices of things have gone up now. So, business is not going on as it should.”
She attributed the poor business climate to border closure. “The border closure has impacted us seriously. Due to the high price of rice now, people who used to buy like three bags are now buying one. And then we make less gain and will not be able to do other things we want to do. If there is no market, where will you get the money to do other things you want to do? Unlike some years ago when around October people, companies, cooperative societies would be calling me for supplies but now when I call, they will say, madam we will call you back.”
‘Ease of going out of business’
The constraints which have dogged business growth remain unchanged, unattended to and debilitating. The government has not really paid attention to the main complaints of business owners, especially small-scale businesses, says Emmanuel Nwosu, Development Economist and senior lecturer of economics at University of Nigeria, Nsukka.
“If the government has reduced the time it takes to register businesses, it is a good thing as it would improve revenue of Corporate Affairs Commission. We should also know the other statistics about the ease of going out of business. Small business owners complain bitterly about multiple taxation from different agencies of government both formal and informal. For example, between Markurdi and Enugu you’ll see so many road barriers for those engaged in the marketing of agricultural produce. These barriers disrupt agricultural value chain and it is highly informal to put barriers and checkpoints along the same federal road up to three or four places in the same state.”
On the index, access to electricity leaped two places from 171 to 169. Better access to electricity for business entails reduction in cost of running power generators – which dot, not just businesses, but homes across the country. But Nwosu disagrees.
“Business owners also complain that electricity has not improved in terms of generation and distribution so that small business start-ups will have to battle with the cost of generating their own energy. In fact, a study we concluded recently shows that electricity outages reduce firm productivity by as high as 40 per cent, reduce capacity utilisation by almost similar percentage points, reduce the probability of engaging in research and development as well as introducing new products. The effect of constant power outages on the cost of operation of the firm is so substantial that our manufactured goods are not globally competitive in terms of unit cost”.
Expensive poor quality
Arimnuta Kingsley has been in the business of making elegant clothing for both males and females for almost a decade. Now at 28, he boasts of not just having garnered some experience but financial success too. With time, he has grown from being alone at his shop, situated at Queen Cinema area in Ibadan, to having not less than five young ladies and men clustered in his shop as apprentices.
The growth had been by leaps and bounds, but since early this year, “things have declined”, he said.
Kingsley attributes the decline to a number of factors ranging from complaints by customers that “things are hard” to poor quality but expensive fabrics which flood the market.
“Now, there is no money and the fabrics we are using are no longer good. We don’t like these fabrics due to the materials they are selling to us at the market. The price of fabrics has gone up and the quality has reduced. To be sincere, I made more money last year than I am making now. The fabrics in the market now are bad. I also had more customers last year than I do now. I had a lot of work to do in the previous year, but now it has reduced. This time around, money is kind of difficult for everyone to get,” he said.
Muritala Taiwo, Awolaja Ayodeji and Bako Yusuf researched the ‘Impact of Small and Medium Enterprises on Economic Growth and Development’ and found out that it leads to greater utilisation of local raw materials, employment generation and development of entrepreneurship mobilisation of local savings.
The research, which was published by American Journal of Business and Management, also found that it provides regional balance by spreading investment more evenly, providing opportunities for self-employment. Also, majority of developing countries, which Nigeria is one of, rely on dynamism, resourcefulness and risk taking of small and medium enterprises to trigger and sustain the process of economic growth.
While Nigeria’s new place on the 2020 global ease of doing business index is appreciated, it is not yet time to roll out the drums. The pulse of small businesses shows it is not yet uhuru. “It’s only when they change their narratives and put infrastructure in place”, that it will reflect on small businesses, Nwosu says.