Sechaba ka’Nkosi
THE Economist Intelligence Unit had added its voice to praising Nigeria’s peaceful political transition but said the country needed a complete overhaul of its economic regime to reach its full potential.
The report, which was released yesterday on the sidelines of the World Economic Forum on Africa currently taking place in Cape Town, said Nigeria’s burgeoning economy could accomplish more growth if it was not hampered by red tape and physical infrastructure constraints that had become a burden for small and medium enterprises (SMEs).
The report said while Nigeria had overtaken South Africa as the largest economy in Africa, the country’s complicated trade structure and muddy import and export regimes were still an impediment to its growth prospects.
The report’s editor, Adam Green, said Nigeria had prospered from an array of sectors ranging from oil to its film industry, Nollywood, but newly elected President Muhammadu Buhari still had a long way to go to address the country’s endemic problems.
“While Nigerian SMEs span a dizzying array of products and services, their success is often despite, rather than because of, their environment,” said Green.
Challenges
“They face daunting daily challenges, from poor power supplies to congested roads. Some of these will take years to fix but SMEs are finding innovative workarounds.
“Other challenges, like burdensome tax rules and opaque customs charges, can be fixed by the new government and would have far-reaching benefits.”
Last year Nigeria took over from South Africa as Africa’s largest economy after a rebasing calculation nearly doubled its gross domestic product (GDP).
The 2013 GDP for the continent’s top oil producer totalled 80.3 trillion naira (R4.8 trillion) – an increase from the 42.3 trillion estimated before the rebasing.
The new figure shrank Nigeria’s debt-to-GDP ratio to 11 percent for 2013, against 19 percent in 2012.
The Economist report claimed that Nigeria’s SMEs constituted more than 90 percent, but very little research had been conducted to understand their day-to-day existence.
The Economist said it had studied productivity in policy, transport, technology, energy and finance and combined interviews from across the country with expert insights from Cisco, Standard Bank and Lagos Business School.
It found that while former president Goodluck Jonathan supported small businesses by reducing registration costs and launching targeted funds, no attention was given to the complex and in some instances overlapping rules in the tax system, and import and customs charges remained unpredictable and costly.
It argued that Buhari’s days-old regime should publish a transparent website which companies could use to calculate the charges they owed.
“To support greater productivity gains, attention must now turn to simplifying the tax system, reducing import barriers, stabilising macroeconomic policy and building a more transparent customs system,” stated the report
“Light-rail infrastructure and port development are critical to support Nigeria’s commercial ecosystem, and should be prioritised at a time of fiscal consolidation.”
Infrastructure
The report found that Nigeria’s infrastructure was weak and affected by transport and power deficits.
It said while transport projects and power privatisation were under way, these would take time to deliver benefits.
It also said access to finance was a long-standing problem for SMEs, who rely on angel investors, personal networks, or savings.
“Based on positive experiences in other emerging markets, and an existing investment pipeline, there is a productive role for government and donors to play in stimulating the market through grants, incentives and concessional support,” said the report.