The Global Health Hazards and Economic Impacts of COVID-19

In December 2019, a cluster of pneumonia cases from an unknown virus surfaced in Wuhan, China. Based on initial laboratory findings, the disease named Coronavirus disease 2019 (abbreviated as COVID-19), was described as an infectious disease that is caused by severe acute respiratory syndrome coronavirus 2. The COVID-19 outbreak has since spread to about 196 countries and territories in every continent and one international conveyance across the globe. While there are ongoing efforts to curtail the spread of infection which is almost entirely driven by human-to-human transmission, it has accounted for over 400,000 confirmed cases with over 18,000 deaths[1].

Beyond the tragic health hazards and human consequences of the COVID-19 pandemic, the economic uncertainties, and disruptions that have resulted come at a significant cost to the global economy. The United Nations Trade and Development Agency (UNCTAD) put the cost of the outbreak at about US$2 trillion in 2020. Most central banks, finance ministries and independent economic experts around the world have taken solace in the prediction that the impacts might be sharp but short-lived, and economic activities would return to normal thereafter. This line of thought mirrors the thinking of the events that shaped the 2007 global financial crisis. However, it is quite instructive to note that the 2007 crisis which emanated from the United States’ subprime mortgage crisis was mainly an economic phenomenon, with its fallout spreading across many regions of the world. When compared to COVID-19, the 2007 crisis could be described as minor and manageable. The tumultuous events that COVID-19 had spread across the globe cut across every facet of human existence and the consequences may linger beyond the second half of 2020.

The slowdown in the global economy and lockdown in some countries, such as Italy, Spain and most Eurozone economies and beyond, as a result, COVID-19 has also taken its toll on the global demand for oil. The decline in oil demand is estimated to surpass the loss of nearly 1 million barrels per day during the 2007-08 recession. This is also coming at a time when two key players in the global oil industry – Russia and the OPEC cartel – are at loggerheads on the decision to cut output. The unequivocal oil price war started between these two global oil market giants may have more dire consequences on the oil price that has started to dive. .  

Sector-specific implications and impacts could vary. For example, the impacts on the global aviation and tourism sectors are a result of the implications of the pandemic on global travel. As discretionary spending by consumers continues to decline, cruise companies, hotels, and hospitality are facing declining demand and patronage. For example, in Hungary alone, about 40 to 50% of hotel reservations have been canceled. Also, the pandemic is placing up to 8 million jobs in the leisure and hospitality sector at risk, with travel crashes and cancellations expected to continue. Moody’s Analytics, a rating agency, stated that more than half of the jobs in the United States which is about 80 million may be in jeopardy.

The virus is also taking its toll on health facilities and infrastructures across the globe. Italy is currently the largest affected country with a number of deaths surpassing China, since the outbreak of coronavirus. Across northern Italy, the virus has pushed the country’s National Health Service to a breaking point, emphasizing the test that other countries, especially developing and low-income countries, might face in their approach to contain the virus spread. Most hospitals and health facilities that could not handle the hazards are resulting to operating below their capacity by taking a few regular health-related cases or shutting down. What could be more devastating is the fact that the economic pains that accompanied the virus might not go away soon as envisaged. 

The conventional policy measures currently being taken such as reducing interest rates and costs of borrowing, tax cuts and tax holidays are quite remarkable. However, these conventional policy measures are quite potent when there are demand shocks. There are limitations to the successes that can be recorded when demand shocks are combined with supply shocks. It is already apparent from the emergence of the current crisis that there are implications on the economy from both the demand and supply sides. Some of the demand factors include social distancing with consumers staying at home, limitations in spending and declining consumptions. On the supply side, factories are shutting down or cutting down production and output, while in other instances, staff work from home to limit physical contact.

The decision to close educational institutions and schools around the globe in an attempt to contain the pandemic has also led to a soaring number of children, youth and adults not attending schools. According to UNESCO Monitoring report on COVID-19 educational disruption and response, the impact of school closures in the over 100 countries that have implemented the decisions around the world has impacted over half of the global students’ population. These educational disruptions are being escalated particularly for the most vulnerable members of society.

Bracing up for COVID-19 consequences on the Nigerian economy

For most developing economies, the odds of sliding into a downturn are gradually expected as the global coronavirus outbreak puts severe pressure on the economy. For Nigeria, the country is still sluggishly grappling with recovery from the 2016 economic recession which was a fall out of global oil price crash and insufficient foreign exchange earnings to meet imports. In the spirit of economic recovery and growth sustainability, the Nigerian federal budget for the 2020 fiscal year was prepared with significant revenue expectations but with contestable realizations. The approved budget had projected revenue collections at N8.24 Trillion, an increase of about 20% from 2019 figure. The revenue assumptions are premised on increased global oil demand and stable market with oil price benchmark and oil output respectively at $57 per barrel and 2.18 Million Barrels Per Day.

The emergence of COVID-19 and its increasing incidence in Nigeria has called for drastic review and changes in the earlier revenue expectations and fiscal projections. Compared to events that led to recession in 2016, the current state of the global economy poses more difficulties ahead as the oil price is currently below US$30 with projections that it will dip further going by the price war among key players in the industry. Unfortunately, the nation has grossly underachieved in setting aside sufficient buffers for rainy days such as it faces in the coming days. In addressing these daunting economic challenges, the current considerations to revise the budget downward is inevitable. However, certain considerations that are expected in the review must not be left out. The assumptions and benchmarks must be based on realizable thresholds and estimates to ensure optimum budget performance, especially on the non-oil revenue components.

Furthermore, cutting expenditures must be done such that the already excluded group and vulnerable are not left to bear the brunt of the economic contraction. The economic and growth recovery program which has the aim of increasing social inclusion by creating jobs and providing support for the poorest and most vulnerable members of society through investments in social programs and providing social amenities will no doubt suffers some setbacks. Besides, the downward review of the budget and contractions in public spending could be devastating on poverty and unemployment. The last unemployment report released by the National Bureau of Statistics (NBS) ranks Nigeria 21st among 181 countries with an unemployment rate of about 23.1%. The country has also been rated as the poverty capital of the world with an estimated 87 million people living on less than $2 a day threshold.

The decision to cut the retail price of gasoline under a price modulation arrangement is a welcome development. The cut is expected to curb rising inflation, especially food price inflation which will mainly benefit the poor. However, rather than the price capping regime introduced, by which it is expected of the Petroleum Products Price Regulation Agency (PPPRA) to constantly issues monthly guide on appropriate pricing regime. It is expected that the government will use this opportunity to completely deregulate the petroleum industry in line with existing suggestions and reports. In the event that the global economy becomes healthier and crude oil prices increases, the government might return to the under-recovery of the oil price shortfall by the Nigerian National Petroleum Corporation (NNPC). A policy that annually costs the government huge revenue and recurring losses to the NNPC.

Basically, the Nigerian government essentially must lead economic diversification drive. It is one practicable way to saddle through the current economic uncertainties and instabilities. What the consequences of COVID-19 pandemic should further offer the Nigerian economic managers and policymakers, is that the one-tracked, monolithic reliance on oil is failing. Diversification priorities to alternative sectors such as agriculture, solid minerals, manufacturing and services sectors, should be further intensified.
 

[1] These figures were recorded as a 24th March, 2020.

“I was almost killed”

Amos is perched on the edge of the bench, next to me, underneath the broad shade of an old mango tree. It is mid-afternoon, and the heat is sweltering in this Internally Displaced Persons Camp in Sabo Kuchinguro, Abuja Federal Capitol Territory Nigeria. He is absently kicking the pebbles at his feet with the tip of his worn sandals, and is staring blankly into a crowd of noisy, playing schoolchildren in the distance.

“I was almost killed”, he says to me, his face lost in the contemplation of that troubling memory.

“They murdered my next-door neighbour, right in front of my eyes. When they came into our village, they simply set upon slaughtering everyone in sight. All we could do was run fast and far, away from the gunshots and the screams. We left everything behind and ran. We ran up to the mountains and hid for days with no food. We snuck back down in the middle of the night and kept running; we ran all the way to Cameroun. It was from there that some of us eventually made our way back here”.

These armed assailants in Amos’ tale are part of the Boko Haram terrorist group – who repeatedly attacked his village in Gwoza, Borno State and displaced him along with many others. Since 2009, Boko Haram has enacted sustained insurgency attacks in North-East Nigeria, killing thousands and displacing over 2 million people to date – to other parts of the country and to neighbouring Cameroun, Chad and Niger. Camps have necessarily been assembled to absorb and resettle the displaced persons, with a lot left to be desired howbeit – sparse local resources and thin donor-funding imply difficult living-conditions for the migrants. Although the outflow of persons from the troubled regions has waned over the years, the insurgency has not abated sufficiently for residents to return to their homes, and so Internally Displaced Persons’ (IDP) Camps across Nigeria have, if anything, only ballooned in their population-sizes.

“We have nothing to do here”

A collateral problem has emerged: beyond the immediate needs of resettlement, food, healthcare and WASH (water, sanitation and hygiene) facilities for IDPs, the question of livelihoods has been largely ignored in the intervening humanitarian efforts so far. To put it in context – the vast majority of work-force-age IDPs are (previously-) rural-dwelling farmers with little education, or none at all. Resettling predominantly to urban areas, they are too poorly-skilled to integrate within the local economies of these new metropolitan environments. What is more, opportunities in Agriculture, where their capabilities lie, are sparse in these places. The resultant is their entire dependence on donor-aid for sustenance and survival.

“We have nothing to do here”, says Amos to me.

He and I are walking among the dingy homes in the camp now – some of the dwellings are built only with wood and old cement-bags. A glumness hangs in the air all around us – a palpable despondency of this habitat’s occupants that has materialized into the dullness and dirt that characterize it. I see a barely-clad toddler playing on the ground, by a puddle of water, his faced smudged with mud and mucus. I reach down to pick him up.

“Please don’t do that!” Amos says sharply.

I am puzzled, but I comply and withdraw my outstretched hands. My little would-have-been-acquaintance looks up at me with an expression of disappointment at this turn of events.

“We have had cases of kidnappings of little children here in the camp”, Amos explains.

“We are vulnerable here….we are migrants….this is not our home. People can take advantage; and they have done. From experience, parents here are very wary of strangers accosting their children. This little boy’s parents might misunderstand your intentions”.

I do not press the matter further.

We stop at what Amos informs me is a brothel. The walls are built with bamboo, as is the ‘fence’. There is a large open space outside for visitors to sit in, and await their turns as it were. Clusters of men are seated in that space, speaking very little and smoking marijuana and cigarettes.

“Men here have nothing to do….no work. They just sit around all day, smoke, drink Codeine and Tramadol, and look for sex – consensual or forced. They have stayed idle this way for so long at this point that I feel some of them don’t even want to have any meaningful jobs anymore”, says Amos.

This makes me realize the very distinct possibility that elements of post-traumatic stress disorder and even depression, borne out the horrific ordeals that most of these people have lived through, might reside in them, undiagnosed and untreated. Surely it is important to get them working again, but maybe that step is contingent on an appraisal of their psychological states, given their past and indeed, present situations. Another thing nags at me.

“If these young men have no jobs and income, where do they get the money from, for the drugs and prostitutes?” I ask Amos.

“I don’t know”, he responds. I find this worrisome.

As we leave the premises, I notice 3 of the ‘hostesses’ seated outside in that open, conversing. I am astounded at how young one of them looks to me to be.

“Allow us farm”

Next to the entrance of the camp, where there are makeshift administrative offices and a tiny nurse’s station, we run into Enoch, who is one of the directors at the camp. He is himself an internally displaced person. Enoch tells me of how different groups bring different types of aid to them routinely – mostly money, food, and such items as clothing and books. He and Amos take me to what was purposed as a skills-training centre, housed in a makeshift building. They tell me the centre had been gifted to them by the Embassy of South Africa in Nigeria, in their recognition that the IDPs need to be reskilled in order for them to function gainfully within the labour markets of their new homes. The centre, which at one time had vocations such as sewing, cosmetics-making and basic computing taught within its walls, was now derelict…..with old and damaged equipment strewn about.

“The South Africans started this with the hopes that after a while, aid-groups from Nigeria would carry on the work. That didn’t happen, and it all died out eventually”, Enoch tells me.

“We are at a severe economic disadvantage. We are mostly just uneducated farmers here. Without training in even the most basic trades and crafts, a lot of us really will not be able to ever make a sufficient living”.

“Allow us to farm”, he continues. “If we cannot receive training that will help us get jobs, then at the very least allow us to farm – that is what we know to do. Given our plight, we should be allowed farmland and any concessions that help us get back on our feet. It’s not that we don’t appreciate all the help so far, it’s only that we would be prefer to be assisted to become self-sufficient, and not just be assisted to eat day to day”.

As I leave the camp that evening, I realize that this paradigm-shift Enoch spoke of is an imperative. I realize that in our collective neglect – oblivion even – of the more sustainable manner of aid to IDPs, we may have just been giving room for the emergence of another dire set of problems. But surely it’s not too late.

In 2019 CSEA conducted livelihood assessments in Waru and Sabo Kuchinguro IDP Camps in Abuja FCT Nigeria, to ascertain best methods for training/re-skilling/equipping IDPs for economic independence.

Context: Nigeria has Africa’s largest population and economy, but Nigerians consume 144 kwh per capita annually, only 3.5% as much as South Africans.¹ With only 12 GW installed, and typically just one-third of that delivered, Nigerian power production falls far short of demand, which is a primary constraint on economic growth. Self-generation using dirty diesel generators is exceedingly common in Nigeria, and bear a significant economic and environmental cost.² But exactly how big is the demand-supply gap? And what does future demand look like?

How large is power demand in Nigeria?

Electricity demand estimates and projections for Nigeria suggest that demand is already substantial and increasing rapidly due to population and income growth.

• Nigeria is one of the most underpowered countries in the world, with actual consumption 80% below expectations based on current population and income levels.³
• Peer countries consume far more electricity per capita than Nigeria does currently. Ghana consumes over twice as much, Tunisia over ten times, and South Africa almost thirty times as much.
• Self-generation in Nigeria is extremely prevalent; nearly 14GW capacity exists in small scale diesel and petrol generators, and nearly half of all electricity consumed is self-generated. This implies a huge unserved demand.
• Due to a population boom and a large gap in electrification, the World Bank projects electricity demand will have grown by a factor of over 5 between 2009 and 2020, and 16.8 by 2035.⁴

Given this, we can assume that Nigeria’s demand gap is significant, though exactly how large is disputed. The significant differences in these estimates demonstrate the difficulty, and importance, of accurate demand forecasting.

The below estimates show large variance in projections for peak power demand mainly due to differences in scenario assumptions and existing infrastructure during study periods. Projecting power demand in Nigeria is challenging due to difficulty in estimating the large amount of electricity produced by small and unregulated petrol/diesel-powered generators, and in quantifying suppressed demand. Looking at available demand estimates for 2015 (Table 1), Nigeria’s on-grid electricity demand seems to be about 4 – 12 times the total electricity distributed on the grid (at 3200 MW, or 3.2 GW). Even at optimistic capacity factors and assumptions about deliverability, Nigeria needs well over 63GW of new generation to satisfy unmet demand.⁵ Until then, expensive and dirty self-generation will remain pervasive.

Endnotes

• World Bank (2019). Electric Power Consumption (kWh per capita). Retrieved from: https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?locations=NG
• IEA (2017), Energy Access Outlook: From Poverty to Prosperity, IEA.
• Todd Moss and Gailyn Portelance. “Do African Countries Consume Less (or More) Electricity than Their Income Levels Suggest?”
• R. Cervigni, J. Rogers, and M. Henrion (2018), Low Carbon development: Opportunities for Nigeria, The World Bank
• GIZ (2015), The Nigerian Energy Sector An Overview with a Special Emphasis on Renewable Energy, Energy Efficiency and Rural Electrification. Nigerian Energy Support Programme (NESP)
• Olayande, J.S & Rogo, A.T. (2008), Electricity Demand and Supply Projections for Nigeria, Abuja: Energy Commission of Nigeria
• Sambo, A. S., 2008. Paper presented at the “National Workshop on the Participation of State Governments in the Power Sector: Matching Supply with Demand”, 29 July 2008, Ladi Kwali Hall, Sheraton Hotel and Towers, Abuja.
• O. Ezennaya, O. Isaac, U. Okolie, O. Ezeanyim (2014), Analysis Of Nigeria‘s National Electricity Demand Forecast (2013-2030), International Journal Of Scientific & Technology Research 3(3)

This article was first published on Energy for Growth Hub

By Basil Anthony Abia

In Brief
On 20 August 2019, Nigeria partially closed its land borders with Benin, Togo, Niger, Cameroon and Chad – citing the irate level of smuggling of goods into the country, especially staple food commodities like rice, cooking (vegetable) oil, poultry, tomato, flour and pasta. The closure of Nigeria’s land borders has now been fully consolidated – with further restrictions on import and export of goods through land borders.

Numbers
Since the border closure announcement and its immediate implementation in August, inflation has been on the rise.
The latest consumer price index (CPI) report released by the National Bureau of Statistics (NBS) in November 2019 proved that the year-on-year food inflation rate increased from 13.2% in August 2019 to 13.51% in September 2019 and then from 13.51% in September 2019 to 14.09% in October 2019. This was a 1.33% month-on-month increase – with rice, poultry products, frozen fish, cooking oil/fats and bread/cereals recording the highest increase in cost prices nationally. A huge contrast with regards to decelerating food inflation rates usually recorded during a harvest season.
With the food sub index of the CPI recording an 18-month high in October 2019, it unsurprisingly contributed to the rise in CPI from 11.24% in September 2019 to 11.61% in October 2019.

Context
Staple food commodities like rice, vegetable (cooking) oil, frozen fish, poultry products and packed beef are among the highest hit on the national spectrum in terms of the inflation in food prices since the enforcement of Nigeria’s land border policy.
Rice as one of the main national staple food commodity unsurprisingly has claimed its place as a topic for constant national debate. With context to its massive demand, inability of domestic supply to meet demand, cultural reverence and taste preference, it is inevitable to discuss the land border closure without talking about rice.
The United States Department of Agriculture (USDA) estimates that local demand for rice in Nigeria alone is at 7.3 million metric tonnes. Currently, local production stands at 4.8 million metric tonnes yearly. This suggests that the inability of domestic supply to meet local food demand will cause an inflation of food prices when and if food imports are proscribed.
With Benin and Togo posturing themselves as entrepôt states to Nigeria - where Nigeria’s manufacturing and agro production distortions are actively exploited, Nigeria’s consumption habits over the last three decades has been shaped by its over-dependence on imports from the re-exports of these two neighboring entrepôt states (in particular) into the country.
Given the significance of food import via the entrepôt states for meeting the observed supply gap, abrupt closure of the land border cut that supply channel, further entrenching the observed supply gap. This is where the excess demand is now driving up prices.
For a country with the highest number of extremely poor people in the world, any significant spike in food inflation can cause devastating effects to its already poor population, making social upward mobility more difficult. Hence, policies that further reduce purchasing power predispose the poor to higher vulnerability.
The core question on the national discourse table is what exactly this land border closure aims to achieve – government claims the policy will help curb smuggling of goods through its land borders thereby bolstering domestic food production and national productivity levels in all sectors.
This goal of the government in particular, indirectly implies the ineffectiveness of its customs and immigration service especially with the inability of the country to protect its borders and effectively enforce import restrictions on certain goods. It is not likely that this border policy will achieve its end-goal in the short-term or in the long-term as even with the blanket ban on imports through its land borders, bolstering domestic food production and raising national productivity levels almost immediately will be extremely difficult to attain due to the structural problems abound in the country.

Getting it right
To achieve this set out goal of curbing smuggling and bolstering domestic capacity to attain national productivity at all levels, there should be a multi-pronged approach from government: to improve the capacities of its customs and immigration services, embark on land reforms, improve access to micro and macro-credit for farmers and entrepreneurs, enhance accessibility to affordable and reliable electricity as well as incentivize private sector investments. This is the first step to getting things right – by ensuring government policies improve lives.

Conclusion
With Nigerians already feeling the negative consequences of the land border closure – rising food inflation which in turn is reducing their relative purchasing power, it is important for government to rethink its border policy as it doesn’t sufficiently address the causal factors for irate smuggling and dwindling national productivity in the country.

On 24^th October 2019, the World Bank’s 2020 Ease of Doing Business report was released announcing that Nigeria has climbed 15-places up to 131 rank out of 190 countries globally. This piece throws more light on the ease of doing business in Nigeria and recommends a manageable three-prong strategy for further reforms – automate, simplify, and inform!

As indicated in the report, a high ease of doing business ranking implies that a country’s regulatory environment is more conducive for starting, operating and expanding local businesses; compared to other countries and the preceding years. Countries that have implemented regulatory reforms in 2018/19 making it easier or harder to do business in three or more of the ten topics compared to preceding years, recorded a growth or decline in the ranking respectively.

In total, 42 countries implemented regulatory reforms improving the ease of doing business over the period. For sub-Saharan Africa (SSA), thirteen countries – including Nigeria, Togo and Rwanda – recorded significant improvements. Although Mauritius is the highest-ranked SSA economy in the ease of doing business, Togo was the biggest improver this year – climbing by 40-places up the rank to the 97^th. For Nigeria,  which sits 15-places higher on the Ranking,  it recorded improvement in six out of the ten topics for evaluation: Starting a business; Dealing with construction permits; Getting electricity; Registering a property; Trading across borders; and Enforcing contracts.

The ranking report presenting Nigeria as one of the top improvers in creating an enabling business environment globally was a welcomed news for the Federal Government. Some spheres of the business community corroborate on the progress in the ease of doing business in the country, citing improvements such as visa-on-arrival reforms. However, some business leaders argue that the business environment has not improved, highlighting the presence of counter-productive reforms that restrict business operations; thus, questioning the reflectiveness of the Ranking.

It is important to highlight that the Ranking only measures improvements in the laws and official practices that support formal sector business processes. The scoring mostly accounted for the changes implemented by the Presidential Enabling Business Environment Council (PEBEC) set up in 2016 by the Nigerian government to progressively remove bureaucratic constraints to doing business. Some of the regulatory progress that informed the Ranking for Nigeria include:

• Starting a business: It now takes just 24 hours (not 10 days) to register a business with the Corporate Affairs Commission (CAC). The registration process now allows for online self-application without the need for a legal adviser. This change reduces the formal cost of starting a business by at least N64,000 ($177); representing the foregone cost of hiring a lawyer and the consolidation of registration documents to a single CAC form. It also reduces some informal costs incurred in the interaction with government officials including transportation, unofficial tips and unnecessary delays. The automated process also makes it easier to link business with tax authorities, dispensing the need for physical registration at the tax office.

• Dealing with construction permit: By automating and simplifying registration and payment processes, the  cost and number of required documentations for obtaining a construction permit reduced. For instance, the cost of warehouse (small business) construction in Lagos dropped from 26% to 2% of warehouse value.

• Getting electricity: This does not imply improvement in the reliability of electricity in the country; it only covers the ease of getting new connection to national electricity grid. The online application platform has reduced the connection process to 30 days as opposed several months; particularly in Lagos and Kano.

• Registering property: The use of professional consultants in the process has helped reduce the time and cost for registering properties in Lagos and Kano.

• Trading across border: Regulatory reforms led to the reduction of documents for export (from 10 to 7) and for import (from 14 to 8) enabling slightly quicker movement of goods across borders. In addition, the Apapa port in Lagos began 24/7 operation and the Request for Information (RFI) export form was digitized; leading to a 48-hour reduction in time spent for border compliance. The implementation of the single joint cargo  reducing the number of touch points for import clearing  (from 8 to 1) was also a score point  for Nigeria on the rank. Given that the data collection for the Ranking was concluded in May 2019, the impact of the recent closure of Nigerian borders affecting Benin, Cameroon and Niger were not accounted for.

•  Enforcing a contract: The score points for Nigeria was mainly due to the introduction of small claims commercial court in Lagos and Kano instituted in 2018 and January 2019 respectively. The small claims court allows for faster liquidated damage claims of below N5 million (in Lagos) and below N10 million (in Kano) for small- and medium- size enterprises (SMEs) within 60-days. There is also an opportunity for self-representation in the court. This decongests the High Court and improves entrepreneurs’ ease of taking legal action and getting justice.

However, the country did not experience significant improvement in other Ranking metrics: Paying Taxes, Getting Credit, Resolving Insolvency, and Protecting Minority Investors.

Key Limitations of the Ranking

The Ranking does not cover a broad range of areas pertinent to businesses. As the Ranking report clearly notes, its methodology has two key limitations; suggesting that the skepticism of some Nigerians over the reflectiveness of the Ranking may not be entirely misplaced:

1. It focuses only on the formal sector and formal processes: It does not reflect the informal sector which makes up to 65% of the Nigerian economy in terms of Gross Domestic Product (GDP). Also, studies show that 90% of employees in Sub-Saharan Africa operate in the informal sector. Particularly, firms in the informal sector typically grow more slowly, have poorer access to credit, do not follow the formal process of business registration – and thus the business and its employees remain outside the legal protections of the law compared to their counterparts. As such, SME owners in the  formal and informal sectors face different realities as they set up and operate their businesses –with the latter more likely to record negative experiences.
2. It omits a full range of factors, policies, and institutions that affect the quality of an economy’s business environment or its national competitiveness: It does not account for the difficulties caused by some of the biggest challenges in doing business which Nigeria and many countries face globally including: macroeconomic stability, security, state of the financial system, and prevalence of bribery and corruption.

Nevertheless, the Ranking can be deemed reflective for the metrics it covers given that it involves multiple points of information collection and a data verification/validity process. Information is typically sourced from: legal practitioners, private sector respondents, the government and World’s Bank’s regional staff in the country; with an internal review processes and a transparent complaint procedure allowing people to challenge the data.

Recommendations

Although certain key aspects of an enabling business environment are not reflected in the Ranking, the six areas of reforms where Nigeria has recorded improvement were felt by many formal business owners, especially in Lagos and Kano. These reforms not only minimizes the time and cost of doing business for entrepreneurs and the government (in the areas it covers), but also strengthens transparency in payment and government revenue generation.

However, these reforms have been largely limited to Lagos and Kano – which are the only two states the Ranking accounts for. To ensure that these reforms are not aimed at ‘gaming’ the Rankings, these improvements should be extended to other states in the country including southeastern states. Enhancing other government procedures and services for local businesses is required to ease business difficulties in the country, including taxation and obtaining credit – for which the country did not show any significant score progress. Although the Ranking does not cover infrastructure constraints, it remains one of the biggest challenges at a significant cost to Nigerian businesses, particularly electricity reliability and transport network.

Finally: drawing from the case study of the reforms in the Ease of Doing Business, successes in reforming other areas of government services require a three-prong approach:

Automation: Entrepreneurs typically resort to informal activities, when regulatory processes limit their ability to freely operate private businesses, whether by intent or ignorance. Deploying technology and making processes accessible online makes a great deal of difference. The use of modernized information technology infrastructures increases efficiency, reduces physical interactions between government officials and service beneficiaries, and eliminates the physical exchange of cash --which can reduce rent-seeking behaviors. Ensuring little or no human contact in obtaining government services would make a great difference in the ease of doing business; particularly eroding the “unofficial but almost compulsory tips” paid to receive services. Automating processes can also help cut down the number of officials required for a given service, with a significant impact in reducing the huge sum (nearly 50% of budget expenditures) spent annually on government recurrent expenditures.

1. Simplification: Several required processes for receiving a government services can be consolidated into a fewer processes to reduce the hassle for business and rent-seeking opportunities for officials. Firms tend to opt for informal or unofficial  arrangements to bypass rules where regulation is tedious; thus, economies with burdensome regulations typically have higher levels of informality. Reforms that seek to simplify regulatory processes can make a great difference in serval government services including taxation.
2. Information: Before, during and after reforms are implemented, end-users or beneficiaries must be made aware of prospective and ongoing changes. Information about the reform should be well-disseminated, first, among the implementers (the agency carrying out the reform) at all levels, then relayed to beneficiaries using the most effective communication channels. While improvement in the ease of registering with CAC was implemented two years ago, for instance, the information only just begone to trickle down to users, and many Nigerians still remain unaware. For a seamless reform, implementers need to be transparent in communicating the benefits and downsides of the change, with complaint procedure to welcome feedback to be improved upon.