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Ease of Doing Business should not focus on big corporations alone

by Emeka Osuji

February 14, 2018 | 1:12 am
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Nigerians are happy that the Presidential Committee on the Ease of Doing Business has recorded some achievements within the short time of its existence. Our country, despite facing one its greatest security threats since independence, has moved up 24 places on the Ease of Doing Business scale. That is an achievement and trust Nigerians, they know how to loudly applaud victory. I have always said that Nigerians are ordinarily very good people and compare very well with others elsewhere in the world. They only turn bad when they get into government, and that is not their fault. It is the fault of the system we run, which does not provide for accountability, and power being what it is, corrupts even angels. It feels good therefore to see how excited the people are over this achievement. The corollary to this however is that those in authority should also be tolerant of criticism the same way as they enjoy the praise that comes with success. Often times, praise does not have an identity but criticism is always an opposition handwork.
There are however, some aspects of this success I think we should discuss. Nigeria is now ranked 6th in the world on Ease of getting Credit. That is also good. And quite frankly, so much has been done in this area. The Central Bank and its partners, the banks, have made sure the financial options for Small and Medium Enterprise (SMEs) were expanded. In that regard, many on-lending facilities have been established to provide finance – equity investment, capital and refinancing. Recently, the National Assembly passed two laws, which I continue to describe as very critical to this economy – the Secured Transactions in Movable Assets Law, 2017 (alias the Collateral Registry Law) and the Credit Reporting Act, 2017. These two laws, on their own, constitute major movements towards the improvement of the business environment in Nigeria. And perhaps they are part of the root causes of the improved rating we now celebrate. That improved rating, if based on these developments may mean nothing if certain things are not done. Availability of credit for instance, is nothing unless and until there is drawdown on the facility.
I was so excited about the two laws, because of what I know they could do for SMEs, that I waged a personal campaign in this column to properly and extensively publicise them. Some of my readers had to remind me that I had shouted enough in that regard and should let it rest. I believe the need for that publicity is still present and I still have plans to do more to get the laws to the domain of our small business people, especially the microenterprise group. Actually, the legal system is one of the areas of reform that must happen if an economy like ours and its business environment are to get better. Accordingly, any reform or improvement in the laws will definitely and positively impact the rating of the country. However, to make a law and get credit for its positive impact is one thing but to have the impact really felt by business entities is another. This is a natural phenomenon. We are witnesses to Nigeria’s growth without development and the fall in inflation rate without a decrease in the price of goods. Economists will tell you to focus on the average and not individual prices.
The World Bank may applaud these legal and financial provisions for SME sector and expectedly score us better on some Ease of Doing Business criteria. But that would not automatically translate to improved business practices. If the regulators or relevant authorities do not effectively implement the laws and provisions, they remain marks on papers. I had elsewhere given credit to the Nigeria Deposit Insurance Corporation (NDIC) for being the first public institution to train its staff on the intendments and implications of the Collateral Registry Law. That is good because they understand that they can only regulate what they properly know. But the real owners of the Act are actually the Micro and Small enterprises, and it may be useful to know how many of them appreciate what the law, which is set to make their lives better, is talking about. I am aware that very few of them know anything significant in this regard. I know this because during a recent speaking engagement with hundreds of them, on a different subject, it was very clear some have not even heard of these legal improvements in their business environment. We still need to do more teaching, hand-holding and guidance for them in this area.
Another point we need to discuss is the seeming improvement in the area of multiple taxation. It is very easy to lie with statistics, and this is not because of any fundamental flaws in the subject. Far from it, Statistics helps us to understand phenomena. However, there are all kinds of errors that creep in as we use numbers to make inferences. This is more particularly so when we deal in aggregation. Now we seem to be happy with the activities going on to reduce multiple taxation just because there seems to be some cooperation between the states and the federal tax authorities. I commend those who engineer such cooperation and hasten to add that it is critical for the development of a healthy tax environment for all. However, we must avoid any narrow definition of multiple taxation, which may limit the concept to the taxing of an item of earnings more than once. In other words, our definition must be contextual to capture our peculiar circumstances.
If multiple taxation is the taxing of an item of income more than once, how do we describe the multiple payments that traders make to policemen on the many checkpoints mounted on the roads, some of which, particularly in the police-invaded South East, are separated by less than two poles? Until someone tells me what those payments are, I call them a form of multiple taxation. After all, they are payments out of the income of transporter invariably paid by the passengers. We cannot be talking of ease of doing business based always on some developed-world indices without reference to our domestic circumstances. If we do, we may be focusing, at best, only on the big corporates, which already have a variety of mechanisms for coping with such challenges, including elaborate tax avoidance machineries. MSMEs have no such capacity. We must therefore define multiple taxation more realistically to accommodate, for instance, what the Customs do to traders – let the goods in, for a fee, and go after the trader, in his shop for seizure, and such hidden multiple indirect taxes.

 

Emeka Osuji

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by Emeka Osuji

February 14, 2018 | 1:12 am
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