Leveraging Legislation For Economic Survival
The present economic downturn occasioned by dwindling oil prices in the international market, has not only led to frantic calls for economic diversification, it has also opened our eyes to our deeply flawed laws currently inhibiting business competitiveness and obstacles on the way of investors – foreign and local – who genuinely want to invest in the country. The concomitant negative effect of these deeply flawed and obsolete laws over the years had seen the whittling of businesses in Nigeria at a geometric rate and the permanent lockdown on long term investments in our potentially huge non-oil sector. Therefore, it has become imperative to remove the anti-business obstacles if the urgent quest to navigate the economy away from hitting the rocks due largely to over dependence on revenue from crude oil exports is to be achieved.
Towards this end, both chambers of the 8th National Assembly had at inception made and adopted Legislative Agenda, which among others made the revival of the nation’s economy one of its cardinal objectives. The Senate in particular has continued to focus on how to prevent corruption, block leakages in the system and ensure the full diversification the economy through productive collaboration with the executive, private sector operators and the citizenry. In tandem with his belief in action rather mere talk, the Senate President, Dr. Abubakar Bukola Saraki commissioned a team of experts to work with the National Assembly to research and review all institutional, regulatory and legislative instruments operational in the country, identify their impact on the ease of doing business in the country and to come out with a way forward. The technical team led by Professor Paul Idornigie, included development partners like DFID ENABLE project, the Nigeria Economic Summit Group (NESG), the Nigerian Bar Association Session on Business Law (NBA, SBL). The report of the experts which was submitted to the National Assembly in February was recently the focus at the maiden National Assembly Business Environment Roundtable (NASSBER) in Abuja.
Major sections of the report which were critically reviewed and consensus reached on the way forward during the breakout technical sessions include the laws on competition, doing business, roads, rail and maritime infrastructure, public-private partnerships, taxation, finance and investment, arbitration and dispute resolution, e-business and intellectual property and Constitution review. On business competitiveness, it was observed that since the enactment of the Privatization and Commercialization Act in 1998, public enterprises and services have been transferred to the private investor in the absence of any legal framework for promoting and regulating competition. It was noted that the government’s paradigm shift from public sector provision of infrastructure and other services to the private sector has increased the need to ensure that there is no abuse of dominant positions in the market. Therefore, the session identified anti-competitive practices that substantially lessen competition within the Nigerian market. It also proffered ways on how mergers, acquisitions and business combinations can be controlled so as not to stifle competition. Of additional focus was the emphasis on the fashioning of a legal framework that would sufficiently deal with the emerging reality that competition, if not regulated, the hitherto public monopolies will be replaced by private monopolies with dire consequences for the socio-economic development of the nation.
On Doing Business in Nigeria, the experts at the technical session validated the findings of the report that the country is running largely on obsolete laws, weak governance framework, fragmented regulatory structures and bogged down by inhibiting practices with very weak accountability mechanisms. Data from the “Doing Business 2016″ Report suggests that the generic requirements to set up a business represent an impediment to starting a business. The main bottlenecks are the time and cost requirement. On the average, it takes 30.8 days to start a business in Nigeria” and costs 31.% of income per capita. When compared with the best global performers, th data shows that it takes half a day to start a business in New Zealand, and costs 0.00% of income per capita in Slovenia.
The legislation governing the nation’s road infrastructure were also assessed and found to require urgent review. In this wise, the proposed Roads Sector Bills are intended to establish autonomous bodies that will co-ordinates and allocate funds generated for road maintenance, road planning, monitoring and supervision. According to the experts at the session, it is also intended to promote the sustainable development and operation of the road sector and facilitate the development of competitive markets and the promotion of enabling environment for the private sector participation in the financing, maintenance and improvement of roads in Nigeria.
It was further noted that the existing legislation in the rail infrastructure sector was drafted and enacted to support an outmoded model. They however endorsed a proposed Railway Bill which provides for the “restructuring of the railway sector by establishing the Nigerian Railway Authority, the procurement of private sector participation for the provision of Railway Services and Railway Infrastructure, the regulation of the railway sector, promote the efficient and sustainable development of competitive markets for services in the railways sector, promote the provision of safe Railway Services, promote universal access to Railway Infrastructure in Nigeria; and provide the conditions that will enable the provision of Railway Services and Railway Infrastructure while protecting the rights and interests of Railway Operators, Customers and other stakeholders.”
Another sector of the economy that was critically analyzed during the technical session is the nation’s maritime infrastructure. Clearly, it was noted that government has proved to be poor managers in the maritime infrastructure sector and public finances are thinning down. However a proposed Ports and Harbour Bill to provide an appropriate institutional framework for the ownership, management, operation, development and control of ports and harbour and to ensure the integrity, efficiency and safety of the ports based on the principles of accountability, competition, fairness and transparency and encourage private investment in port infrastructure, promote private sector participation in the provision of port services and facilities, promote and safeguard Nigeria’s competitiveness and trade objectives was okayed by the experts as a way of remedying the situation.
On the operation of the Public-Private Partnership (PPP) policy do far, it was observed that even though the government had made commitments towards tackling the infrastructure deficit, “the government often does not and indeed cannot source the funds to follow through.” The report had noted that in countries at the top tier of the Global Competitiveness index, PPPs have played a central role in providing new and well-maintained roads, bridges, airports, railways, ports, waterways as well as in efficient water and sanitation infrastructure. It was also underscored that recent trends in the economy suggest that there is enough interest from domestic and foreign investors in Nigeria’s infrastructure. However, they agreed that the government needs to intervene by strengthening the legislative framework to make the sector more conducive for private sector investment.
Again it was noted that another factor undermining doing business in the country is the prevalence of a “prohibitive prohibitive tax system.” For instance, the session agreed that most aspects of Nigeria’s taxation compare unfavorably with its competitors and this they say had culminated in a deplorable 181 place in the World Bank’s Paying Taxes’ survey. According to the experts, “despite having the largest economy in Africa, Nigeria has one of the lowest tax revenue to GDP ratios in the world.” Even though the Federal Government had initiated steps to raise tax revenue, such as the introduction of luxury taxes and the on-going process to review incentives, such as the much abused pioneer status system it was opined that it still needs to focus on reviewing tax disincentives, which “hinder growth, prevent productive diversification of the economy and make it difficult to earn sustainable non-oil tax revenue.” To turn around the situation, the session stressed that “reform of the Nigerian tax system should have a high priority in the legislative agenda of the National Assembly.”
On the other hand, the session on finance and investment observed that Micro, Small and Medium-sized Enterprises (MSMEs) represent 96 per cent of the nation’s businesses, and that it is therefore crucial to support their growth and further innovation. However, one of the most important issues facing MSMEs as highlighted is their difficulty in accessing finance. It was emphasized that “While the ‘Doing Business 2016’ Report indicates that Nigeria’s financial system is performing well, a joint survey conducted by SMEDAN and the National Bureau of Statistics suggests that the majority of small business owners are not accessing credit facilities offered by banks and other financial institutions.” This, they said, supported the idea that traditional credit markets have historically been difficult for start-up to access. It wad also noted that transparency is important for investors to be able to analyze a company’s risks and opportunities. The role of the law and by extension that of the National Assembly, according to submissions at the session, is to ensure parity of information through disclosures so that investors pay the right price to acquire securities, whether in the primary market or the secondary market.
The critical role played by arbitration and alternative dispute resolution mechanism in the building of investor’s confidence also came to the fore at one of the technical sessions. They noted that the ability of a legal system to efficiently handle complex (and indeed all) disputes is crucial for investor confidence. They bemoaned a situation where in the various States across the Federation, Judges are confronted with dockets containing thousands of cases and motions – and the caseload continues to increase. According to them, “This expanding, increasingly complex workload limits the time available for judges to prepare for cases in advance of hearings, affects the atmosphere in courtrooms and delays the resolution of disputes. For courts to resolve commercial cases with the efficiency and quality that Nigeria businesses deserve, it is vital that the Federal and State Legislatures introduce reforms to their respective judicial systems.”
The issues emanating from the emerging e-business and intellectual property was also identified as one of the disincentive to businesses in the country. It was underscored that the application of information and communication technology (ICT), support most business activities activities today as they have automated processes, improved systems and generally created new business frontiers. This development the session noted had enabled businesses and individuals to communicate and transact with other parties “electronically, instantaneously and internationally.” However, it was noted that this has given rise to a variety of legal and regulatory issues for policymakers and lawmakers, from the validly of electronic methods of contracting and the security risks inherent in them, to concerns over cybercrime, privacy and the ability to protect intellectual property rights online. It was further noted that even though Nigeria has welcomed advancements in ICT and its application in the business environment, translating policy objectives into workable laws and regulations can be difficult especially with technology which represents particular challenges to lawmakers, primarily due to the pace of change that occurs in the subject matter itself.
Above all it was noted that the Constitution needs review if the work being done to make for business competitiveness and to attract investors is to yield the desired results. The Constitution it was observed has certain provisions that impede businesses in the country, hence the need for it to be amended to enhance doing business in the country.
It is clear that arising from the report and roundtable where the findings of the report were interrogated and validated, the 8th National Assembly now has a sharper focus on the laws it needs to urgently repeal and re-enact and the new bills it needs to introduce to remove obstacles to doing business in Nigeria. The good thing is that both chambers and both at par on the need to improve the business environment. With the close collaboration it has established with the private sector, it is hoped that the legislature will continue to be businesslike by making its impact felt through cutting edge legislation in tandem with best practices anywhere in the world. This would no doubt lay a solid foundation for the nation’s economic survival and growth.
Interestingly, the Senate President, while declaring the session opened had pledged that the National Assembly will work assiduously to pass the identified critical bills in the shortest possible time. On his part, the Speaker of the House of Representatives, Hon. Yakubu Dogara, represented by the Chief Whip of the House, Hon. Ado Doguwa, commended the initiative of the roundtable and promised that the House would support the initiative to create enabling business environment in the country, boost investors confidence and in turn create the needed jobs.
Written by Sanni Onogu, the Chief Press Secretary to the Senate President.