Db10 sub-nigeria


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  3. 3. © 2010 The International Bank for Reconstruction and Development / The World Bank1818 H Street NWWashington, DC 20433Telephone 202-473-1000Internet www.worldbank.orgE-mail feedback@worldbank.orgAll rights reserved.A publication of the World Bank and the International Finance Corporation.This volume is a product of the staff of the World Bank Group. The findings, interpretations, and conclusions expressed in thisvolume do not necessarily reflect the views of the Executive Directors of the World Bank or the governments they represent. TheWorld Bank does not guarantee the accuracy of the data included in this work.Rights and PermissionsThe material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission maybe a violation of applicable law. The World Bank encourages dissemination of its work and will normally grant permission toreproduce portions of the work promptly.For permission to photocopy or reprint any part of this work, please send a request with complete information to the CopyrightClearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, USA; telephone 978-750-8400; fax 978-750-4470; Internet:www.copyright.com.All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The WorldBank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422; e-mail: pubrights@worldbank.org.Doing Business in Nigeria 2010 and other subnational and regional Doing Business studies can be downloaded at no charge athttp://subnational.doingbusiness.orgAdditional copies of the Doing Business global reports: Doing Business 2010: Reforming through Difficult Times, Doing Business2009, Doing Business 2008, Doing Business 2007: How to Reform, Doing Business in 2006: Creating Jobs, Doing Business in 2005:Removing Obstacles to Growth and Doing Business in 2004: Understanding Regulations, may be purchased at www.doingbusiness.orgAbout the Investment Climate Advisory Services of the World Bank GroupThe Investment Climate Advisory Services of the World Bank Group helps governments implement reforms to improve their busi-ness environment, and encourage and retain investment, thus fostering competitive markets, growth and job creation. Fundingis provided by the World Bank Group (IFC, MIGA, and the World Bank) and over fifteen donor partners working through themulti-donor FIAS platform.
  4. 4. ContentsDoing Business in Nigeria 2010 is the reforms have worked, where, and why. About Doing Business andsecond subnational report of the Doing Other areas important to business—such Doing Business in Nigeria 2010 1Business series in Nigeria. In 2008, quan- as a country’s proximity to large markets, Overview 7titative indicators on business regula- the quality of infrastructure services Starting a business 13tions were created for 10 states and (other than services related to trading Dealing with construction permits 18Abuja, FCT. This year, Doing Business across borders), the security of propertyin Nigeria 2010 expands the analysis to from theft and looting, the transparency Registering property 23all 36 Nigerian states and Abuja, FCT, of government procurement, macro- Enforcing contracts 28and documents progress in the 10 states economic conditions, or the underlyingand the capital previously measured. The strength of institutions—are not directly Data notes 33states are compared against each other, studied by Doing Business. To make the State tables 38and with 183 economies worldwide. data comparable across jurisdictions, the Doing Business indicators 47 Comparisons with other economies indicators refer to a specific type ofare based on the indicators in Doing business—generally a small or medium- List of proceduresBusiness 2010: Reforming through Dif- size limited liability company. Starting a business 51ficult Times, the seventh in a series of This project is part of the Nigeria Dealing with construction permits 90annual reports published by the World Subnational Investment Climate Pro- Registering property 137Bank and the International Finance gram, which supports state governments Acknowledgments 168Corporation. The indicators in Doing in improving their business environ-Business in Nigeria 2010 are also compa- ments. This program is the Nigerianrable with the data in other subnational government’s response to its NationalDoing Business reports. All Doing Busi- Economic Empowerment and Develop-ness data and reports are available at ment Strategy (NEEDS) and the Coun-http://subnational.doingbusiness.org try Partnership Strategy between it,and at www.doingbusiness.org. the U.K. Department for International Doing Business investigates the regu- Development (DFID), and the Worldlations that enhance business activity and Bank Group, which aim to create mo-those that constrain it. Regulations af- mentum for reform through dialoguefecting 4 stages of the life of a business between the private and public sectorsare measured at the subnational level in in participant states, drive investmentsNigeria: starting a business, dealing with and non-oil growth in these states, andconstruction permits, registering prop- reduce income poverty through sharederty, and enforcing contracts. These in- sustainable economic growth in Nige-dicators have been selected because they ria’s non-oil sector. This study is part ofcover areas of local jurisdiction or prac- a three-instrument benchmarking pro-tice. The data in Doing Business in Nigeria cess for Nigeria that also includes an2010 are current as of January 2010. Investment Climate Assessment (ICA) The indicators are used to analyze and State Level Policy and Institutionaleconomic outcomes and identify which Mapping (SLPIM).
  5. 5. 1About Doing The global financial crisis has re- newed interest in good rules and regu- WHAT DOING BUSINESS IN NIGERIA 2010 COVERSBusiness and lation. In times of recession, effective business regulation and institutions can Doing Business in Nigeria 2010 providesDoing Business support economic adjustment. Easy a quantitative measure of the federal entry and exit of firms, and flexibility and state regulations for starting a busi-in Nigeria 2010 in redeploying resources, make it easier ness, dealing with construction permits, to stop doing things for which demand registering property, and enforcing con- has weakened and to start doing new tracts—as they apply to domestic small things. Clarification of property rights and medium-size enterprises. and strengthening of market infrastruc- A fundamental premise of Doing ture (such as credit information and Business is that economic activity re- collateral systems) can contribute to con- quires good rules. These include rules fidence as investors and entrepreneurs that establish and clarify property rights look to rebuild. and reduce the costs of resolving disputes, Until very recently, however, there rules that increase the predictability ofIn 1664 William Petty, an adviser to were no globally available indicator sets economic interactions and rules thatEngland’s Charles II, compiled the first for monitoring such microeconomic fac- provide contractual partners with coreknown national accounts. He made 4 tors and analyzing their relevance. The protections against abuse. The objectiveentries. On the expense side, “food, hous- first efforts, in the 1980s, drew on per- is: regulations designed to be efficient, toing, clothes and all other necessaries” ceptions data from expert or business be accessible to all who need to use themwere estimated at £40 million. National surveys. Such surveys are useful gauges and to be simple in their implementa-income was split among 3 sources: £8 of economic and policy conditions. But tion. Accordingly, some Doing Businessmillion from land, £7 million from other their reliance on perceptions and their indicators give a higher score for morepersonal estates and £25 million from incomplete coverage of poor countries regulation, such as stricter disclosure re-labor income. constrain their usefulness for analysis. quirements in related-party transactions. In later centuries estimates of coun- The Doing Business project, launched Some give a higher score for a simplifiedtry income, expenditure and material 8 years ago, goes one step further. It looks way of implementing existing regulation,inputs and outputs became more abun- at domestic small and medium-size com- such as completing business start-updant. But it was not until the 1940s that panies and measures the regulations ap- formalities in a one-stop shop.a systematic framework was developed plying to them through their life cycle. Doing Business in Nigeria 2010for measuring national income and ex- Doing Business and the standard cost encompasses 2 types of data. The firstpenditure, under the direction of British model initially developed and applied in come from readings of laws and regula-economist John Maynard Keynes. As the the Netherlands are, for the present, the tions. The second are time and motionmethodology became an international only standard tools used across a broad indicators that measure the efficiencystandard, comparisons of countries’ fi- range of jurisdictions to measure the in achieving a regulatory goal (such asnancial positions became possible. Today impact of government rule-making on granting the legal identity of a business).the macroeconomic indicators in na- business activity. Within the time and motion indicators,tional accounts are standard in every The first Doing Business report, pub- cost estimates are recorded from officialcountry. lished in 2003, covered 5 indicator sets in fee schedules where applicable. Here, Governments committed to the eco- 133 economies. This year’s report covers Doing Business builds on Hernando denomic health of their country and op- 10 indicator sets in 183 economies. The Soto’s pioneering work in applying theportunities for its citizens now focus on project has benefited from feedback from time and motion approach first usedmore than macroeconomic conditions. governments, academics, practitioners by Frederick Taylor to revolutionize theThey also pay attention to the laws, regu- and reviewers. The initial goal remains: production of the Model T Ford. De Sotolations and institutional arrangements to provide an objective basis for under- used the approach in the 1980s to showthat shape daily economic activity. standing and improving the regulatory the obstacles to setting up a garment fac- environment for business. tory on the outskirts of Lima, Peru.
  6. 6. 2 DOING BUSINESS IN NIGERIA 2010WHAT DOING BUSINESS IN phases of a company’s life cycle, through social security, for example.NIGERIA 2010 DOES NOT COVER 4 specific sets of indicators. The indica- Where regulation is particularly tor sets also do not cover all aspects of onerous, levels of informality are higher.It is important to know the scope and regulation in the particular area. For Informality comes at a cost: firms inlimitations of Doing Business in Nigeria example, the indicators on starting a the informal sector typically grow more2010 in order to interpret the results of business do not cover all aspects of com- slowly, have poorer access to credit andthis report. mercial legislation. employ fewer workers—and their work- ers remain outside the protections ofLIMITED IN SCOPE BASED ON STANDARDIZED CASE labor law. Doing Business in Nigeria 2010 SCENARIOSDoing Business in Nigeria 2010 focuses measures one set of factors that helpon four topics, with the specific aim of The indicators analyzed in Doing Business explain the occurrence of informalitymeasuring the regulation and red tape in Nigeria 2010 are based on standardized and give policy makers insights into po-relevant to the life cycle of a domestic case scenarios with specific assumptions, tential areas of reform. Gaining a fullersmall to medium-size firm. Accordingly: such as that the business is located in cer- understanding of the broader business Doing Business in Nigeria 2010 does tain cities in one of the 36 Nigerian states environment, and a broader perspective not measure all ten indicators covered or in Abuja, FCT. Economic indicators on policy challenges, requires combining in the global Doing Business report. commonly make limiting assumptions of insights from Doing Business in Nigeria The report covers only those 4 areas of this kind. Inflation statistics, for example, 2010 with data from other sources, such business regulation that are the prov- are often based on prices of consumer as the World Bank Enterprise Surveys. enance of state or federal governments goods in a few urban areas. Such assump- and where local differences exist. tions allow global coverage and enhance WHY THIS FOCUS Doing Business in Nigeria 2010 does comparability, but they inevitably come at not measure all aspects of the busi- the expense of generality. Doing Business in Nigeria 2010 func- ness environment that matter to firms In areas where regulation is com- tions as a kind of cholesterol test for or investors—or all factors that affect plex and highly differentiated, the stan- the regulatory environment for domestic competitiveness. It does not, for ex- dardized case used to construct each businesses. A cholesterol test does not ample, measure security, macroeco- Doing Business in Nigeria 2010 indicator tell us everything about the state of our nomic stability, corruption, the labor needs to be carefully defined. Where health. But it does measure something skills of the population, the under- relevant, the standardized case assumes important for our health. And it puts us lying strength of institutions or the a limited liability company. This choice on watch to change behaviors in ways quality of infrastructure. Nor does it is in part empirical: private, limited li- that will improve not only our cholesterol focus on regulations specific to for- ability companies are the most prevalent rating but also our overall health. eign investment. business form in most economies around One way to test whether Doing Busi- Doing Business in Nigeria 2010 does the world. The choice also reflects one ness serves as a proxy for the broader not assess the strength of the financial focus of Doing Business: expanding op- business environment and for competi- system or market regulations, both portunities for entrepreneurship. Inves- tiveness is to look at correlations be- important factors in understanding tors are encouraged to venture into busi- tween the Doing Business rankings and some of the underlying causes of the ness when potential losses are limited to other major economic benchmarks. The global financial crisis. their capital participation. indicator set closest to Doing Business Doing Business in Nigeria 2010 does in what it measures is the Organization not cover all regulations, or all regu- FOCUSED ON THE FORMAL SECTOR for Economic Co-operation and Devel- latory goals, in any jurisdiction. As In defining the indicators, Doing Business opment’s indicators of product market economies and technology advance, in Nigeria 2010 assumes that entrepre- regulation; the correlation here is 0.75. more areas of economic activity are neurs are knowledgeable about all regu- The World Economic Forum’s Global being regulated. lations in place and comply with them. Competitiveness Index and IMD’s World In practice, entrepreneurs may spend Competitiveness Yearbook are broader in For example, the European Union’s considerable time finding out where to scope, but these too are strongly corre-body of laws (acquis) has now grown go and what documents to submit. Or lated with Doing Business (0.79 and 0.72,to no fewer than 14,500 rule sets. Doing they may avoid legally required proce- respectively). These correlations suggestBusiness in Nigeria 2010 measures just 4 dures altogether—by not registering for that where peace and macroeconomic
  7. 7. ABOUT DOING BUSINESS AND DOING BUSINESS IN NIGERIA 3stability are present, domestic business makers face particular challenges. Both results. Some states may rank unexpect-regulation makes an important differ- developed and developing economies are edly high on some indicators. And someence in economic competitiveness. seeing the impact of the financial crisis states that have had rapid growth or A bigger question is whether the flowing through to the real economy, attracted a great deal of investment mayissues on which Doing Business focuses with rising unemployment and income rank lower than others that appear to bematter for development and poverty re- loss. The foremost challenge for many less dynamic.duction. The World Bank study Voices governments is to create new jobs and But for reform-minded govern-of the Poor asked 60,000 poor people economic opportunities. But many have ments, how much their indicators im-around the world how they thought they limited fiscal space for publicly funded prove matters more than their abso-might escape poverty. The answers were activities such as infrastructure invest- lute ranking. As states develop, theyunequivocal: women and men alike pin ment or for the provision of publicly strengthen and add to regulations totheir hopes above all on income from funded safety nets and social services. protect investor and property rights.their own business or wages earned in Reforms aimed at creating a better in- Meanwhile, they find more efficient waysemployment. Enabling growth—and en- vestment climate, including reforms of to implement existing regulations andsuring that poor people can participate business regulation, can be beneficial for cut outdated ones. One finding of Doingin its benefits—requires an environment several reasons. Flexible regulation and Business: dynamic and growing econo-where new entrants with drive and good effective institutions, including efficient mies around the world continually re-ideas, regardless of their gender or ethnic processes for starting a business and effi- form and update their regulations andorigin, can get started in business and cient insolvency or bankruptcy systems, their way of implementing them, whilewhere good firms can invest and grow, can facilitate reallocation of labor and many poor economies still work withgenerating more jobs. capital. And regulatory institutions and regulatory systems dating to the late Small and medium-size enterprises processes that are streamlined and acces- 1800s.are key drivers of competition, growth sible can help ensure that, as businessesand job creation, particularly in develop- rebuild, barriers between the informal DOING BUSINESS—ing countries. But in these economies up and formal sectors are lowered, creating A USER’S GUIDEto 80% of economic activity takes place more opportunities for the poor.in the informal sector. Firms may be pre- Quantitative data and benchmarking canvented from entering the formal sector DOING BUSINESS IN NIGERIA be useful in stimulating debate aboutby excessive bureaucracy and regulation. 2010 AS A BENCHMARKING policy, both by exposing potential chal- Where regulation is burdensome EXERCISE lenges and by identifying where pol-and competition limited, success tends icy makers might look for lessons andto depend more on whom you know Doing Business in Nigeria 2010, in captur- good practices. These data also providethan on what you can do. But where ing some key dimensions of regulatory a basis for analyzing how different policyregulation is transparent, efficient and regimes, can be useful for benchmark- approaches—and different policy re-implemented in a simple way, it becomes ing. Any benchmarking—for individu- forms—contribute to desired outcomeseasier for any aspiring entrepreneurs, als, firms or economies—is necessarily such as competitiveness, growth andregardless of their connections, to oper- partial: it is valid and useful if it helps greater employment and incomes.ate within the rule of law and to benefit sharpen judgment, less so if it substitutes Seven years of Doing Business datafrom the opportunities and protections for judgment. have enabled a growing body of researchthat the law provides. Doing Business in Nigeria 2010 pro- on how performance on Doing Busi- In this sense Doing Business values vides 2 approaches on the data it collects: ness indicators—and reforms relevantgood rules as a key to social inclusion. It it presents “absolute” indicators for each to those indicators—relate to desiredalso provides a basis for studying effects state for each of the 4 regulatory topics social and economic outcomes. Someof regulations and their application. For it addresses, and it provides rankings of 405 articles have been published inexample, Doing Business 2004 found that states by indicator. Judgment is required peer-reviewed academic journals, andfaster contract enforcement was associ- in interpreting these measures for any about 1,143 working papers are avail-ated with perceptions of greater judicial state and in determining a sensible and able through Google Scholar. Among thefairness—suggesting that justice delayed politically feasible path for reform. findings:is justice denied. Reviewing the Doing Business rank- - In the current global crisis policy- ings in isolation may show unexpected ated with a smaller informal sector.
  8. 8. 4 DOING BUSINESS IN NIGERIA 2010 - METHODOLOGY AND DATA DEVELOPMENT OF THE METHODOLOGY preneurship, enhance firm productiv- ity and reduce corruption. Doing Business in Nigeria 2010 covers all The methodology for calculating each 36 Nigerian states and Abuja, FCT. The indicator is transparent, objective and employment opportunities. data are based on federal and state laws easily replicable. Leading academics col- and regulations as well as administrative laborate in the development of the indi-HOW DO GOVERNMENTS USE DOING requirements. (For a detailed explana- cators, ensuring academic rigor. SevenBUSINESS? tion of the Doing Business in Nigeria 2010 of the background papers underlyingA common first reaction is to doubt methodology, see the Data notes). the indicators have been published inthe quality and relevance of the Doing leading economic journals. One is at anBusiness data. Yet the debate typically INFORMATION SOURCES FOR THE DATA advanced stage of publication.proceeds to a deeper discussion explor- Most of the indicators are based on laws Doing Business uses a simple averag-ing the relevance of the data to the and regulations. In addition, most of the ing approach for weighting subindica-economy and areas where reform might cost indicators are backed by official fee tors and calculating rankings. Other ap-make sense. schedules. Doing Business respondents proaches were explored, including using Most reformers start out by seeking both fill out written surveys and provide principal components and unobservedexamples, and Doing Business helps in references to the relevant laws, regu- components. The principal componentsthis. For example, Saudi Arabia used the lations and fee schedules, aiding data and unobserved components approachescompany law of France as a model for re- checking and quality assurance. turn out to yield results nearly identicalvising its own. Many countries in Africa For some indicators part of the cost to those of simple averaging. The testslook to Mauritius—the region’s stron- component (where fee schedules are lack- show that each set of indicators providesgest performer on Doing Business indica- ing) and the time component are based new information. The simple averag-tors— as a source of good practices for on actual practice rather than the law on ing approach is therefore robust to suchreform. In the words of Luis Guillermo the books. This introduces a degree of tests.Plata, the Minister of Commerce, Indus- subjectivity. The Doing Business approachtry and Tourism of Colombia, has therefore been to work with legal IMPROVEMENTS TO THE practitioners or professionals who regu- METHODOLOGY AND DATAIt’s not like baking a cake where you follow REVISIONS larly undertake the transactions involved.the recipe. No. We are all different. But we Following the standard methodological The methodology has undergone contin-can take certain things, certain key les- approach for time and motion studies, ual improvement over the years. Changessons, and apply those lessons and see howthey work in our environment. Doing Business breaks down each process have been made mainly in response to or transaction, such as starting and legally country suggestions. In accordance with Over the past 7 years there has been operating a business, into separate steps the Doing Business methodology, thesemuch activity by governments in re- to ensure a better estimate of time. The changes have been incorporated into theforming the regulatory environment for time estimate for each step is given by Doing Business in Nigeria 2010.domestic businesses. Most reforms relat- practitioners with significant and routine For starting a business, for example,ing to Doing Business topics were nested experience in the transaction. the minimum capital requirement can bein broader programs of reform aimed at The Doing Business approach to an obstacle for potential entrepreneurs.enhancing economic competitiveness. In data collection contrasts with that of Initially, Doing Business measured thestructuring their reform programs, gov- enterprise or firm surveys, which capture required minimum capital regardless ofernments use multiple data sources and often one-time perceptions and experi- whether it had to be paid up front orindicators. And reformers respond to ences of businesses. A corporate lawyer not. In many economies only part of themany stakeholders and interest groups, registering 100–150 businesses a year minimum capital has to be paid up front.all of whom bring important issues and will be more familiar with the process To reflect the actual potential barrier toconcerns into the reform debate. than an entrepreneur, who will register entry, the paid-in minimum capital has World Bank support to these reform a business only once or maybe twice. A been used since 2004.processes is designed to encourage criti- bankruptcy judge deciding dozens of All changes in methodology are ex-cal use of the data, sharpening judgment cases a year will have more insight into plained in the Data notes section of thisand avoiding a narrow focus on improv- bankruptcy than a company that may report as well as on the Doing Businessing Doing Business rankings. undergo the process. website. In addition, data time series
  9. 9. ABOUT DOING BUSINESS AND DOING BUSINESS IN NIGERIA 5for each indicator and state are availableon the website. The website also makesavailable all original data sets used forbackground papers. Information on data corrections isprovided in the Data notes and on thewebsite. A transparent complaint pro-cedure allows anyone to challenge thedata. If errors are confirmed after a veri-fication process, they are expeditiouslycorrected.
  10. 10. 7Overview across states. Doing Business in Nigeria there are exceptions. For example, Akwa 2008 was the first report to go beyond Ibom ranks better than its regional neigh- Lagos, to capture these differences in bors due to its above average performance 10 other Nigerian states and the capi- on starting a business and registering tal on 4 Doing Business topics: starting property. In Uyo, Akwa Ibom’s capital, the a business, dealing with construction cost of legal representation to handle com-Nigeria is Africa’s giant. It is the conti- permits, registering property, and en- pany incorporation and property transfernent’s most populous country, second- forcing contracts. This report updates is also cheaper than in other states fromlargest economy, and an emerging leader the information presented in 2008 and the South South region.of African diplomacy. By virtue of its tracks the progress in implementation Large southern business centers—size alone, a prosperous Nigeria would of reforms. It also expands the analysis such as Lagos, Port Harcourt, and Iba-generate social and economic gains for to all 36 Nigerian states and the capital dan—deal with a higher volume of busi-the whole region. But the challenges city, to provide a comprehensive map of ness services, which can lead to delaysfacing the country are formidable and the ease of doing business in the country. and more expensive professional services.success is not guaranteed. Despite its oil The results are presented here (table On the other hand, these cities shouldwealth and sustained economic growth 1.1). Overall, it is easiest to do business also benefit from economies of scale andduring the last decade, more than half in Jigawa, Gombe, and Borno and most have more resources at their disposal toof its population still lives in poverty.1 difficult in Imo and Ogun. invest in administrative modernizationGiven the low employment capacity in Two observations stand out. First, than their smaller neighbors. Behind thethe oil sector, economic diversification this year’s top performers are states with aggregate ranking, there is a rich varia-is important for sustainable growth, job competitive regulatory frameworks that tion on a topic-by-topic basis. No singlecreation, and poverty reduction. Nigeria’s were not measured in Doing Business state does well on all four topics, evenprivate sector is a tribute to the resilience in Nigeria 2008. Others, like Kano and when compared with peers (figure 1.1).of a vibrant enterprise culture struggling Bauchi, maintain their position in the top For example, Ekiti performs well on theto take root. For years Nigerian firms 10. Second, in aggregate, northern states ease of dealing with construction per-have faced a tough business environ- generally perform better.2 Nevertheless, mits, but lags behind on the three otherment and yet resourceful entrepreneurs TABLE 1.1continue to find ways of coping. Efficient, Where is it easier to do business in Nigeria—and where not?accessible, and simple regulations and 1 Jigawa (easiest) 11 Taraba 21 Edo 31 Ebonyiclear property rights could unleash the 2 Gombe 12 Sokoto* 22 Kaduna* 32 Abia*natural entrepreneurship of small and 3 Borno 13 Benue 23 Osun 33 Cross River*medium-size firms even further. 4 Kebbi 14 Kwara 24 Ondo 34 Ekiti Doing Business studies business reg- 5 Kogi 15 Plateau 25 Lagos* 35 Anambra*ulations from the perspective of a small 6 Yobe 16 Niger 26 Oyo 36 Imoto medium-size domestic firm. Lagos 7 Katsina 17 Abuja, FCT* 27 Rivers 37 Ogun*represents the country in the annual 8 Kano* 18 Nasarawa 28 BayelsaDoing Business report, which compares 9 Zamfara 19 Adamawa 29 Deltaregulatory practices in 183 economies.Yet, within Nigeria, entrepreneurs face 10 Bauchi* 20 Akwa Ibom 30 Enugu* *State included in Doing Business in Nigeria 2008 report.different local regulations and practices Source: Doing Business database.
  11. 11. 8 DOING BUSINESS IN NIGERIA 2010FIGURE 1.1Comparing the Doing Business rankings of states with similar population and economic activity States with low economic activity States with medium economic activity States with high economic activity Starting Starting Starting a busines a busines a busines TOP RANK TOP RANK TOP RANK Akwa Ibom Lagos Plateau Kebbi Dealing with Dealing with Dealing with construction construction construction permits Abia permits permits Enugu Ekiti Bauchi KadunaTOP TOP TOP TOP TOP Rivers TOPRANK RANK RANK RANK RANK RANKEnforcing Enforcing Enforcingcontracts contracts Cross River contracts Kano TOP RANK TOP RANK TOP RANK Registering Registering Registering property property propertySource: Doing Business database. WHAT GETS MEASURED GETStopics when compared with states with DONE and employers are no longer required toa similar population size and economic register with the Nigeria Social Insuranceactivity,3 such as Akwa Ibom, Enugu, or Despite the hardship imposed by the Trust Fund.5 In addition, Nigeria intro-Kebbi. And while Enugu does not do well 2009 economic crisis on businesses glob- duced electronic procedures at the com-on contract enforcement, the other three ally, this was a record year for regula- pany registry, such as online verificationstates can learn from Enugu how to make tory reforms. Doing Business recorded of the company name, speeding start-upproperty registration easier. 287 reforms in 131 of the 183 econo- time by 9 days.6 Stamp duty fees were re- While Bauchi is the best overall mies measured between June 2008 and duced from 1.5% to 0.75% of the nominalperformer among medium-size states, it May 2009—20% more than the previ- share capital. A new building code wasshould look to Plateau for good practices ous year. In Sub-Saharan Africa, 29 of introduced in August 2006, which madewhen starting a business. Cross River 46 economies reformed in 2008/2009, significant improvements to buildingranks lowest among its peers on starting implementing 67 reforms. As in previ- safety.7 Nigeria embarked on major tradea business and enforcing a contract, but ous years, nearly half the reforms in the facilitation reforms, including: introduc-Plateau and Abia can learn from Cross region focused on making it easier to ing computerization to speed up the in-River how to make dealing with construc- start a business and trade across borders. spection of goods, implementing a posttion permits more efficient. Among large And for the first time, a Sub-Saharan Af- clearance audit system to eliminate delaysstates, Kano’s overall performance is bet- rican economy, Rwanda, led the world in and congestion in ports, concessioningter than Lagos, Rivers, and Kaduna. More- Doing Business reforms (figure 1.2). container terminals to private operators,over, Kano outperforms smaller states on Nigeria’s 2020 strategy targets eco- and establishing Inland Container Ter-dealing with construction permits and nomic growth, through structural and minals. Nigeria reformed getting creditregistering property. But when it comes to institutional reforms, as a critical devel- by adopting regulations which paved theenforcing a contract or starting a business, opment initiative. The strategy includes way for the creation of a private credit bu-Kano could learn from Kaduna or Lagos. an ambitious goal of taking the country reau.8 Despite these efforts, Nigeria’s over-The conclusion is that all states can learn into the ranks of the world’s 20 largest all ranking on the ease of doing businessfrom the local regulations and practices economies by the year 2020.4 did not improve, because other countriesof their peers. Also, national level agen- Between 2005 and 2009, Nigeria in- have been reforming more vigorously. Incies can compare the performances of troduced 9 major regulatory reforms to the most recent report, Doing Businesstheir local branches in different states, make it easier for firms to start-up and 2010: Reforming through Difficult Times,implementing the experiences of the most operate, as measured by Doing Business Nigeria, represented by Lagos, ranks 125efficient ones in less successful locations. (table 1.2). With the passing of the Pen- of 183 economies globally on the overall sion Reform Act No.2 of 2004, companies ease of doing business.
  12. 12. OVER VIE W 9FIGURE 1.2 2008 to 18 days now. Abuja’s Develop-Consistent reformers continued reform efforts in 2008/09Improvement in the ranking on the ease of doing business, DB2009–DB2010 ment Control Department imposes no1 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 160 170 183 time limits, but organizes weekly ap- proval committee meetings to review Georgia Colombia applications. If approval is granted, the 16 TO 11 49 TO 37 2 REFORMS 8 REFORMS permit is issued in one month, faster Mauritius Rwanda than in 2008, when it took 60 days. Some 24 TO 17 143 TO 67 6 REFORMS 7 REFORMS states have taken steps to make informa- Macedonia, FYR Egypt, Arab Rep. tion more easily available to the public. 69 TO 32 116 TO 106 7 REFORMS 4 REFORMS Abeokuta’s Bureau of Urban and Physical Planning organizes a weekly televisionAVERAGE RANKING 30 71 83 95 118 139 program, Town Planning Half an Hour, ON THE EASE OF OECD EASTERN EAST 92 LATIN SOUTH SUB- DOING BUSINESS, HIGH EUROPE ASIA & MIDDLE AMERICA & EAST & CARIBBEAN ASIA SAHARAN on the Ogun state Gateway television DB2010 INCOME & CENTRAL PACIFIC AFRICA ASIA NORTH AFRICA channel every Thursday to address urbanSource: Doing Business database. development issues and complaints. In Lagos, several reforms are currently NIGERIAN STATES ARE obtaining a building permit has halved being implemented. In October 2009, the REFORMING the time to 14 days. Delegating the gov- governor of Lagos issued an executive ernor’s power to grant consent on prop- order that delegates the power to grantThe federal government is not alone erty transfers to both the Commissioner construction permits to lower levels ofin introducing regulatory reforms in and the Permanent Secretary for Lands the administration, depending on theNigeria. States have been actively imple- has resulted in substantial reductions in complexity of the project. The executivementing reforms over the past two years. time. The process can now be completed order also specifies that building regula-Since the publication of Doing Business in 2 weeks, faster than in most states. tions contained in the Lagos Buildingin Nigeria 2008, eight of the ten states Efforts have been made to broaden ac- Permit Approval Handbook should beand the capital measured for the second cess to justice and speed up proceedings made available to the public for free.time reformed in at least one of the by setting up new Magistrates Courts. Lagos’ District Office now requires itsfour Doing Business indicators (table The new courts and an increase in the field officers to carry a camera when1.3). In total, 14 positive reforms9 were number of magistrates have resulted in a conducting their first site inspection. Therecorded, of which 11 focused on con- decrease in the time needed to enforce a pictures—proving that the plot is in factstruction permits and property registra- contract by three months, from 810 days empty—are attached to the application,tion. Most reforms adopted by the states recorded in the last report. with no need to conduct any further pre-were administrative and often not costly In dealing with construction per- construction inspections.to implement. One state stands out: mits, five of the eleven states surveyed Six states reformed property registra-Kano introduced reforms in three areas in the last report reformed. Enugu has tion. One of the reasons why transferringbecoming the top reformer since the enforced statutory time limits, result- a property title in Nigeria is cumbersomepublication of Doing Business in Nigeria ing in a reduction in the time to obtain is because entrepreneurs have to pay mul-2008. Enforcing statutory time limits for a construction permit from 67 days in tiple fees at commercial banks and waitTABLE 1.2Reforms in Nigeria* 2005–2009Doing Dealing with TradingBusiness Starting a construction Employing Registering Getting Protecting Paying across Enforcing Closing areport business permits workers property credit investors taxes borders contracts businessDB 2006DB 2007DB 2008DB 2009DB 2010* Represented by LagosSource: Doing Business database.
  13. 13. 10 DOING BUSINESS IN NIGERIA 2010TABLE 1.3 The average cost of starting a business isEight of the eleven states measured since 2008 implemented reforms in at least one area below the Sub-Saharan Africa average of Dealing with Registering EnforcingState construction permits property contracts 99.7% and, unlike most countries on the continent, Nigeria abolished the min-Kano*Anambra imum capital requirement. In Abuja,Ogun FCT, the top-ranked city for starting aEnugu business, it takes 5 procedures, 22 days,Abuja, FCT and 58.5% of income per capita to start aKaduna business. By contrast, in Enugu, it costsSokoto almost twice as much. In Bayelsa, theAbia most difficult state in which to start a*Top reformer. A top reformer is a state that implemented reforms since Doing Business in Nigeria 2008 that made it easier to do business in business, it takes almost a month longertwo or more of the Doing Business indicators, and also achieved the largest increase in the aggregate ranking from the previous report. to complete the same incorporation pro- indicates a negative reformNote: This table records reforms that occurred between June 2008 and January 2010. cess as it does in Abuja, FCT.Source: Doing Business database. In comparison with countries from the Economic Community of West Afri-for the respective agency to receive pay- doubled the number of account officers can States (ECOWAS), Nigeria requiresment confirmation. Ogun state addressed from 2 to 4 in an effort to speed up the rec- almost the same number of proceduresthis problem by introducing a system that onciliation of payments for property fees. than the ECOWAS average but five moreallows fee payments using an ATM card Ongoing reforms in Lagos also include than Burkina Faso and Senegal. The av-at a “point of payment” terminal located the delegation of governor consent for erage time needed to start a business iswithin the Ministry of Lands. The total property transfers to 4 more commission- below the ECOWAS average (39 days), buttime needed to register property in Ogun ers, with a mandatory consent deadline behind twelve ECOWAS countries and justhas decreased by almost two weeks, com- of 48 hours. ahead of Côte d’Ivoire, Guinea, Togo, andpared with 114 days two years ago. Abia In the area of contract enforcement, Guinea-Bissau. When it comes to cost,introduced e-payment in 2009 and now there is a dynamic trend of moderniz- Nigeria’s national average is cheaper thanall fees are paid at a commercial bank and ing and updating civil procedure rules in the ECOWAS average (113.7%), but moretransferred electronically to the account many states. The momentum was initiated expensive than in Ghana and Liberia.of each agency, which keeps corruption at by Lagos, where new High Court Civilbay. In Sokoto, the Nigerian Bar Associa- Procedure Rules were adopted in 2004. In DEALING WITH CONSTRUCTIONtion and other stakeholders put pressure 2006, Abuja, FCT, was among the first to PERMITSto speed up the process of granting con- follow suit. As a result, the time to enforce A construction company based in Lagossent on property transfers. The governor a contract in the capital was reduced from spends 350 days on 18 procedures toagreed and has since ensured that consent 432 to 381 days. Since then, many other obtain all building approvals and util-is granted within 60 days, rather than 75 states have remodeled their rules on those ity connections, at a cost of 580%10 ofdays, as previously. Another reform is of Lagos and Abuja, FCT. Some states, like income per capita. As reported in Doingthe introduction of the Geographic Infor- Kaduna and Nasarawa, have been faster to Business in Nigeria 2008, building a ware-mation System (GIS). Following Abuja’s act than others. Most recently, in Decem- house is faster and cheaper in the Northexample, and more recently Lagos, Kano ber 2009, Ondo adopted new High Court than in the South. It takes on average 74and Kwara will implement GIS, which rules. Others are setting up committees to days and 514% of income per capita tocaptures and stores land information in introduce the new rules. deal with construction permits in the 19a digital format. This reform speeds the northern states and the capital surveyed,process of searching the property title COMPARING BUSINESS against 114 days and 573% of income perfor encumbrances. It also increases title REGULATIONS ACROSS NIGERIA capita in the 17 southern states. Theresecurity, eliminating the need for submit- are also large variations in the numberting additional documents to prove the STARTING A BUSINESS of procedures required across Nigeriantitle origin. Anambra lowered the search Across all 36 states and Abuja, FCT, start- states. To obtain all construction-relatedfee for property titles fivefold from NGN ing a limited liability company requires permits and utility connections, a con-5,000 (US$ 37) to NGN 1,000 (US$ 7). on average 9 procedures and 36 days, struction company must complete onlyIn 2009, the Lands Registry in Lagos has and costs 77.7% of income per capita. 10 procedures in Jigawa, compared with
  14. 14. OVER VIE W 11TABLE 1.4Best practices in Nigeria compared internationally Nigeria in DB 2010 Nigeria best practice (represented by Lagos) Global rank (183 economies) Global rank How Nigerian (183 Best-performing states wouldIndicator Performance economies) state within Nigeria Performance compare globallyDays to deal with construction permits 350 days 167 Jigawa 47 days 6Number of procedures to deal with 18 procedures 101 Jigawa 10 procedures 9construction permitsDays to enforce a contract 457 days 64 Jigawa 261 days 10Number of procedures to start a business 8 procedures 94 Abuja, FCT 5 procedures 25Days to register property 82 days 140 Borno 14 days 26 580.3% of income 94.6% of income perCost to deal with construction permits 143 Kano 67 per capita1 capita 32% of the claim 26% of the claimCost to enforce a contract 120 Katsina 86 value valueDays to start a business 31 days 117 Abuja, FCT 22 days 92 20.9% of the 5.2% of the propertyCost to register property 178 Yobe 104 property value valueNumber of procedures to register property 13 procedures 177 Borno, Gombe, Kwara 8 procedures 136 77.0% of income 58.5% of income perCost to start a business 153 Abuja, FCT 148 per capita2 capita1. At the time of publication of Doing Business 2010: Reforming through Difficult Times the cost was 573.4% of income per capita.2. At the time of publication of Doing Business 2010: Reforming through Difficult Times the cost was 76.7% of income per capita.Source: Doing Business database.23 procedures in Ebonyi. This difference the 36 states and the capital in detail, state, it takes more than twice the timeis explained in part by the fact that in wide differences emerge. State govern- (835 days) and money (52.8%) to get theJigawa there are only two inspections ment requirements and practices and the same result. On a global scale, Nigerianduring construction, while in Ebonyi, differing performances of local branches courts prove efficient when filing a claim.a site analysis report is required before of federal agencies drive these variations. It takes an average of 23 days, but inconstruction starts, followed by 12 in- For example, registering property is easi- Akwa Ibom, Delta, Ekiti, and Ondo, thespections during the construction. est in Gombe, where it takes 8 procedures, process can be as fast as 7 days. The trial 16 days, and 6.6% of the property value and judgment stage is where most delaysREGISTERING PROPERTY to transfer a title. By contrast, in Rivers occur. This usually takes at least one year,On average, an entrepreneur would have state, it takes 13 procedures, 201 days, and with the longest delays in Niger state—to go through 12 procedures, wait 82 days, 23.2% of the property value to complete more than three years.and pay 16% of the property value to have the same process.it registered in the Lands Registry. The LEARNING FROM EACH OTHER:average time and cost needed to transfer ENFORCING CONTRACTS ADOPTING GOOD LOCALa property title make Nigeria one of the It takes on average 511 days and costs PRACTICESmost difficult places to register property 36.3% of the claim value to resolve aworldwide. Nigeria only has two fewer commercial dispute through the courts. Benchmarking exercises like Doing Busi-requirements than Brazil—the country This is faster and cheaper than the Sub- ness inspire governments to reform. Theywith the highest number of procedures Saharan Africa regional average of 644 uncover potential challenges and iden-to register a property globally—and one days and 49.3% of the claim value. How- tify where policy makers can look forless than Uganda—that with the highest ever, Nigeria lags behind Ghana, where it good practices. Comparisons betweennumber of procedures in Sub-Saharan takes 487 days and costs 23% of the claim cities within the same country are evenAfrica. At 16% of property value on aver- value. There are wide differences across stronger drivers of reform, because localage, the cost is almost 70% higher than the Nigeria. In Yobe, it takes 1 year and costs governments have a hard time explain-Sub-Saharan average. Yet, when analyzing 26.1% of the claim value. In Cross River ing why doing business in their city or
  15. 15. 12 DOING BUSINESS IN NIGERIA 2010state may be harder than in neighboring days, is similar to Finland. Finally, resolv-locations. The good news is that sharing ing a commercial dispute in 261 days, likea national legal framework facilitates the in Jigawa, would put Nigeria among the 1. United Nations. 2009. Human Develop- ment Report. New York.implementation of existing good prac- 10 fastest countries in the world, similar 2. Nigeria is divided into six geopoliticaltices within a country. National govern- to Rwanda and faster than the United regions: North West, North East, Northments can also use Doing Business data Kingdom. Central, South West, South East, andto monitor how local branches of their Payoffs from reform can be large. South South.agencies implement national regulations. Reforms expand the reach of regulation 3. The classification is based on city popula- tion and on state Gross Domestic Prod-In a world where locations compete by bringing businesses and employees uct (GDP). Population statistics are basedagainst each other to attract investment, into the formal sector. Take Mexico, for on the 2006 Census published in thesubnational Doing Business data allow example, where reforms cut the time Official Gazette of Lagos on January 19, 2007. GDP statistics were obtained fromlocal governments to review the condi- to start a business from 58 to 13 days. the Canback Global Income Distributiontions facing entrepreneurs in their cities A recent study reports the payoffs: the Database, Canback Dangel. http://www.from a comparative perspective. Subna- number of registered Mexican busi- cgidd.com. Accessed on August 20, 2008.tional data are now available for almost nesses rose by nearly 6%, employment 4. Nigeria’s Vision 2020: www.nv2020.org.300 cities in 41 countries. increased by 2.6%, and prices fell by 1% 5. World Bank. 2005. Doing Business 2006: Creating Jobs. Washington, DC. World The example of Colombia is telling. because of the competition from new Bank Group.Doing Business in Colombia 2008 identi- entrants.13 Such results would be im- 6. World Bank. 2007. Doing Business 2008.fied good practices in 13 cities, pointed portant for Nigeria, where only 10% of Washington, DC. World Bank Group.out bottlenecks, and provided recommen- the 6-million new entrants to the labor 7. Ibid.dations for reform. Two years later, a new market find jobs.14 The high percentage 8. World Bank. 2009. Doing Business 2010:report tracked progress over time. The re- of youth in Nigeria (more than 50% of all Reforming through Difficult Times. Wash-sults were impressive. All 13 cities showed Nigerians are under 24) is an indicator ington, DC. World Bank Group.improvements in at least one of the areas that the country will struggle to create 9. There were also 4 negative reforms in Enugu, Abuja, FCT, Abia, and Bauchi –allmeasured, thanks to local-level reforms.11 the jobs needed to absorb new entrants of them due to fee increases for propertySimilarly, Doing Business in India 2009 into the formal labor market.15 Reforms transfers.showed that 9 out of 10 Indian states that strengthen property rights would 10. At the time of publication of Doing Busi-benchmarked for the second time had also benefit the Nigerian economy, where ness 2010: Reforming through Difficult Times the cost was 573.4% of income perintroduced reforms. As a result of these secure property titles exist for just 3% capita.reforms, the average time to start-up a of the country’s land area,16 preventing 11. World Bank. 2010. Doing Business incompany dropped from 45 to 35 days and businesses and the poor from using it as Colombia 2010. Washington, DC. Worldthe time to obtain a building permit was collateral to raise funds. Bank Group.reduced by 25 days, on average.12 The implementation of and support 12. World Bank. 2009. Doing Business in India 2009. Washington, DC. World Bank States in Nigeria can learn from each for reforms at all levels of government Group.other and adopt regulations and practices must continue. Consistent reformers 13. Bruhn, Miriam. 2008. “License to Sell:that are working elsewhere in the country. globally follow a long-term agenda and The Effect of Business RegistrationIf a hypothetical state called “Nigeriana” continually push forward. The top-ranked Reform on Entrepreneurial Activity in Mexico.” Policy Research Working Paperadopted all the best practices identified economy on the ease of doing business, 4538. Washington, DC. World Bank. Thein this report, it would rank 72nd out of Singapore, introduces reforms every results were obtained after controlling for183 countries globally—53 places ahead year. Reforms are comprehensive, thus GDP per capita, number of economic es- tablishments per capita, fixed assets perof Nigeria’s position in Doing Business increasing the chances of success and capita, and investments per capita in the2010 (table 1.4). Reducing start-up re- impact. Moreover, consistent reformers benchmarked municipalities.quirements to the 5 procedures and 22 are inclusive, involving all relevant actors 14. Kwakwa, Victoria, Adeola Adenikinju,days needed in Abuja, FCT, would make and institutionalizing the reform effort. Peter Mousley, and Mavis Owusu-Nigeria as speedy as Japan. Fast approval They also stay focused by setting specific Gyamfi. 2008. Binding Constraints to Growth in Nigeria. New York: Palgraveof construction permits, like in Jigawa, goals and regularly monitoring progress. Macmillan.would mean that dealing with construc- The federal and state governments in 15. Economist Intelligence Unit, Nigeriation permits is three times faster than Nigeria can follow similar strategies to Country Profile 2009.the OECD average (157 days). The time improve their regulatory environment 16. Nigeria: Factbook. CIA.needed to register property in Borno, 14 and enhance the chances for success.
  16. 16. 13Starting a TABLE 2.1 Where is it easy to start a business—and where not?business 1 2 Abuja, FCT (easiest) Kogi 14 15 Kaduna Zamfara 27 28 Anambra Ebonyi 3 Kebbi 16 Edo 29 Rivers 4 Gombe 17 Jigawa 30 Osun 4 Plateau 18 Abia 31 Delta 6 Taraba 19 Kwara 32 Ekiti 7 Akwa Ibom 20 Adamawa 33 Imo 8 Lagos 21 Bauchi 33 Ondo 9 Niger 21 Enugu 35 Cross River 10 Benue 23 Sokoto 36 Ogun 11 Borno 24 Oyo 37 Bayelsa (most difficult) 12 Nasarawa 25 Katsina 13 Yobe 26 KanoTuoyo has returned to Nigeria after earn- Note: The ease of starting a business is a simple average of the state rankings on the number of procedures, and the associated time and cost required to start a business. See the Data notes for details.ing an MBA from Harvard and is anxious Source: Doing Business database.to set up his own business. His motherhas a weaving business that produces Across all 36 states, starting a lim- a business globally have no more than sixrugs, baskets, and various other crafts. ited liability company requires on aver- procedures each and a cost of less thanTuoyo’s mother could not afford the high age 9 procedures and 36 days and costs 5% of income per capita (figure 2.2).cost and hassle of business incorporation 77.7% of income per capita. The cost of There are marked differences acrossin Delta state and has operated for over starting a business in Nigeria is less than Nigeria in the time, cost, and number oftwelve years from the family compound. the regional average of 99.7% and, unlike procedures required to start a business.Because her business is informal, she can- many countries in Sub-Saharan Africa, These variations stem from differentnot advertise and must rely on verbal Nigeria has abolished the minimum cap- performance levels of state branches ofreferrals from customers. She markets her ital requirement. But starting a business national agencies, such as the Corporatecrafts at local fairs and festivals, where her is still a burdensome process, and in the Affairs Commission (CAC) and stamp-stand is always the busiest. Tuoyo plans area of business registration the country duty offices, as well as variations in stateto expand his mother’s thriving business lags behind economies such as Mauritius departmental taxes and local licensingand to set up manufacturing outlets in and South Africa. In Mauritius, the top- fees for business premises in each state.the neighboring states to tap into new ranked economy in Sub-Saharan Africa In Abuja, FCT, the top-ranked city formarkets. For this to happen the business on business start-up, it takes only six starting a business in the country, it takesmust be properly set up in each state. In days and costs 4.1% of income per capita. only five procedures, 22 days, and 58.5%Delta state, where Tuoyo’s mother lives, it In South Africa it is 13 times cheaper and of income per capita to open a business.takes as long as 51 days to complete the two weeks faster to register a company By contrast, in Bayelsa, it takes almost anregistration procedures and costs 84.4% than in Nigeria. The more efficient proce- extra month to complete the same incor-of income per capita. dures for business start-up in Mauritius poration process due to the high number In order to increase private-sector and South Africa can be accounted for of procedures required—two more thanactivity, the incorporation requirements to some extent by automation and themust be easy, fast, and inexpensive. Re- use of information and communication What is measured?search shows that the number of new technologies (ICT), but some other Sub- Doing Business records all procedures that arefirms increases and employment grows Saharan Africa countries are champions officially required to start-up and formallywhen business entry becomes easier. In in business start-up without ICT involve- operate a commercial or industrial small or medium-size limited liability company. TheseColombia, after the introduction of one- ment. This is the case of Rwanda, which include obtaining the necessary licenses andstop shops in six cities, new firm registra- has a completely manual and paper- permits and completing all required notifica-tion increased by 5.2%.1 These findings based system, but provides for business tions, verifications, and registrations for the company and its employees with the relevantare confirmed by additional studies in start-up in only two steps and three authorities. See the detailed description ofother countries (figure 2.1).2 days. The top ten performers on starting the standard case in the Data notes.