Nigeria's most unfriendly business states

Most emerging economies around the world often see the World Bank as an unwelcome guest that will not leave even when its host is not happy with it. Why is that so, you may ask? It is because, almost always, reports from that global financial institution is seen as bad news.

The fact that from hindsight, many prescriptions or reports from the World Bank have not quite helped the economies of developing countries adds to this intrinsic fear that any report seen as unhealthy by developing countries may cause an economic overheating.

The worrying prospect for investment inflow is perhaps the most dreaded of any uncomforting report from the World Bank.
But as disturbing as some World Bank reports may seem to many third World economies, (Nigeria inclusive), reports from that financial institution do carry a lot of weight. They signal either how good or bad the level of business prospect is in any particular states country or states within that nation.
And since commonsense is an integral part of economics, investors don't joke with any bad report concerning any country or its component parts.

It is in that regard that the recent report by the World Bank about some states in Nigeria, as very unfriendly for business must elicit more than a passing interest. The Bank had in its report headlined: “ Doing Business in Nigeria 2010”, listed Anambra, Imo and Ogun states as the “most difficult states for business operations in Nigeria. Doing Business Report is a sub-national and regional publication that captures differences in business regulations and enforcement across locations within a country or region. For what matters, the report provides the necessary data on the ease of doing business, using selected indicators, ranks each location and recommends reforms that will enable these regions or states to improve performance.

Whether the states so categorized as unfriendly business terrains avail themselves of the necessary data to improve on the “afflicted' areas, is up to them.
Taken together, the World Bank Doing Business Report not only rates the ease of doing business across nation's or states, it also analyses regulations affecting the life-circle of domestic, small to medium size firms, from business start-ups and operations, to trading, paying taxes and the closure of such businesses whenever the need arises.

Specifically, in arriving at why Anambra, Imo and Ogun, states were the “most difficult” for business operations, the Bank's Vice-President and Head of Network, Financial and Private sector Development, Mr. Janamitra Devan, identified four main indicators used in its judgement. These pressure points he said, include the ease of starting a business, dealing with construction permits, registration of companies and enforcing contracts. Apart from Anambra, Imo and Ogun States, the report also noted that Ebonyi, Cross Rivers, Ekiti, Abia and Enugu states were very unfriendly for doing business. While the report explained that doing business in the Northern states are much easier that cannot be said of the states in the south, especially Anambra, Imo and Ogun States. These states (Anambra, Imo and Ogun), the report insists do not have competitive regulatory frameworks that make businesses to flourish. Kano state was listed as the top performer in three, out of the four criteria used in the ranking.

Though many will complain sensibly about the yardsticks used by the World Bank, a dispassionate view should not be a hoo-hah at the states so categorized as most difficult for business. Some business analysts have dubbed the report as a poor advert for global business. However, the report being the highest circulation publication of the bank is indeed, a veritable business guide with uncommon influence worldwide. It is not a surprise why all the five states in the South East were ranked unfavourably by this report. States like Abia and Imo are gradually becoming “ungovernable” as a result of spate of kidnappings and armed robberies. This can be a big disincentive to business operations. Only recently, all the banks in Aba, the commercial nerve centre of Abia state, were forced to close shop for days because of robbery attacks. Add that to the incidence of kidnappings, which has become a cottage industry of sorts in Aba cannot but make business a dangerous undertaking.

The situation in Abia is not different from that of neighbouring Imo state. Perhaps worse. For instance, last week, bank workers in Okigwe, embarked on a 5-day strike as a result of incessant armed robbery attacks on their banks and staff. Precisely on April 21, Okigwe recorded perhaps the most numbing spectacle when a simultaneous robbery attacks on nine banks left at least 9 persons dead. Millions of naira were also carted away by the robbers. In the past one year alone, such incidence has become a regular occurrence in both Abia and Imo states, and to a lesser degree, in Anambra as well. Interestingly, the World Bank report came the very week Gov. Ikedi Ohakim claimed at the state organised Economic Summit that Imo State was the most crime-free state in the country. Really? That cannot be comforting at all, because business thrives on security and stability. The citizens and business operators in these states have watched helplessly as things just go from bad to worse in these South East states, most disturbingly, in Abia and Imo states. And in the worst of these, this cannot be good news. Without saying so openly, the World Bank considered these happenings before arriving at its decision.

In the absence of security, rumours take over as business of its own. Such is the peddling of malicious rumours in Imo state, that the state Police Command had to issue a strong statement warning rumour mongers to stop. It was the Police quick response to the wide spread rumour that a mere handshake with a Hausa man could cause the disappearance of one's sexual organ.

Sound ridiculous, isn't it? The command's spokesman, Mr. Livinus Nwaiwu who issued the statement last week described the rumour as “unfounded and irresponsible fabrication”, attributing it to the “idle work of talebearers”. The difficulty here, indeed, more difficult than the indices the World Bank used, is that rumour as news without a discernible source, its peddlers are as hard to nail as nail itself. Three months ago, I wrote in this column on the 'evil reports' always coming from the South East, especially Imo State. That doesn't mean that Imo is more crime-prone than others, but I did warn that the political and socio-economic implications of the spate of kidnapping, bitter rivalries among the political elites could be foreboding enough, with the unintended consequence of scaring away potential entrepreneurs and even existing businessmen.

When recently a group of concerned citizens of Ihiala in Anambra state visited the Inspector General of Police (IGP), Ogbonna Onovo, they lamented that insecurity poses a present danger in all the South East states. The truth is that the present inclement environment in the South East is making businessmen to relocate to other states they consider as safe havens. The biggest loser is the South East economy which used to contribute the highest Gross Domestic Product (GDP) in the whole of West Africa. But not any more. Has politics got anything to do with the bad reports from the South East? Yes! It has to do with the 'do-or-die' politics by the politicians.

Today, there is a strong suspicion that the governors in the South East are not doing enough to contain the sense of insecurity in their domains. This recently prompted the IGP to deploy 10,000 police personnel to the South East. The World Bank report should task the governors to do something urgent to check the factors that are giving their states this terrible image. They should be reminded that of all issues on which their administrations would be judged by the electorate next year, security challenge tops, perhaps, above all things else.

Writing on Security Alert in the July - August 2009 edition of Harvard Business Review, two leading security experts, Messrs George K Campbell and Richard A. Lefler noted that the insider threats have historically accounted for the majority of economic losses incurred by business operators. They do collateral damage through such nefarious activities like frauds, theft and generally, making businesses too hard to function. What's the solution? Embrace transparency, quell rumours, communicate candidly and reduce levels of discontent by creating job opportunities. Unfortunately, some of the state governors are the masterminds and conspirators of the problems they are elected to solve.