By Ochiagha Reagan Ufomba
The role of the Ministry of Industry, Trade, and Investment in shaping Nigeria’s economic landscape cannot be overemphasized. Yet, for too long, the business climate in Nigeria has remained hostile, stifling innovation, investment, and economic growth. As you settle into your role, it is crucial to tackle the systemic barriers that have crippled businesses across the country. These obstacles are well known: unease of doing business, multiple taxation, excessive regulation, conflicting laws, and a restrictive business environment that discourages entrepreneurship. Below are the key issues that must be addressed if Nigeria is to realize its economic potential.
One of the most significant challenges businesses face in Nigeria is the overwhelming tax burden. Entrepreneurs are subjected to multiple taxes from federal, state, and local governments. Companies are taxed by various agencies, some even duplicating efforts. For example, businesses in states contend with levies from the Federal Inland Revenue Service (FIRS), the state’s Internal Revenue Service (SIRS), and local government authorities, all demanding payment for similar services. In some cases, investors contend with community issues, village issues that transcend family issues.
This multiplicity of taxes creates an environment of uncertainty and discouragement. Rather than focusing on growth and innovation, business owners are preoccupied with meeting endless tax demands, often leading to insolvency or relocation of businesses to more business-friendly countries. If we are serious about making Nigeria an attractive destination for investment, we must harmonize and simplify the tax system.
A Nigerian entrepreneur is often expected to register with numerous agencies before they can legally operate. For instance, depending on the sector, a company registers with the Corporate Affairs Commission (CAC), then, the Standards Organisation of Nigeria (SON), further with the National Agency for Food and Drug Administration and Control (NAFDAC), and the again, with the Nigerian Export Promotion Council (NEPC), the Nigerian Export Processing Zonal Authority (NEPZA), numerous trade portals, Ministry of External affairs, ETLS, AFCFTA, NMDPRA, among others.
The cost of registering with all these agencies is prohibitively high, both in time and money.
Beyond registration, companies often have to undergo periodic assessments and pay for additional certifications, adding another layer of bureaucracy that hampers business growth. A case in point is CAC registration, DPR registration, NMDPRA registration, License registration, IPMAN registration, Import/Export licenses on Oil & Gas trade activity alone. Why won’t petroleum products sell for over N1000? We must streamline these processes. One-stop shop or centralized digital platform for registration and certification would ease this burden significantly.
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Another major hindrance to business growth in Nigeria is the existence of conflicting laws and regulations. A classic example is the clash between NNPCL and the $20billion Dangote Refinery investment. Please tell us, is NNPCL a public or a limited liability company with powers to fix prices for other Limited liability companies? The other is the environmental laws from the Ministry of Environment and mining laws from the Ministry of Mines and Steel Development, which creates confusion for businesses operating in the extractive industry. In agriculture, companies face similar conflicts between agricultural and environmental regulators. The conflict between NEPZA Act No 60 of 1993 and the CBN, with particular reference to foreign exchange regulations has stifled free zone operations. The list is endless.
The absence of harmonization between different regulatory bodies has created an environment where businesses are unsure of which regulations to comply with, risking penalties from one agency even while obeying the directives of another. Your leadership could spearhead the coordination of these regulatory agencies, ensuring clear and uniform guidelines for all sectors.
Restrictions and prohibitions on certain goods and services, either through outright bans or high tariffs, have made it difficult for businesses to operate and scale. The restrictions on the importation of raw materials, for example, have led to shortages for manufacturers, increasing production costs and reducing competitiveness. Additionally, these restrictions stifle innovation by limiting access to new technologies and inputs from the global market.
It is vital that trade policies are revisited to foster an open and competitive market that encourages investment. This will also align Nigeria with the African Continental Free Trade Area (AfCFTA) agreement, promoting intra-African trade and boosting economic growth, and not merely cherry-pick.
No meaningful discussion about Nigeria’s business environment can ignore the issue of insecurity. The rising threat of terrorism, banditry, and kidnapping has made it nearly impossible for businesses, especially in rural and semi-urban areas, to operate. Insecurity increases operational costs as businesses must invest heavily in private security, and it reduces access to certain markets, further limiting growth opportunities.
Insecurity also discourages foreign direct investment, which is crucial for industrialization and economic expansion. The government must prioritize addressing insecurity as a core part of improving the business environment. Without safety, businesses cannot thrive.
The sorry state of Nigeria’s infrastructure, particularly electricity and transportation, acts as an unseen tax on businesses. Entrepreneurs spend enormous sums of money generating their own power and navigating poor roads. This lack of infrastructure hampers productivity and increases the cost of doing business, making it difficult for Nigerian businesses to compete both locally and internationally.
Businesses thrive on predictability. Unfortunately, Nigeria has earned a reputation for frequent and abrupt policy shifts. Investors need assurance that government policies will remain consistent and predictable. Constantly changing trade policies, exchange rates, and regulatory frameworks deter both local and international investors from making long-term commitments. It is time to establish policies that promote stability and foster confidence in the business environment.
Abandoning Nigeria’s “big brother” role in re-exporting goods to other African nations would have significant economic implications. Nigeria has historically served as a major economic hub in West Africa, playing a key role in re-exportation, where imported goods are shipped through Nigerian ports and later distributed to other countries in the region, and earning foreign exchange in return.
Nigeria’s “big brother” role has positioned it as a trade hub in Africa, particularly in the ECOWAS region. Abandoning this role would reduce Nigeria’s influence in regional trade, potentially allowing smaller nations like Benin, Ghana or Côte d’Ivoire to assume the role of a regional gateway. This would diminish Nigeria’s geopolitical and economic leverage in ECOWAS and other African trade blocs.
Re-exportation boosts Nigeria’s transportation, logistics, and warehousing industries. A reduction in these activities would directly affect trucking companies, shipping lines, warehouses, and other associated industries. The transportation sector, which heavily depends on the movement of goods, would experience diminished activity, leading to job losses and a potential rise in unemployment.
Nigeria’s large market size has traditionally absorbed both imported and re-exported goods. By stepping away from re-export activities, Nigeria can also not focus more on local production to meet domestic demand. This shift incapacitation could increase competition for local producers who would now face more pressure to meet the demand for goods previously sourced through re-export. While this could benefit sectors like agriculture and manufacturing, it may also overwhelm industries that are not yet competitive on a global scale due to issues like inadequate infrastructure, cost of funds, and high production costs.
Nigeria is a signatory to the African Continental Free Trade Area (AfCFTA), which promotes the free movement of goods and services across African borders. Abandoning its role in re-exporting goods could undermine Nigeria’s position within this agreement. As other countries take over re-exportation, Nigeria might lose out on the economic benefits of AfCFTA, including market access, foreign exchange inflows, and opportunities for cross-border trade growth.
Nigeria’s decision to halt re-export activities would not only affect its own economy but also the economies of its neighbours. At some point in our economic life, our borders with Benin Republic were closed for any form of cross border trade. Many West African countries, especially landlocked ones like Niger and Chad, rely on Nigeria as a key transit point for goods. These countries would need to find alternative routes, likely leading to increased costs for their businesses and consumers. This could strain diplomatic and economic relations within the region.
A shift away from formal re-exportation could unintentionally boost illegal cross-border trade, including smuggling. With fewer legitimate pathways for goods to move through Nigeria, traders might resort to informal routes to avoid tariffs, border controls, and regulations.
Nigeria is blessed with immense potential, yet we remain a nation where doing business is unnecessarily complex and discouraging. The obstacles discussed —unease of doing business, reduction to small brother role, multiple taxation, excessive registration requirements, conflicting regulations, restrictions on trade, insecurity, poor infrastructure, and policy inconsistency, are all solvable with the right leadership and reforms.
Your tenure presents an opportunity to rewrite Nigeria’s economic narrative. By addressing these fundamental barriers, your ministry can pave the way for an enabling business environment that encourages innovation, attracts investment, and drives sustainable economic growth.