Nigeria’s Policy Reforms Bearing Fruit

Against the backdrop of several deep-seated structural challenges stifling operating environment for businesses, Nigeria has persistently been ranked low by the World Bank in its Ease of Doing Business (EODB) report. Out of the 190 countries surveyed for 2017, the report ranked Nigeria 169th - a negligible improvement from 170th of 189 countries in 2016. On average, the country ranked 158th of 189 countries surveyed in the last 5 years and 37th of 48 countries in Sub-Saharan Africa for 2017.

Borrowing a leaf from several countries that have implemented ease of doing business reforms within a very short time (Kenya for example undertook 5 reforms which moved her ranking upwards by 21 places to rank amongst the top 100 countries in 2017), the Nigerian government took several steps towards improving the Nation’s ranking by setting a target of moving 20 places higher in 2018 and eventually breaking into the top 100 economies by 2019. To this end, the Presidential Enabling Business Environment Council (PEBEC) was set up to remove the administrative bottlenecks associated with doing business in Nigeria. At the tail end of 2016, the operational arm of PEBEC - the Enabling Business Environment Secretariat (EBES) agency - became functional with a delivery span of 2 years to implement the reforms of PEBEC.

The PEBEC’s two key Executive Bills - Collateral Registry Bill & Credit Services Bureau Bill - were passed into law with the objective to aid access to credit for SMEs. Furthermore, the PEBEC made strides in reducing the number of agencies in Nigerian ports to allow ease of entry and exit of goods and people. Accordingly, the impact of these reforms were evident in the recently released Doing Business 2018 report titled “Reforming to Create Jobs” as Nigeria moved up 24 places (surpassing the target of 20) to 145th and ranked in the top 10 most improved countries. The key areas Nigeria improved the most include: 1) Starting a business (online registration of businesses and reduced turnaround time); 2) Getting construction permits; 3) Registering property; 4) Getting credit; and 5) Payment of taxes (electronic payment and filing).

To consolidate on these gains, the PEBEC has kicked off its National Action Plan 2.0 (NAP 2.0) which is in line with objectives laid out in the Economic Recovery & Growth Plan (ERGP) and aims to spread the reforms implemented across some MDAs as well as Lagos and Kano in the initial 60-day NAP launched in February 2017, to more states and government MDAs.

In our view, the achievements and ongoing efforts on ease of doing business are laudable, more so that the target set for 2018 was surpassed; yet, feasible reforms, especially in areas where the country is poorly rated such as Getting Electricity and Trading across Borders, need to be given utmost priority in order to truly attain a competitive and attractive business environment.

October Purchasing Managers’ Index (PMI) Survey… Economy Shows Further Expansion
The CBN released its PMI report for the month of October in the week, with both Manufacturing and Non-Manufacturing sectors showing further expansions. Manufacturing PMI settled at 55.0 points, 0.3 points lower than September but above the baseline threshold of 50.0 points. This indicates the manufacturing sector expanded for the seventh consecutive month in October, albeit at a slower pace relative to previous month. The Non-Manufacturing PMI rose 0.4 points M-o-M to 54.9 points, suggesting activity in the sector improved at a faster pace relative to previous month. The upbeat performance of both the Manufacturing and Non-Manufacturing sectors is not surprising, given improving macroeconomic stability anchored by rebound in FX liquidity and cyclical recovery in the oil market. We expect PMI data in subsequent months to stay robust as we remain confident on near term economic prospects on the back of stronger FX earnings and structural reforms by policy makers. Hence, we retain our FY:2017 and FY:2018 growth forecasts of 1.2% and 2.6% respectively.