On-why-business-fail-in-nigeria
September 7, 2020 | News
ON WHY BUSINESSES FAIL IN NIGERIA
Some few months back, President of the Institute of Chartered Accountants of Nigeria (ICAN), Deacon Titus Soetan, stated that Poor infrastructure, lack of basic amenities and multiple taxations frustrate enterprise in Nigeria. Organizations surviving the harsh economic conditions in Nigeria, therefore, deserve kudos, AS THE COUNTRY REMAINS ONE OF THE TOUGHEST PLACES TO DO BUSINESS. Nothing could be further from the truth because Nigeria’s poor infrastructure has historically held back its economic development. Noting that: “Doing business in Nigeria is not a tea party,” Soetan also added that findings have shown businesses in Nigeria do not live up to the fifth or sixth year, and that those that survive the first five years, find it difficult to achieve the next span. That is how serious this situation is, and there is urgent need for the current administration at all levels to take pragmatic steps to address this.
Though, other reports some weeks back revealed that the Presidency, notwithstanding the instability in global oil prices, is rallying UK’s support for development, and it noted that the Federal Government needs to source and invest $70 billion in infrastructure every year to address deficit in the country, the British Government has said. According to the British government, this is the only way Nigeria can compete and bring in needed infrastructure for businesses to thrive in the country. Also, the UK Department for International Development (DFID), Nigeria Infrastructure Advisory Facility (NIAF) also confirmed that it is providing technical support for Nigeria to encourage private sector participation in the Transmission Company of Nigeria (TCN).
This was the picture presented by the Vice President, Yemi Osibanjo, when he called for further support from NIAF in government’s quest for infrastructure development. Osibanjo stated that: “NIAF’s goal to enhance the management of Nigeria’s infrastructure development towards power sector reform, more impactful capital spending, transport roads, climate change, and urban planning and development is aligned with and invaluable to this administration.” He also emphasized the fact that: “As we all know, infrastructure is critical to spurring economic growth, reducing poverty and improving life opportunities for millions of Nigerians. Improved infrastructure increases job creation, disposable income, and security through equipping Nigerians to tackle the constraints holding back the great entrepreneurial spirit of this country. It is completely clear to me that accelerated infrastructure development is critical to sustainable growth in Nigeria. We assure our friends in DFID that we continue to appreciate our partnership with them which allows us to deliver change for ordinary Nigerians across our partnership areas. I look forward to more collaboration to come.”
The importance of having the basic infrastructure and amenities for the development of any society, especially in this modern age, cannot be overemphasized. J. F Kennedy once stated that “America has good roads, not because America is rich, but America is rich because it has good roads.” That depicts the importance of such a basic infrastructure like good network of roads, to the overall development and citizenry enrichment of any nation.
Sadly, not much has been done in the area of basic infrastructural development over the past years by Federal, State and Council Governments. Take the Road infrastructure for instance. Despite the fact that the road system is the most important element in the country’s transportation network, carrying about 95 percent of all the nation’s goods and passengers, but over the years and even currently, many of the roads are in disrepair because of poor maintenance-culture and years of heavy traffic.
Most developed nations in the world jump-started their economies by accelerating their infrastructure and building on it; examples being those of India and the United States of America. The crux of this matter is that a country cannot be rich without good infrastructure. All the great civilizations attained greatness only through the entrenchment of adequate and sustainable infrastructure. The World Bank estimates that every one per cent of government funds spent on infrastructure leads to an equivalent of one per cent increase in Gross Domestic Product, GDP, which invariably means that there is a correlation between any meaningful inputs in infrastructure development which reflects on economic growth, indices, hence the value of infrastructure cannot be underplayed. Infrastructure development has in recent times assumed a central importance in Nigeria’s fight to attain social and economic stability. The Federal government and all State Governments are using infrastructure as the focal point of their administrations and policy enactments. But much is left to be desired from their angle, especially from State Governments across the nation.
Agreed that there is need for the Private sector to partner more with the public sector in the actualization of desired infrastructural developmental objectives in a State and nation, but it is the Government (public sector) that should ‘oil the system’ for any economic investment by the Private sector participation to thrive. In fact, the Organized Private Sector is regarded as the ‘drivers of an economy’ while the State/Federal Governments are seen as the ‘enablers of the economy.’ For instance, State Governors cannot be urging private investors through their usual Economic Forums (or other means/channels), to come and invest in their States due to the numerous benefits derivable from such, when they have done little or nothing on their own part as State Governments, to attract these private investors in the first place. All the so called Economic Forums investments summits, often organized by State and Federal Governments, will amount to funfairs, jamboree of a gathering and nothing if it is not backed by ‘concrete incentives’ to attract private investors to invest in the States.
Infrastructure generally has to do with the “fixed provision of tangible assets on which other intangibles can be built on”. Not limited in scope, it involves the provision of Housing, Power (electricity), Transport, Education, Communication, and Technology. The challenges involved cut across political, economic, social, technology, legal, environmental and safety issues. Poor political stability, policy formulation and politics of the project environment both within and without are problems the country has been contending with in her infrastructural development. Equally, the country is dealing with issues of poverty, inflation, insecurity; cultural difference and poor technological environment to be used for the execution of projects. With a land mass of 9,110,000 square kilometres of land and over 170,000 million people, Nigeria has a total road network of 193,200 km according to available records. This comprises 34,123km Federal roads, 30,500 km State roads and 129,577 km Local Government roads. Unfortunately, over 70 per cent of the Federal roads are in bad state of repair. In the area of housing, Nigeria is said to require more than 17 million housing units and N60 trillion to meet its housing needs. Economic returns Over the years, corruption not only raise the price of infrastructure but also reduces the quality of, and economic returns from, infrastructure investment. The corruption in Nigeria is very high and unbearable for effective infrastructural development.
The country’s poor unemployment rate is aggravated by poor infrastructure. Poor infrastructure is the main reason Nigeria’s economy is not growing and the only way out of the economic doldrums is conscious massive investment in infrastructure by ‘all levels’ of government in the country. Weak infrastructure exerts a huge burden on foreign and local businesses. Difficulties accessing markets via crumbling roads or clogged up ports, and vast expenditure on generators required to avoid blackouts, are regularly cited as being among the biggest challenges to investors in the country. “The shortage of infrastructure means that a great deal of businesses are having to self-generate electricity at vast cost, which puts them at a competitive disadvantage,” explains Phillip Ihenacho, CEO of Seven Energy, which is investing heavily in the Nigerian power sector. It also lowers the quality of life for millions of Nigerians. The majority of citizens, who cannot afford diesel generators, have no access to electricity. Because of poor roads and heavy traffic, Lagosians for instance, spend hours commuting distances that should take only minutes. Poor infrastructure causes post-harvest losses that can stretch to as high as 40 percent, destroying the livelihoods of millions of farmers. It also hampers vital job creation and poverty reduction. Because of lack of infrastructure, industrialisation and manufacturing – which are known to create jobs – have not really grown. As to what it the infrastructure deficit costs Nigerians, we can only really imagine. It translates into an atrocious environment for doing business; poor quality of life; low national productivity; a very thin industrial base; and over-dependence on imported products. All of these perpetuate poverty, unemployment and underdevelopment.
No magic or economic expert that can develop this country in the absence of basic infrastructure. The provisions of these basic infrastructure is not only part of what constitutes as development, but also the foundation upon which all other efforts towards development are made. Infrastructure is a necessity for development to thrive. But rather than pursue this vigorously, all the current government have been doing more to keep blaming the immediate past government for problems we have today. The ‘blame game’ is not helping anyone. It is time for the current government to embrace the responsibilities staring at them and do the needful. It is time to resolve the challenges facing us as a nation.
Today, people across the globe like going to places like Dubai, New York, Milan, London, Paris, Amsterdam, and other developed countries/cities to invest and do businesses simply because the Government there have done their homework and constitutional obligations by “creating the enabling attractive environment for any business to thrive” with little or no interferences to profit margins. This is exactly what the Nigerian Government at all levels should be focusing on doing, if we are to get Nigeria out the woods of economic recession and perpetual underdevelopment.
Zik Gbemre, JP.
Some few months back, President of the Institute of Chartered Accountants of Nigeria (ICAN), Deacon Titus Soetan, stated that Poor infrastructure, lack of basic amenities and multiple taxations frustrate enterprise in Nigeria. Organizations surviving the harsh economic conditions in Nigeria, therefore, deserve kudos, AS THE COUNTRY REMAINS ONE OF THE TOUGHEST PLACES TO DO BUSINESS. Nothing could be further from the truth because Nigeria’s poor infrastructure has historically held back its economic development. Noting that: “Doing business in Nigeria is not a tea party,” Soetan also added that findings have shown businesses in Nigeria do not live up to the fifth or sixth year, and that those that survive the first five years, find it difficult to achieve the next span. That is how serious this situation is, and there is urgent need for the current administration at all levels to take pragmatic steps to address this.
Though, other reports some weeks back revealed that the Presidency, notwithstanding the instability in global oil prices, is rallying UK’s support for development, and it noted that the Federal Government needs to source and invest $70 billion in infrastructure every year to address deficit in the country, the British Government has said. According to the British government, this is the only way Nigeria can compete and bring in needed infrastructure for businesses to thrive in the country. Also, the UK Department for International Development (DFID), Nigeria Infrastructure Advisory Facility (NIAF) also confirmed that it is providing technical support for Nigeria to encourage private sector participation in the Transmission Company of Nigeria (TCN).
This was the picture presented by the Vice President, Yemi Osibanjo, when he called for further support from NIAF in government’s quest for infrastructure development. Osibanjo stated that: “NIAF’s goal to enhance the management of Nigeria’s infrastructure development towards power sector reform, more impactful capital spending, transport roads, climate change, and urban planning and development is aligned with and invaluable to this administration.” He also emphasized the fact that: “As we all know, infrastructure is critical to spurring economic growth, reducing poverty and improving life opportunities for millions of Nigerians. Improved infrastructure increases job creation, disposable income, and security through equipping Nigerians to tackle the constraints holding back the great entrepreneurial spirit of this country. It is completely clear to me that accelerated infrastructure development is critical to sustainable growth in Nigeria. We assure our friends in DFID that we continue to appreciate our partnership with them which allows us to deliver change for ordinary Nigerians across our partnership areas. I look forward to more collaboration to come.”
The importance of having the basic infrastructure and amenities for the development of any society, especially in this modern age, cannot be overemphasized. J. F Kennedy once stated that “America has good roads, not because America is rich, but America is rich because it has good roads.” That depicts the importance of such a basic infrastructure like good network of roads, to the overall development and citizenry enrichment of any nation.
Sadly, not much has been done in the area of basic infrastructural development over the past years by Federal, State and Council Governments. Take the Road infrastructure for instance. Despite the fact that the road system is the most important element in the country’s transportation network, carrying about 95 percent of all the nation’s goods and passengers, but over the years and even currently, many of the roads are in disrepair because of poor maintenance-culture and years of heavy traffic.
Most developed nations in the world jump-started their economies by accelerating their infrastructure and building on it; examples being those of India and the United States of America. The crux of this matter is that a country cannot be rich without good infrastructure. All the great civilizations attained greatness only through the entrenchment of adequate and sustainable infrastructure. The World Bank estimates that every one per cent of government funds spent on infrastructure leads to an equivalent of one per cent increase in Gross Domestic Product, GDP, which invariably means that there is a correlation between any meaningful inputs in infrastructure development which reflects on economic growth, indices, hence the value of infrastructure cannot be underplayed. Infrastructure development has in recent times assumed a central importance in Nigeria’s fight to attain social and economic stability. The Federal government and all State Governments are using infrastructure as the focal point of their administrations and policy enactments. But much is left to be desired from their angle, especially from State Governments across the nation.
Agreed that there is need for the Private sector to partner more with the public sector in the actualization of desired infrastructural developmental objectives in a State and nation, but it is the Government (public sector) that should ‘oil the system’ for any economic investment by the Private sector participation to thrive. In fact, the Organized Private Sector is regarded as the ‘drivers of an economy’ while the State/Federal Governments are seen as the ‘enablers of the economy.’ For instance, State Governors cannot be urging private investors through their usual Economic Forums (or other means/channels), to come and invest in their States due to the numerous benefits derivable from such, when they have done little or nothing on their own part as State Governments, to attract these private investors in the first place. All the so called Economic Forums investments summits, often organized by State and Federal Governments, will amount to funfairs, jamboree of a gathering and nothing if it is not backed by ‘concrete incentives’ to attract private investors to invest in the States.
Infrastructure generally has to do with the “fixed provision of tangible assets on which other intangibles can be built on”. Not limited in scope, it involves the provision of Housing, Power (electricity), Transport, Education, Communication, and Technology. The challenges involved cut across political, economic, social, technology, legal, environmental and safety issues. Poor political stability, policy formulation and politics of the project environment both within and without are problems the country has been contending with in her infrastructural development. Equally, the country is dealing with issues of poverty, inflation, insecurity; cultural difference and poor technological environment to be used for the execution of projects. With a land mass of 9,110,000 square kilometres of land and over 170,000 million people, Nigeria has a total road network of 193,200 km according to available records. This comprises 34,123km Federal roads, 30,500 km State roads and 129,577 km Local Government roads. Unfortunately, over 70 per cent of the Federal roads are in bad state of repair. In the area of housing, Nigeria is said to require more than 17 million housing units and N60 trillion to meet its housing needs. Economic returns Over the years, corruption not only raise the price of infrastructure but also reduces the quality of, and economic returns from, infrastructure investment. The corruption in Nigeria is very high and unbearable for effective infrastructural development.
The country’s poor unemployment rate is aggravated by poor infrastructure. Poor infrastructure is the main reason Nigeria’s economy is not growing and the only way out of the economic doldrums is conscious massive investment in infrastructure by ‘all levels’ of government in the country. Weak infrastructure exerts a huge burden on foreign and local businesses. Difficulties accessing markets via crumbling roads or clogged up ports, and vast expenditure on generators required to avoid blackouts, are regularly cited as being among the biggest challenges to investors in the country. “The shortage of infrastructure means that a great deal of businesses are having to self-generate electricity at vast cost, which puts them at a competitive disadvantage,” explains Phillip Ihenacho, CEO of Seven Energy, which is investing heavily in the Nigerian power sector. It also lowers the quality of life for millions of Nigerians. The majority of citizens, who cannot afford diesel generators, have no access to electricity. Because of poor roads and heavy traffic, Lagosians for instance, spend hours commuting distances that should take only minutes. Poor infrastructure causes post-harvest losses that can stretch to as high as 40 percent, destroying the livelihoods of millions of farmers. It also hampers vital job creation and poverty reduction. Because of lack of infrastructure, industrialisation and manufacturing – which are known to create jobs – have not really grown. As to what it the infrastructure deficit costs Nigerians, we can only really imagine. It translates into an atrocious environment for doing business; poor quality of life; low national productivity; a very thin industrial base; and over-dependence on imported products. All of these perpetuate poverty, unemployment and underdevelopment.
No magic or economic expert that can develop this country in the absence of basic infrastructure. The provisions of these basic infrastructure is not only part of what constitutes as development, but also the foundation upon which all other efforts towards development are made. Infrastructure is a necessity for development to thrive. But rather than pursue this vigorously, all the current government have been doing more to keep blaming the immediate past government for problems we have today. The ‘blame game’ is not helping anyone. It is time for the current government to embrace the responsibilities staring at them and do the needful. It is time to resolve the challenges facing us as a nation.
Today, people across the globe like going to places like Dubai, New York, Milan, London, Paris, Amsterdam, and other developed countries/cities to invest and do businesses simply because the Government there have done their homework and constitutional obligations by “creating the enabling attractive environment for any business to thrive” with little or no interferences to profit margins. This is exactly what the Nigerian Government at all levels should be focusing on doing, if we are to get Nigeria out the woods of economic recession and perpetual underdevelopment.
Zik Gbemre, JP.