The World Bank ease of doing business ranking of Nigerian states, due by the first half of 2018 could make or mar the states’ investment appeal, amid a tussle to attract private capital to complement dwindling federal cash hand-outs.
The drag on government revenue caused by low oil prices has had a knock-on effect on the states, most of which have gorged on allocations from the federal purse. Workers’ salaries have gone unpaid, while actual capital expenditure has plummeted.
At N1.6 trillion in 2016, federal allocations to state governments tumbled by almost half last year, compared to a N3.1 trillion splurge in 2013 when oil price was $100 per barrel, according to data compiled by BusinessDay.
The dwindling allocations have seen states make sweeping reforms to improve their internally generated revenue, through attracting private capital and improving the ease of doing business.
The first World Bank ranking for the states since 2014 will show how far they have come and what must now follow in the quest for investments, according to Muda Yusuf, director-general of private sector interest group, the Lagos Chamber of Commerce and Industry (LCCI).
“It will help the states measure what has been achieved so far, in creating an enabling environment for doing business and cause them to sit up where necessary,” Yusuf said from his office in Lagos.
“It is a good development because it breeds healthy competition among the states,” Yusuf said of the ranking.
In 2014, the FCT ranked first for “Starting a Business,” while Jigawa state sat at the top for “Dealing with Construction Permits.
“Registering property” was easiest in Zamfara state, while “Enforcing contracts” was easiest in Katsina.
Lagos ranked 4th for starting a business, 36th for dealing with construction permits, 31st for registering property and 28th for enforcing contracts.
A high ranking for any state will be an indication of how attractive it is to investors, according to Johnson Chukwu, CEO of financial advisory firm, Cowry Assets.
“When a state’s ranking is high, investors prefer to do business there because they are somewhat assured of the ease of operating there,” Chukwu said.
“Attracting private capital is important for the states if they are to be financially autonomous at a time of reduced federal allocation,” Chukwu added.
Nigeria’s 36 states and the Federal Capital Territory (FCT) will be ranked by the World Bank based on an assessment of the ease of doing business within each location for the period 2014-2018, according to Okechukwu Enelamah, Nigeria’s minister of trade and Investment and Jumoke Oduwole, secretary to the Presidential Enabling Business Environment Council (PEBEC), an agency set up to improve the ease of doing business in the country.
The Sub-national rankings will be undertaken by the World Bank Group, with the Enabling Business Environment Secretariat (EBES) and the Nigerian Investment Promotion Council (NIPC) providing support to the state governments as they implement their priority reforms.
The sub-national process cycle which has already begun, will culminate in the release of the report and rankings in the first half of 2018.
The proposed format to be adopted by the states is similar in structure to the federal PEBEC-EBES model, which is based on global best practice and has already started delivering results for Nigeria.
The eleven indicator areas to be ranked include four World Bank indicators and seven additional areas of interest that are governed or implemented by state governments.
The World Bank indicators are Starting a Business, Enforcing Contract, Registering Property and Dealing with Construction Permits.
The seven additional indicator areas include Trade/Investment & Marketing, Infrastructure, Access to Land Property, Regulatory Environment, Institutional support & business resources, Transparency & accessibility to information and security.
“Unlike the global World Bank Doing Business Rankings, which evaluate nations based on the performances of one or two major cities, the sub-national would rank all states, capture local differences, help regions compete and tell their stories, and provide replicable good practices,” a note from the Enabling Business Environment Secretariat stated.
The 2018 Nigerian sub-national rankings will be the fourth in the series, following similar efforts by the World Bank in 2008, 2010, and 2014.
At sovereign level, Nigeria ranked 169 of 190 countries surveyed by the World Bank in its 2017 ranking.
Government officials have set a target to move north to within 100 by 2020.