Investors lost 10% of revenues to insecurity, corruption in Nigeria –World Bank

Investors in Nigeria lost 10 per cent of their revenues to poor quality infrastructure, crime, insecurity, and corruption in 2011, the World Bank has said in its report for the year.

The revelation is the outcome of an assessment conducted by the World Bank on the country’s investment climate in 26 states for the 2011 fiscal period.

The assessment reviewed the experiences of over 3,000 business owners in the affected states with a focus on challenges associated with their businesses.

The World Bank assessment complements a similar study in 2007 that covered 11 other Nigerian states.

The report was launched in Abuja by the World Bank Country Director, Ms Marie Francoise Marie-Nelly, in company with the Minister of Trade and Investment, Mr. Olusegun Aganga, and the Governor of Anambra State, Mr. Peter Obi.

The Lead Private Sector Development Specialist, World Bank, Mr. Michael Wong, said the 10 per cent revenue loss recorded in Nigeria was twice as high as what obtained in South Africa, Brazil, Russia and Indonesia.

President Jonathan of Nigeria

He said the study revealed that entrepreneurs’ biggest problem was epileptic power supply while access to finance and corruption followed in that order.

For instance, he said manufacturing firms lost about 4.3 per cent of their sales proceeds to power outage while companies operating in the services sector lost about 6.3 per cent to epileptic power supply.

The report, according to Wong, shows that companies in the manufacturing sector lost 2.3 per cent of their revenue while those in the service sector lost about 2.2 per cent to corruption.

He said, “The poor performance of Nigerian firms reflects many factors. This study focuses on constraints in the business climate and the serious costs they impose on Nigerian firms.

“Taken together, the total indirect costs of poor quality infrastructure, crime and security, and corruption amount to over 10 per cent of sales for Nigerian firms. This is twice as high as in South Africa, Brazil, Russia and Indonesia.

“Nigerian businesses’ biggest reported problem is the unreliable power supply. About 83 per cent of all managers surveyed considered electricity outages to be a serious problem-more than any other constraint.

“Firms of all sizes, in all states and sectors, report average power outages equivalent to eight hours per day. The average firm reported that outages cost them money equivalent to more than four per cent of sales. No comparator country experiences such severe business losses related to the power supply.”

The report also listed tax rates, cost of finance, micro economic environment, transport, tax administration and access to land as other areas that posed serious problems to entrepreneurs in the country.

The report also said that only 15 per cent of Nigerian entrepreneurs were women, adding that the figure was the lowest in sub-Saharan Africa.

It also revealed that more than half of manufacturing firms in Nigeria did not employ women, noting that nearly 70 per cent of small firms with loans had to pledge their personal assets as collateral.

The 202 page report said, “Five other areas of the investment climate were rated as serious problems by at least one-third of firms—tax rates and tax administration, the macroeconomic environment, corruption, and transportation.

“Manufacturing firms reported paying an average of 3.2 per cent of their sales in bribes – second only to electricity outages among the costs measured by the study.

“Large and foreign-owned firms were more likely than others to rate corruption an important constraint, although as many as one-third of microenterprises also affirm that informal payments/gifts are commonplace. Losses of goods during transit emerged as an important cost, especially for exporters and larger firms.”

But Aganga said the Federal Government had identified the grey areas raised in the report and had begun the process of addressing them.

He said that President Goodluck Jonathan was addressing the problem of power supply and that before the end of the first quarter of 2013, the country would start experiencing at least 16 hours of uninterrupted power supply.

He, however, said that despite the harsh investment climate, Nigeria still remained the preferred investment destination in the world.

Since the inception of World Bank, United States of America have been producing presidents of the Brentwood institution.  But this time around a new tune is brewing and United States may have to be ready for a change.  For the first time, there is the possibility, that United States candidate, Dr. Jim Yong Kim may lose the position to Nigeria's Ngozi Okonjo-Iweala. But how is going to happen?

It may happen because many emerging nations for first time are asking for inclusion in making monetary and economic decisions in the global institutions including World Bank and International Monetary Fund (IMF).  Developing nations and emerging economies contributed more than fifty percent of the global GDP.   Many of these nations have decided that the time has come to have one of their own lead World Bank.  Nigeria’s Ngozi Okonjo-Iweala with the most attractive experience and resume might be the beneficiary of the emerging nation’s quest for leadership position at World Bank.

Change maybe clumsy and cumbersome but it can be healthy too. Just ask some Nigerians who knew when the country changed from left hand drive to right hand drive. Changing to right-hand traffic was like doing something alien and unnatural but eventually they get used to the change.

Change is good for it gives a room for reflection and growth. When change takes place the excluded, the outsider gets the opportunity to become an insider and to pilot the affairs.  In most cases change does bring innovation and invigorating ideas with affirmative outcome.

President Obama nominated Dr. Jim Yong Kim, a medical doctor by training and the current president of Darthmont College for World Bank leadership. But with Dr. Ngozi Okonjo-Iweala in the competition for same position, Kim's luck appears to be gradually dimming. Okonjo-Iweala the Nigerian finance minister and former managing director of World Bank, has a solid support from African Union and growing endorsements from many emerging nations.

There is no need to re-introduce Okonjo-Iweala to the global community because she had already made a verifiable impact on macro- economics and finance of developing nations as she went through secretary, vice-president and managing director positions at World Bank.

Okonjo-Iweala emerging support and glowing endorsements for the position goes beyond Nigeria and Africa. Many influential news outlets including Financial Times of London and Economist Magazine are recommending her for the job. Even the United States flagship newspaper, the New York Times was extolling her experience and resume.

L-R:Jim Yong Kim and Ngozi Okonjo-Iweala

Her fellow economists around the world including Joseph E. Stiglitz who has worked with her and Jose Ocampo, another candidate from Columbia had good things to say about Okonjo-Iweala. Stiglitz wrote recently that Okonjo-Iweala has what it takes to lead World Bank, suggesting that she had already made an impact on the developing world.

Stiglitz, a Nobel economics laureate wrote, "Both Okonjo-Iweala and Ocampo understand the role of international financial institutions in providing global public goods. Throughout their careers, their hearts and minds have been devoted to development, and to fulfilling the World Bank’s mission of eliminating poverty. They have set a high bar for any American candidate."

All these endorsements for Okonjo-Iweala do not translate that she will easily be elected to lead the World Bank. United States is not willing to give up the leadership at World Bank and Dr. Kim has already embarked on international tour around the world to seek support and goodwill.

President Obama's United States still enjoys an upper hand at the World Bank because of its undeniable influence and power. United States has the most number of votes together with its supportive and willing allies including Europe, Japan and others can easily elect Dr. Kim to replace the United States outing president of World Bank, Robert Zoellick.

Obama's White House may have a compelling reason for nominating Dr. Kim, maybe for the touted compassion quality he brought to his former work at World Health Organization (WHO).  But World Bank presidency should based on merit not on compassion.  Kim may have been nominated as a result of domestic politics or for Geo-political reasons.  When it comes to merit, Okonjo-Iweal stands taller than Kim.

All things being equal, the time has come for a new song from a new singer to be heard. Nigeria's Dr. Ngozi Okonjo-Iweala should be considered seriously for this job. She has been at both ends; an insider at World Bank and outsider as Nigeria's minister of finance and former Foreign minister. She is ready for the challenges and rewards of the job.

Emeka Chiakwelu is the Principal Policy Strategist at Afripol Organization. Africa Political and Economic Strategic Center (Afripol) is foremost a public policy center whose fundamental objective is to broaden the parameters of public policy debates in Africa. To advocate, promote and encourage free enterprise, democracy, sustainable green environment, human rights, conflict resolutions, transparency and probity in Africa. http://afripol.org. This e-mail address is being protected from spambots. You need JavaScript enabled to view it