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Trading Without Limits: A Matter of Time and Cost

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Making it easier to trade within and outside the country, trading without limits, as well as simplifying government procurement processes will lead to significant contributions to the nation’s GDP.

 

By Ayokunnu Ojeniyi

My thoughts race towards the orthopedic surgeon each time I consider the reform agenda of the Presidential Enabling Business Environment Council (PEBEC) over last three years.

To reform is to make an attempt at reshaping or remoulding what is considered to be out of order or unworkable – just as the orthopedic surgeon would, often through a painful process, cast a broken limb until the desired outcome of healing is confirmed.

The case for reforms under our trade-related indicators is a strong one. After all, trade contributed 16.44% to real GDP in 2018 – almost twice the contribution of oil. This, perhaps, provides some context to the consistent call for the removal of regulatory or administrative processes that continue to constrain doing business in Nigeria.

So, buoyed by feedback from the public, PEBEC in 2016 identified a number of reform areas for immediate intervention: food and drug registration, product certification, movement of goods and services, intellectual property and trading across the Nigerian borders.

 

Food and Drug Registration, Product Certification and Intellectual Property

A priority task was to inject some predictability to the food and drug registration process. The National Agency for Food Drug Administration and Control (NAFDAC), in collaboration with PEBEC, reduced the cost of product registration for MSMEs by half in 2017 and was able to clear all pending applications as at March 2018 to begin the enforcement of a 90-day timeline for food and 120-day timeline for drug registration in April 2018.

Consequently, in line with its service level agreement (SLA), the agency is now expected to complete the registration of food products within these stated timelines.

Another identified task was Intellectual Property (IP), and the 2010 National MSME Collaborative Survey report sets the context for IP related reforms. The report revealed that over 70% of entrepreneurs do not have patent rights.

In other words, 7 out of every 10 entrepreneurs in Nigeria lack any form of IP protection, and the implications of this in a global knowledge economy are significant.  Without patent rights, entrepreneurs have no right to stop others from copying, manufacturing, selling or importing their inventions without permission.

An entrepreneur is also limited from doing business in certain sectors as NAFDAC requires, among other things, an approved trademark before a NAFDAC number can be issued.

The reform interventions in the areas above mean that today, approval of trademarks and patents is now easier and faster. The Trademark Registry cleared a backlog of 30,000 outstanding marks as at April 2018.

The Ministry of Industry, Trade and Investment is also working on the automation of the trademark registry and patent office, and similar steps are being taken at the National Office for Technology Acquisition and Promotion.

 

Movement of Goods & Services

A 2010 African Development Bank report on port development in Africa ranked Nigeria as one of the countries with the poorest port turnaround times.

The failed infrastructure in and around the ports is undoubtedly a major factor affecting this, but regulatory practices such as multiplicity of documentation have also continued to heighten the challenges.

As a first step to reducing the turnaround time, the Apapa Port now runs 24-hour operations in line with Executive Order 001 (E01) directives.

Importers and exporters now have less documentation to deal with, and the Standards Organisation of Nigeria processes all SONCAP certificates within 48 hours of the inspection of exports.

PEBEC, working with security agencies and the Lagos State Government, is now focused on eliminating the traffic logjam around the port following recent improvements in road infrastructure, as the hitherto impassable Leventis Bridge and Ijora Wharf Road have now been constructed.

 

Simplifying Government Procurement Processes

There are also ongoing efforts to eliminate the strictures that have long prevented MSMEs from doing business with government.

The common thread in public sector bid announcements is the proof of compliance with taxation and other regulatory obligations. Some of these requirements have limited the ability of MSMEs, and particularly the Nigerian startup community, to participate in public procurements.

The realisation of these constraints has led to the review of the procurement requirements on contractor obligations to the National Pension Commission (PENCOM) and the Industrial Training Fund (ITF).

With the review, contractors with less than 15 employees, as opposed to 3 employees previously, are no longer required to obtain a PENCOM compliance certificate for procurement.

In the same vein, companies with less than 5 personnel or less than fifty million naira annual turnover also do not require the ITF compliance certificate to do business with government. This is especially instructive, as according to the 2010 National MSME Collaborative Survey report, 97% of businesses in Nigeria, do not have more than 10 employees or N50 million in assets.

Furthermore, the Bureau of Public Procurement (BPP) has automated the registration process for prospective contractors, consultants and service providers, and improved transparency through its national open contracting portal.

These reforms, and several more, have been delivered by PEBEC working in collaboration with multiple stakeholders across the public and private sectors over the past 3 years.

People have often questioned the logic behind the focus on these reforms, including regulatory interventions, given the current state of infrastructure in Nigeria.

While Infrastructure is, and will remain a major factor in the realisation of Nigeria’s economic potential, it must be noted, that infrastructure is not the only known impediment to economic growth.

According to the last three KMPG CFO Outlook reports, Chief Financial Officers (CFOs) have consistently and increasingly ranked regulatory risk as one of the top business risks their organizations have to grapple with. PEBEC’S reforms are therefore targeted towards reducing the cost, time and procedures for businesses in their engagement with government agencies.

 

Editorial Note: This article was originally published in The Spark Magazine. Find the magazine here to read other articles.

 

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