Tackling competitiveness by looking beyond bureaucracy
Over the last few years the reality of Nigeria’s lack of competitiveness in industry has been apparent. Most international agencies which measure competitiveness have placed us close to the bottom of their rankings. The World Economic Forum ranked us 125th out of 137 countries in their 2017 global competitiveness rankings for instance, a position we have hovered around for most of the last decade. The ratings in the World Bank’s doing business index paint a similar picture. Besides the rankings, there has also been a tacit acceptance that the country is not a great place to do business. With many obstacles and bottlenecks holding businesses back, the local business community has pushed for improvements for a while too.
The reality of the situation has rightly spurred government to acting to correct some of the challenges. In the last few years various initiatives have been launched to try to improve the business environment with varying degrees of success. Most recently, the Presidential Enabling Business Environment Council (PEBEC) has tried tackle some of the bureaucratic bottlenecks to doing business in Nigeria. Their work has focussed on important aspects such as registering businesses and getting goods and people in and out of the country without too much hassle, and they have recorded successes with Nigeria moving up multiple places in the latest World Bank Doing Business rankings.
Although the efforts to tackle bureaucratic issues with regards to doing business have to be commended, competitiveness involves a lot more than just bureaucracy. Take for instance, the challenges of an imaginary firm that wants to set up, say, a shoe making factory in Nigeria. Yes, it has to go through the process of registering its business, and getting a tax identification number, and all that. It, however, also has to hire workers of sufficient quality; it has to buy or lease property for its factory; it has to buy raw materials either from domestic or international sources and transport them to its factory; it has to purchase or generate electricity for its factory; it has to distribute its product or export it; the list could go on.
What this means is, competitiveness involves a lot of things. Using our example above, the quality of workers hired matters for competitiveness. If a firm has to choose between country A where it can hire high quality labour, and country B where the labour is not of the same quality, it will opt for country A, all other things being equal. Or if a firm has to choose between country A where workers frequently miss work due to illness, and country B where workers do not miss work as much, it will opt for country B. What this means is that, quality of the labour force also matters for competitiveness. The level of human capital available to firms is perhaps a bigger factor for a country being competitive, as anything else.
Another example can be seen in a firm’s ability to transport its raw materials and products. If a firm can transport its raw materials from the sea port to its factory in less than a day in country A, whereas in country B, it takes four of five days to transport its products over the same distance, it will opt for country A. Or if a firm can distribute its product to all parts of the country in 24 hours in country A, whereas in country B it takes 72 hours, the firm will opt for country A. The quality of infrastructure counts for competitiveness.
Once you start to take all these factors into account, then the challenges for our competitiveness look even more dire. As most businesses will tell you, Nigeria has a serious skills problem in the sense that we have a lot of people, but not enough people with adequate skills. The less said about our infrastructure challenges the better. One only has to think of the challenges getting a container from the Apapa port out of Lagos to know that our infrastructure problems are just as problematic as out bureaucratic problems. Issues like security, justice, and land tenure security are also not far from problematic.
However, in many cases, the baton for improving competitiveness cannot be passed to the federal government alone. Once you look past some of the bureaucratic issues, many of the other challenges are things that state and local governments have some say in, or at the very least have the capacity to improve on. Unfortunately, within Nigeria there is almost no information on the level of competitiveness across states, at least not information that captures competitiveness from a wholistic point of view, and looking beyond bureaucratic issues.
This is why the first Subnational Competitiveness Index (SCI), developed by the National Competitiveness Council of Nigeria (NCCN), has the potential to play an important role in helping improve competitiveness. It is the first index to capture a broad range of indicators that matter for competitiveness, and hopefully is the first step towards helping state and local governments identify areas where they can make a difference. As the slightly adjusted saying goes, “Without data, states are blind and deaf, wandering into policy, like cows on the highway”.
Nonso Obikili is an economist currently roaming somewhere between Nigeria and South Africa. The opinions expressed in this article are the author’s and do not reflect the views of his employers.
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