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.

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

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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.”

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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.

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“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.

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