Killing Small Businesses Softly
Some years ago, I was at the Nnamdi Azikiwe University, Awka, Anambra state, for a public lecture. An obviously popular lecturer was invited to the podium to make his contributions. Students went gaga, screaming his nickname and giving him a standing ovation. In the euphoria, he posed elegantly in front of the microphone and started making a proposal on how to tackle unemployment in Nigeria. Wait for this: he said all federal ministries should be directed to employ one million people annually for the next five years “to wipe out unemployment from the land”. The students jumped on their feet, clapped frenetically and screamed his nickname again. I laughed until I forgot my name.
Let’s not say a word on the office space required to accommodate one million new employees a year, or the wage bill, or the job description. I would rather leave that to accountants, economists and personnel managers. But how many people can the government employ in a country of 185 million people? Globally, the biggest employers of labour are not the government, Apple or Microsoft. They are the small and medium-sized enterprises (SMEs). They are recognised as the engine of any economy. The Buhari administration has developed quite a number of policies to support entrepreneurs, with a lot of emphasis on the ease of doing business.
In fact, the Presidential Enabling Business Environment Council (PEBEC), chaired by Vice-President Yemi Osinbajo, was set up in July 2016 by President Muhammadu Buhari “to remove bureaucratic constraints to doing business in Nigeria, and make the country a progressively easier place to start and grow a business”. The council comprises 10 ministers, the head of civil service of the federation, the CBN governor and representatives of Lagos and Kano state governments, the national assembly and the private sector. A lot has been achieved, no doubt, and this is evident in Nigeria’s improved ranking in World Bank’s Ease of Doing Business Index.
Osinbajo, while acting as president in May 2017, said: “The powerhouse of the economy, the fastest and most efficient job creators are private businesses – both small and large investments, local and foreign. Everyone who starts a business, invests in an existing business or expands a going concern creates opportunities for jobs. Jobs mean money in people’s pockets… whole families can survive, live well and pay taxes, so that government can continue to provide services, build schools, hospitals, roads and other infrastructure. But small or large businesses cannot be created or can be frustrated out of existence if the environment for doing business in a country is harsh or difficult.”
Good talk. Now let us discuss the enemies of progress. I quote Osinbajo again: “It is the public service that provides the services that determine whether the business environment will be friendly and welcoming for business or whether it will drive away business and destroy opportunities for job creation… So, when a potential business owner wants to register a company, collect tax clearance certificate or obtain NAFDAC registration or SON certification, expatriate quotas, any other papers, approvals or certification from government and we do not willingly and efficiently help him or her, we are killing the jobs and prosperity that he would have created.”
Exactly. And this is what I intend to discuss today. The business I run falls under the SME category, with a staff strength of 20. Compared to other lines of business, however, I have little to complain about in terms of the shenanigans of government agencies — apart from the overauditing by the inland revenue service. A friend told me that the constant “tax audit” is because we remit taxes regularly. Those who don’t bother about paying taxes are hardly bothered by the tax authorities, he said. What an incentive! I am honestly OK with the audits; when I listen to other SME owners complain about all the stress they go through, I realise I am enjoying life!
Two years ago, I wanted to go into table water production. I spent quite a lot of money on feasibility studies. One thing I kept hearing was the constant troubles from government agencies under the general guise of regulation. I was told that if I wanted to site the factory in Lagos state, I would have to deal with regular harassment from these agencies: National Agency for Food and Drug Administration and Control (NAFDAC), Standards Organisation of Nigeria (SON), Lagos State Water Regulatory Commission (LSWRC), Lagos State Environmental Protection Agency (LASEPA), Lagos State Ministry of Environment and Lagos State Ministry of Health.
I’m not done yet. Other agencies waiting to pounce are: Lagos State Fire Service, Federal Fire Service, Local Government Environment Service, Local Government Health Department, Local Government Fumigation Department, Local Government Food Department and the health office nearest to the factory. SON, meanwhile, will inspect four times a year. Ministry of Health inspects at least twice a year. Ministry of Environment visits two times a year. By the way, all these inspections often come with extortion. There is nothing wrong with regulation — we have to enforce standards — but you and I know that the least interest of these guys is health and safety.
Needless to say I was discouraged from going ahead with the water business. I lost possible income — and I probably would have created at least 50 jobs. That is loss of revenue for government as well. You can accuse me of chickening out. You can remind me that despite all these challenges, many Nigerians are still opening new businesses and making it. I have no intention of arguing against that, just that the threshold for stress differs from individual to individual. When a matter puts me completely at the mercy of the regulatory authorities — as represented by their sadistic field agents — I am not cut out for such a life. And I can imagine there are thousands of Nigerians like me.
My friend owns a bakery in Abuja. She regularly complains to me about the stress she faces from all manner of government officials who come to the bakery everyday from all manner of agencies. It is nothing short of harassment, intimidation and extortion. It is terrorism. One day I sat down with her and asked her to list all the fees she pays, all the agencies she deals with and all the threats she faces all the time. I walked away feeling so sad but still thankful that the business is nonetheless thriving — in spite of the enormous odds mounted by the government. It is as if government is doing everything within its power to kill SMEs. The determination is unmistakable.
The Nigeria Social Insurance Trust Fund (NSTIF) had just notified her of another “health inspection”. She was horrified. At least three units from the Abuja Municipal Council Area (AMAC) do “health inspection” every year. Two of the units charge N25,000 each while the third takes N50,000. NAFDAC, NSTIF and SON all coming for “health inspection”! One agency can do all the health checks, trust me. There is a N25,000 annual licence for “operating in FCT”. She pays N34,000 fee for “using a car to distribute bread”. She pays Federal Housing Authority (FHA) and AMAC N40,000 each for “fumigation”. It’s a major racket — the agencies MUST supply the fumigators!
AMAC collects two tenement rates from her — they say there are two buildings on the same plot of land. That’s N150,000. I find this very strange even in a land of strange things. There is also the AMAC “sanitary inspection” fee of N30,000. AMAC’s department of environment collects N150,000 yearly to inspect — you guessed right — the environment. There is also the N30,000 AMAC fee for “food and water-related handling”. I know I am boring you with figures, but you need to see how we have made life very difficult for those who run SMEs. You can imagine how many SMEs are struggling or dying because of this regulatory tyranny and legalised extortion.
It’s time to conclude and shut down my laptop so I can watch some football to calm my nerves. We cannot expect the economy to grow if government agencies that should incentivise productivity are the ones stifling it. I understand that government is desperately in need of revenue, but how much is too much? You cannot say you want SMEs to grow and be taxing them to hell at the same time. That will be counterproductive. Regulation should be about enforcing compliance, not raising revenue. You can’t milk businesses dry and expect a boom. There must be regulation, sure, but it needs to be streamlined. We need to create one-stop centres to handle issues about standards.
Also, there is an element of sadism that we need to deal with. NAFDAC once shut down my friend’s bakery over a flimsy excuse, and the agency’s team leader boasted about how many factories she had shut down that day alone. How can any sane human being celebrate hurting legitimate investments that employ people? It is nothing but despotism. There must be checks and balances and room for redress for businesses that have grievances. While I commend the Buhari administration for its ease of doing business initiative, there is more to be done to create incentives for SMEs to thrive and create jobs. Government can definitely not employ one million people yearly.