As Nigeria moves closer to an election year, YNaija is encouraging young and vibrant candidates in the upcoming elections to reach out to the electorate with their policy direction and plan of action so as to get familiar with it. We have therefore provided them with a platform to articulate their plans and present same to our readers across Nigeria and beyond.
Akin Alabi, the founder of Nairabet, a sports betting company has taken a dive into politics and he promises something different from the norm. He recently made public his campaign policy document and here’s what he has to say about it.
Why are you running for office?
Over the course of many years, I have had the cause of engaging with members of my Egbeda/Ona Ara constituency of Oyo. As a young man and now a business owner, I have stayed connected to my roots and people, which has resulted in a firm understanding of our collective values, desires, goals and aspirations.
I know my constituents are passionate about the opportunity to thrive, the health and safety of loved ones and the education of their wards to mention a few, this is why I have focused my legislative goals and plans on promoting the ease of doing business, human capacity development, child rights, land reforms, citizen welfare and infrastructure.
Therefore, developing my legislative plan based on the mandate of the good people of Egbeda/Ona Ara Federal Constituency. This is the first installation of my legislative plan to provide solutions to the barriers SMEs and MSMEs face in their businesses, this is my proposal to make the business environment better for my constituency and Nigeria at large.
With decades of entrepreneurial and business experience within and outside Nigeria, I have a clear understanding of the institutional, regulatory, legislative and associated frameworks affecting businesses in our dear country, especially in Egbeda/Ona Ara as I also have my business located within my constituency.
What are your plans for Micro, Small and Medium Enterprises?
Micro, Small and Medium-sized Enterprises (MSMEs) are at the heart of my constituency and form the backbone of the Nigerian economy. Together, they make up approximately 96% of all businesses in Nigeria. They employ 57.74 million individuals, representing 84.02% of the Nigerian workforce, and contribute almost 50% to Nigeria’s nominal Gross Domestic Product (GDP). Now, more than ever, with the downturn in the international oil market, there is a need for MSMEs to succeed.
In Egbeda Local Government alone, we have markets like Bola Ige International Market, New Gbagi, Temidire plank market, Fashade plank market, Alaakia-Adegbayi Market and Idi-Iroko Market. These are organic and inorganic markets that house several SMEs and MSMEs where Nigerians engage in daily business. In Ona-Ara, asides from the markets, there’s an availability of large arable land for farming and the establishment of industries.
I have spoken to the business owners and they have outlined the major problems they encounter with their business, the major ones are: business registration, access to finance, poor infrastructure, inconsistent government policies, lack of support (business development services), lack of workspace, multiple taxation, increased cost of doing business, exportation and access to international markets and economic volatility. I will be tackling these issues by providing legislative reforms that will make business easier for my constituents and Nigeria at large.
Why do you think business registration is strenuous in Nigeria?
Nigeria ranks 130 out of 180 countries in the ‘starting a business’ rank of the 2018 World Bank doing business report, we are up two spots from 2017, while it is good to be climbing this is still not good enough.
The main problems are the time and cost requirements. On average, it takes 30.8 days to start a business in Nigeria, compared to half a day in other countries with 0.0% per capita in places like Slovenia.
The report found that in almost every state, more than half of the total time is spent on name reservation and company registration with the Corporate Affairs Commission (CAC). To register the company, entrepreneurs can download standard incorporation forms from the CAC’s website, but they must submit the filled-out forms and make the necessary payments in person.
The ‘Doing Business in Nigeria 2018’ found that Oyo stands out as the costliest, out of all the states at more than 70% of income per capita. The largest cost component is the professional fee charged by lawyers, which amounts to almost half of total cost in all states. Further still, cost variations among states are driven by the differences in fees charged by state authorities for the registration of business premise.
What reforms will you be proposing to enhance the ease of doing business in the country?
The Senate has passed an amendment to the archaic Companies and Allied Matters Act (CAMA), in this new legislation, company registration has been made electronic and online enhancing the e-governance initiatives, the Annual General Meetings are no longer mandatory for small companies and small businesses no longer require a lawyer to register their companies.
This bill is yet to be passed in the House of Representatives and I will ensure to work with my colleagues in the House to pass our own version that will then include;
• A flat fee structure for incorporation and stamp duty – After legal fees, incorporation fees and stamp duty (put together) constitute the second largest cost of starting a business in Nigeria. Government should collapse the fees into one payment and ensure it is lowered. Government revenue will increase from taxing thriving businesses and not several fees for new entrants.
• Remove outdated or duplicate requirements, such as the need for a Company Seal or a
Statutory Declaration of Compliance.
• Remove minimum share capital requirement. 103 countries no longer require the provision of minimum share capital to incorporate a company. International best practice requires that we eliminate or reduce minimum share capital.
• Simplify the process for obtaining a business residence permit from state authorities.
Some states like Oyo still require physical inspections to the business location while utility bills and bank payments are enough in states like Lagos and Ogun, the new legislation must ensure same across all states. The receipt issued by the designated bank showing that the business premises fee has been paid serves as proof of registration. Others states can follow suit, eliminate unnecessary steps and simplify the process.
How do you intend to provide access to credit for your constituents?
In a collaborative survey conducted by the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) and the National Bureau of Statistics (NBS) in 2013, revealed that of a total of 80,312 Small and Medium Enterprises (SMEs), only 13,031
(representing 17%) listed their source of capital as a loan. As it concerned MSMEs, only 3% of the surveyed enterprises listed their source of capital as a loan.
• Create alternatives to collateral-based lending criteria: New businesses do not have the
collateral or assets usually requested by banks before they will administer a loan, making it
difficult to obtain a loan. Banks could examine alternatives such as cash flow-based or working capital-based lending criteria. I will sponsor a bill that will allow businesses to securitise their commercial warehouse receipts. I will ensure that I work with the committee on banking to make these steps easier for entrepreneurs and banks.
• Create a proper credit reporting system: One of the major reasons that banks don’t
administer loans to smaller and newer companies is the risk involved and this is partly due to a lack of proper credit reporting system. I will sponsor a bill that will expand the range and type of information shared, collecting and distributing data from sources other than banks and regulated financial institutions. It will empower private credit reporting agencies that can then lobby for their clients with proper verified credit scores. This can fuel economic growth, and enable more efficient allocation of risk, costs and financial reserves.
What is your thought on the current tax regime in the country?
Nigeria ranks 181 in the World Bank’s paying taxes survey, despite the low tax to GDP ratio of about 6% which is one of the lowest in the world, the tax system is restrictive for businesses.
According to the World Bank, it requires an estimated 908 hours per year to comply with taxation requirements in Nigeria, this is 826 hours longer than Djibouti (82 hours).
Nigeria has initiated steps to increase tax revenue, the federal government did with the
introduction of luxury taxes and the ongoing process to review incentives, such as the much-abused pioneer status system. However, the Federal Government needs to focus more on reviewing tax disincentives, which hinder growth, prevent productive diversification of the economy and improve non-oil revenue.
What is the solution to Nigeria’s tax problems?
The company income tax of 2004 is outdated and in need of amendments.
• Revoke the requirement of Minimum Taxation: The Company Income Tax (CIT) imposes a minimum tax on companies where they have no taxable profits or taxable profits resulting in lower than minimum tax. These companies are compelled to pay taxes out of their capital. The provision is discriminatory as it does not apply to companies with significant imported equity capital. It discourages investment and increases the risk of failure for companies in periods of little or no profitability.
• Stop the multiciplity of taxes by ensuring one tax for each tax base: Nigerian businesses pay similar taxes on the same tax base and this increases the cost of doing business. Taxes like CIT, Information Technology Tax (NITDA Levy), Education Tax, Nigerian Content Development Levy are all based on income or profits. Likewise, Value Added Tax, Sales Tax and Hotel Consumption Tax are all based on sales. It is important to streamline the payment by merging some of the taxes and allow joint filing and payment of taxes levied on the same base. This will reduce compliance time and frequency of payments which stands at about 40% presently. I intend to propose amendments to collapse these payments to be jointly filed and paid.
• Repeal rules on commencement of business, change of accounting date and cessation. The commencement rule often leads to double taxation on a company at its early stage thereby increasing the risk of failure. Commencement, change of accounting date and cessation rules should be repealed. Tax should be assessed on an accounting period using preceding year basis.
What’s the current challenge Nigerian businesses face with exportation?
Exportation and access to the international market is one of the major problems that Nigerian businesses face, Nigeria is ranked 183 out of 190 countries in the ‘trading across borders’ index of the 2018 World Bank “doing business” report. The report focuses on the time taken in the process of Export/Import and the cost of exporting/importing. On the average, it takes 159 hours and costs USD 786 to comply with border requirements when exporting a consignment from Nigeria.
How can this delay in exportation be resolved?
Collapsing several agencies through one electronic window. Way too many agencies are involved in the export process in Nigeria, from NDLEA to NAFDAC to the Customs, SON and several others. I will sponsor a bill that will streamline all these agencies into one data entry point for traders.
It is important to link all agencies involved in trade and transport through an electronic single-window system. This system allows traders to file standard information and documents through a single entry point to fulfil all import, export and transit-related regulatory requirements, then shares relevant information with all parties involved in trade, including banks and insurance companies.