Doing Business 2017 Nigeria Economy Profile 2017 Nigeria Doing Business 2017 Nigeria 2 © 2017 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved 1 2 3 4 19 18 17 16 This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. 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Doing Business 2017 Nigeria 3 CONTENTS Introduction .................................................................................................................................. 4 Starting a business ..................................................................................................................... 17 Dealing with construction permits ........................................................................................... 32 Getting electricity ....................................................................................................................... 49 Registering property .................................................................................................................. 62 Getting credit .............................................................................................................................. 80 Protecting minority investors ................................................................................................... 87 Paying taxes ................................................................................................................................ 95 Trading across borders ............................................................................................................ 103 Enforcing contracts .................................................................................................................. 110 Resolving insolvency ................................................................................................................ 119 Labor market regulation ......................................................................................................... 126 Distance to frontier and ease of doing business ranking .................................................... 132 Resources on the Doing Business website ............................................................................ 135 Doing Business 2017 Nigeria 4 INTRODUCTION Doing Business sheds light on how easy or difficult it is provides data for other selected economies (comparator for a local entrepreneur to open and run a small to economies) for each indicator. The data in this report are medium-size business when complying with relevant current as of June 1, 2016 (except for the paying taxes regulations. It measures and tracks changes in indicators, which cover the period January–December regulations affecting 11 areas in the life cycle of a 2015). business: starting a business, dealing with construction The Doing Business methodology has limitations. Other permits, getting electricity, registering property, getting areas important to business—such as an economy’s credit, protecting minority investors, paying taxes, proximity to large markets, the quality of its trading across borders, enforcing contracts, resolving infrastructure services (other than those related to insolvency and labor market regulation. Doing Business trading across borders and getting electricity), the 2017 presents the data for the labor market regulation security of property from theft and looting, the indicators in an annex. The report does not present transparency of government procurement, rankings of economies on labor market regulation macroeconomic conditions or the underlying strength of indicators or include the topic in the aggregate distance institutions—are not directly studied by Doing Business. to frontier score or ranking on the ease of doing The indicators refer to a specific type of business, business. generally a local limited liability company operating in In a series of annual reports Doing Business presents the largest business city. Because standard assumptions quantitative indicators on business regulations and the are used in the data collection, comparisons and protection of property rights that can be compared benchmarks are valid across economies. The data not across 190 economies, from Afghanistan to Zimbabwe, only highlight the extent of obstacles to doing business; over time. The data set covers 48 economies in Sub- they also help identify the source of those obstacles, Saharan Africa, 32 in Latin America and the Caribbean, 25 supporting policy makers in designing regulatory reform. in East Asia and the Pacific, 25 in Eastern Europe and More information is available in the full report. Doing Central Asia, 20 in the Middle East and North Africa and Business 2017 presents the indicators, analyzes their 8 in South Asia, as well as 32 OECD high-income relationship with economic outcomes and presents economies. The indicators are used to analyze economic business regulatory reforms. The data, along with outcomes and identify what reforms have worked, where information on ordering Doing Business 2017, are and why. available on the Doing Business website at This economy profile presents the Doing Business http://www.doingbusiness.org. indicators for Nigeria. To allow useful comparison, it also Doing Business 2017 Nigeria 5 CHANGES IN DOING BUSINESS 2017 As part of a three-year update in methodology, Doing having equal evidentiary weight of women’s testimony in Business 2017 expands further by adding postfiling court. processes to the paying taxes indicator, including a Also for the first time this year Doing Business collects gender component in three of the indicators and data on Somalia, bringing the total number of developing a new pilot indicator on selling to the economies covered to 190. government. Also, for the first time this year Doing Business collects data on Somalia, bringing the total For more details on the changes, see the “”Old and new number of economies covered to 190. factors covered in Doing Business” section in the The paying taxes indicator is expanded this year to Overview chapter starting on page 1 of the Doing include postfiling processes – those processes that occur Business 2017 report. For more details on the data and after a firm complies with its regular tax obligations. methodology, please see the “Data Notes” chapter These include tax refunds, tax audits and tax appeals. In starting on page 114 of the Doing Business 2017 report. particular, Doing Business measures the time it takes to For more details on the distance to frontier metric, get a value added tax (VAT) refund, deal with a simple please see the “Distance to frontier and ease of doing mistake on a corporate tax return that can potentially business ranking” chapter in this profile. trigger an audit and good practices with administrative appeals process. This year’s Doing Business report presents a gender dimension in four of the indicator sets: starting a business, registering property, enforcing contracts and labor market regulation. Three of these areas are included in the distance to frontier score and in the ease of doing business ranking, while the fourth —labor market regulation—is not. Doing Business has traditionally assumed that the entrepreneurs or workers discussed in the case studies were men. This was incomplete by not reflecting correctly the Doing Business processes as applied to women—which in some economies may be different from the processes applied to men. Starting this year, Doing Business measures the starting a business process for two case scenarios: one where all entrepreneurs are men and one where all entrepreneurs are women. In economies where the processes are more onerous if the entrepreneur is a woman, Doing Business now counts the extra procedures applied to roughly half of the population that is female (for example, obtaining a husband’s consent or gender-specific requirements for opening a personal bank account when starting a business). Within the registering property indicators, a gender component has been added to the quality of land administration index. This component measures women’s ability to use, own, and transfer property according to the law. Finally, within the enforcing contracts indicator set, economies will be scored on Doing Business 2017 Nigeria 6 THE BUSINESS ENVIRONMENT For policy makers trying to improve their economy’s regulatory environment for business, a good place to start ECONOMY OVERVIEW is to find out how it compares with the regulatory environment in other economies. Doing Business provides an aggregate ranking on the ease of doing business Region: Sub-Saharan Africa based on indicator sets that measure and benchmark regulations applying to domestic small to medium-size Income category: Lower middle income businesses through their life cycle. Economies are ranked from 1 to 190 by the ease of doing business ranking. Population: 182,201,962 Doing Business presents results for 2 aggregate measures: the distance to frontier score and the ease of doing GNI per capita (US$): 2,820 business ranking. The ranking of economies is determined by sorting the aggregate distance to frontier scores, DB2017 rank: 169 rounded to two decimals. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where DB2016 rank: 170* 0 represents the worst performance and 100 the frontier. Change in rank: 1 (See the chapter on the distance to frontier and ease of doing business). DB 2017 DTF: 44.63 The ease of doing business ranking compares economies with one another; the distance to frontier score DB 2016 DTF: 44.02 benchmarks economies with respect to regulatory best practice, showing the absolute distance to the best Change in DTF: 0.61 performance on each Doing Business indicator. When compared across years, the distance to frontier score * DB2016 ranking shown is not last year’s published shows how much the regulatory environment for local ranking but a comparable ranking for DB2016 that entrepreneurs in an economy has changed over time in captures the effects of such factors as data revisions absolute terms, while the ease of doing business ranking and the changes in methodology. See the data notes can show only how much the regulatory environment has starting on page 114 of the Doing Business 2017 changed relative to that in other economies. report for sources and definitions. The 10 topics included in the ranking in Doing Business 2017: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. The labor market regulation indicators are not included in this year’s aggregate ease of doing business ranking, but the data are presented in the economy profile. Doing Business 2017 Nigeria THE BUSINESS ENVIRONMENT Figure 1.1 Where economies stand in the global ranking on the ease of doing business Source: Doing Business database. Doing Business 2017 Nigeria THE BUSINESS ENVIRONMENT For policy makers, knowing where their economy regional average (figure 1.2). The economy’s rankings stands in the aggregate ranking on the ease of doing (figure 1.3) and distance to frontier scores (figure 1.4) business is useful. Also useful is to know how it ranks on the topics included in the ease of doing business relative to comparator economies and relative to the ranking provide another perspective. Figure 1.2 How Nigeria and comparator economies rank on the ease of doing business Note: The rankings are benchmarked to June 2016 and based on the average of each economy’s distance to frontier (DTF) scores for the 10 topics included in this year’s aggregate ranking. The distance to frontier score benchmarks economies with respect to regulatory practice, showing the absolute distance to the best performance in each Doing Business indicator. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where 0 represents the worst performance and 100 the frontier. For the economies for which the data cover 2 cities, scores are a population-weighted average for the 2 cities. Source: Doing Business database. Doing Business 2017 Nigeria 9 THE BUSINESS ENVIRONMENT Figure 1.3 Rankings on Doing Business topics - Nigeria (Scale: Rank 190 center, Rank 1 outer edge) Figure 1.4 Distance to frontier scores on Doing Business topics - Nigeria (Scale: Score 0 center, Score 100 outer edge) Source: Doing Business database. Note: The rankings are benchmarked to June 2016 and based on the average of each economy’s distance to frontier (DTF) scores for the 10 topics included in this year’s aggregate ranking. The distance to frontier score benchmarks economies with respect to regulatory practice, showing the absolute distance to the best performance in each Doing Business indicator. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where 0 represents the worst performance and 100 the frontier. For the economies for which the data cover 2 cities, scores are a population-weighted average for the 2 cities. Doing Business 2017 Nigeria 10 THE BUSINESS ENVIRONMENT Just as the overall ranking on the ease of doing business Doing Business introduced the distance to frontier score. tells only part of the story, so do changes in that ranking. This measure shows how far on average an economy is Yearly movements in rankings can provide some indication from the best performance achieved by any economy on of changes in an economy’s regulatory environment for each Doing Business indicator. firms, but they are always relative. Comparing the measure for an economy at 2 points in time Moreover, year-to-year changes in the overall rankings do allows users to assess how much the economy’s regulatory not reflect how the business regulatory environment in an environment as measured by Doing Business has changed economy has changed over time—or how it has changed over time—how far it has moved toward (or away from) in different areas. To aid in assessing such changes, the most efficient practices and strongest regulations in areas covered by Doing Business (figure 1.5). Figure 1.5 How far has Nigeria come in the areas measured by Doing Business? Note: The distance to frontier score shows how far on average an economy is from the best performance achieved by any economy on each Doing Business indicator. Starting a business is comparable to 2010. Getting credit, protecting minority investors, paying taxes and resolving insolvency had methodology changes in 2014 and thus are only comparable to 2013. Dealing with construction permits, registering property, trading across borders, enforcing contracts and getting electricity had methodology changes in 2015 and thus are only comparable to 2014. The measure is normalized to range between 0 and 100, with 100 representing the best performance (the frontier). See the data notes starting on page 114 of the Doing Business 2017 report for more details on the distance to frontier score. Source: Doing Business database. Doing Business 2017 Nigeria 11 THE BUSINESS ENVIRONMENT The absolute values of the indicators tell another part of regulation—such as a regulatory process that can be the story (table 1.1). The indicators, on their own or in completed with a small number of procedures in a few comparison with the indicators of a good practice days and at a low cost. Comparison of the economy’s economy or those of comparator economies in the indicators today with those in the previous year may region, may reveal bottlenecks reflected in large numbers show where substantial bottlenecks persist—and where of procedures, long delays or high costs. Or they may they are diminishing. reveal unexpected strengths in an area of business Table 1.1 Summary of Doing Business indicators for Nigeria United Kingdom DB2017 Best performer globally South Africa DB2017 Nigeria DB2017 Nigeria DB2016 Indicator Kenya DB2017 Lagos DB2017 Kano DB2017 India DB2017 DB2017 Starting a Business 138 137 -- -- 155 116 131 16 1 (New Zealand) (Rank) Starting a Business (DTF 78.62 77.19 79.98 74.08 74.31 83.13 80.47 94.58 99.96 (New Zealand) Score) Procedure – Men 8.7 8.7 8.0 11.0 12.9 7.0 7.0 4.0 1.0 (New Zealand) (number) Time – Men (days) 25.2 30.5 24.0 29.0 26.0 22.0 43.0 4.5 0.5 (New Zealand) Cost – Men (% of 31.0 31.7 30.6 32.4 13.8 21.1 0.2 0.1 0.0 (Slovenia) income per capita) Procedure – Women 8.7 8.7 8.0 11.0 12.9 7.0 7.0 4.0 1.0 (New Zealand) (number) Time – Women (days) 25.2 30.5 24.0 29.0 26.0 22.0 43.0 4.5 0.5 (New Zealand) Cost – Women (% of 31.0 31.7 30.6 32.4 13.8 21.1 0.2 0.1 0.0 (Slovenia) income per capita) Paid-in min. capital (% 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 (127 Economies*) of income per capita) Dealing with 174 173 -- -- 185 152 99 17 1 (New Zealand) Construction Permits Doing Business 2017 Nigeria 12 United Kingdom DB2017 Best performer globally South Africa DB2017 Nigeria DB2017 Nigeria DB2016 Indicator Kenya DB2017 Lagos DB2017 Kano DB2017 India DB2017 DB2017 (Rank) Dealing with Construction Permits 49.63 49.61 42.35 73.98 32.83 57.18 68.21 80.34 87.40 (New Zealand) (DTF Score) Procedures (number) 16.1 16.1 17.0 13.0 35.1 17.0 19.0 9.0 7.0 (4 Economies*) Time (days) 106.3 106.3 116.0 74.0 190.0 160.0 141.0 86.0 28.0 (Korea, Rep.) Cost (% of warehouse 0.1 (Trinidad and 23.6 24.4 30.0 2.3 25.9 6.3 0.9 1.1 value) Tobago) Building quality control 6.8 6.8 6.5 8.0 11.5 7.0 10.0 9.0 15.0 (Luxembourg*) index (0-15) Getting Electricity 180 182 -- -- 26 106 111 17 1 (Korea, Rep.) (Rank) Getting Electricity (DTF 29.43 29.38 29.13 30.43 85.09 64.43 63.18 89.12 99.88 (Korea, Rep.) Score) Procedures (number) 9.0 9.0 9.0 9.0 5.0 3.0 4.0 4.0 3.0 (15 Economies*) Time (days) 195.2 195.2 198.0 186.0 45.9 97.0 84.0 79.0 18.0 (Korea, Rep.*) Cost (% of income per 422.8 437.7 422.8 422.8 133.2 642.0 156.1 25.8 0.0 (Japan) capita) Reliability of supply and transparency of tariff 0.0 0.0 0.0 0.0 7.0 0.0 0.0 8.0 8.0 (26 Economies*) index (0-8) Registering Property 182 182 -- -- 138 121 105 47 1 (New Zealand) (Rank) Registering Property 31.44 31.43 29.86 36.71 50.00 54.40 59.03 74.11 94.46 (New Zealand) (DTF Score) Procedures (number) 12.1 12.1 13.0 9.0 7.0 9.0 7.0 6.0 1.0 (4 Economies*) Doing Business 2017 Nigeria 13 United Kingdom DB2017 Best performer globally South Africa DB2017 Nigeria DB2017 Nigeria DB2016 Indicator Kenya DB2017 Lagos DB2017 Kano DB2017 India DB2017 DB2017 Time (days) 69.6 69.6 77.0 45.0 46.8 61.0 23.0 21.5 1.0 (3 Economies*) Cost (% of property 10.5 10.5 10.1 11.8 7.7 6.1 7.3 4.8 0.0 (Saudi Arabia) value) Quality of the land administration index (0- 6.3 6.3 7.0 4.0 7.0 16.0 13.5 24.0 29.0 (Singapore) 30) Getting Credit (Rank) 44 60 -- -- 44 32 62 20 1 (New Zealand) Getting Credit (DTF 65.00 60.00 65.00 65.00 65.00 70.00 60.00 75.00 100.00 (New Zealand) Score) Strength of legal rights 7.0 6.0 7.0 7.0 6.0 7.0 5.0 7.0 12.0 (3 Economies*) index (0-12) Depth of credit 6.0 6.0 6.0 6.0 7.0 7.0 7.0 8.0 8.0 (30 Economies*) information index (0-8) Credit registry coverage 0.1 0.1 0.1 0.1 0.0 0.0 0.0 0.0 100.0 (3 Economies*) (% of adults) Credit bureau coverage 7.7 6.7 7.7 7.7 21.4 25.8 63.7 100.0 100.0 (23 Economies*) (% of adults) Protecting Minority 32 30 -- -- 13 87 22 6 1 (New Zealand*) Investors (Rank) Protecting Minority 65.00 65.00 65.00 65.00 73.33 53.33 70.00 78.33 83.33 (New Zealand*) Investors (DTF Score) Strength of minority investor protection 6.5 6.5 6.5 6.5 7.3 5.3 7.0 7.8 8.3 (New Zealand) index (0-10) Extent of conflict of interest regulation 7.0 7.0 7.0 7.0 6.7 6.7 8.0 8.3 9.3 (New Zealand) index (0-10) Extent of shareholder 6.0 6.0 6.0 6.0 8.0 4.0 6.0 7.3 8.3 (Norway) governance index (0- Doing Business 2017 Nigeria 14 United Kingdom DB2017 Best performer globally South Africa DB2017 Nigeria DB2017 Nigeria DB2016 Indicator Kenya DB2017 Lagos DB2017 Kano DB2017 India DB2017 DB2017 10) 1 (United Arab Paying Taxes (Rank) 182 182 -- -- 172 125 51 10 Emirates) Paying Taxes (DTF 99.44 (United Arab 28.09 28.43 28.08 28.09 46.58 61.72 81.09 90.74 Score) Emirates) Payments (number per 3.0 (Hong Kong SAR, 59.0 59.0 59.0 59.0 25.0 31.0 7.0 8.0 year) China*) Time (hours per year) 907.9 907.9 956.0 747.0 241.0 195.5 203.0 110.0 55.0 (Luxembourg) Total tax rate (% of 34.3 33.3 34.3 34.3 60.6 37.4 28.8 30.9 26.1 (32 Economies*) profit) Postfiling index (0-100) 17.2 17.2 32.1 58.6 87.4 98.5 (Estonia) Trading across Borders 181 181 -- -- 143 105 139 28 1 (10 Economies*) (Rank) Trading across Borders 100.00 (10 19.93 19.93 19.93 19.93 57.61 66.38 58.01 93.76 (DTF Score) Economies*) Time to export: Border 135 135 135 135 106 21 100 24 0 (18 Economies*) compliance (hours) Cost to export: Border 786 786 786 786 413 143 428 280 0 (18 Economies*) compliance (USD) Time to export: Documentary 131 131 131 131 38 19 68 4 1 (25 Economies*) compliance (hours) Cost to export: Documentary 250 250 250 250 92 191 170 25 0 (19 Economies*) compliance (USD) Time to import: Border 284 284 284 284 283 180 144 3 0 (25 Economies*) compliance (hours) Doing Business 2017 Nigeria 15 United Kingdom DB2017 Best performer globally South Africa DB2017 Nigeria DB2017 Nigeria DB2016 Indicator Kenya DB2017 Lagos DB2017 Kano DB2017 India DB2017 DB2017 Cost to import: Border 1077 1077 1077 1077 574 833 657 0 0 (28 Economies*) compliance (USD) Time to import: Documentary 173 173 173 173 61 84 36 2 1 (29 Economies*) compliance (hours) Cost to import: Documentary 564 564 564 564 135 115 213 0 0 (30 Economies*) compliance (USD) Enforcing Contracts 139 139 -- -- 172 87 113 31 1 (Korea, Rep.) (Rank) Enforcing Contracts 48.59 48.59 49.34 46.07 35.19 58.27 54.10 69.36 84.15 (Korea, Rep.) (DTF Score) Time (days) 509.8 509.8 447.0 720.0 1420.0 465.0 600.0 437.0 164.0 (Singapore) Cost (% of claim) 57.7 57.7 62.0 43.4 39.6 41.8 33.2 43.9 9.0 (Iceland) Quality of judicial 7.7 7.7 8.0 6.5 9.0 9.0 7.0 15.0 15.5 (Australia) processes index (0-18) Resolving Insolvency 140 139 -- -- 136 92 50 13 1 (Finland) (Rank) Resolving Insolvency 30.60 30.68 30.60 30.60 32.75 43.39 57.94 82.04 93.89 (Finland) (DTF Score) Recovery rate (cents on 27.8 28.0 27.8 27.8 26.0 28.4 35.1 88.6 92.9 (Norway) the dollar) Time (years) 2.0 2.0 2.0 2.0 4.3 4.5 2.0 1.0 0.4 (22 Economies*) Cost (% of estate) 22.0 22.0 22.0 22.0 9.0 22.0 18.0 6.0 1.0 (22 Economies*) Strength of insolvency 5.0 5.0 5.0 5.0 6.0 9.0 12.5 11.0 15.0 (6 Economies*) framework index (0-16) Source: Doing Business database. Note: DB2016 rankings shown are not last year’s published rankings but comparable rankings for DB2016 that capture the effects of such factors as data revisions and changes to the methodology. The global best performer on time for paying taxes is defined as the lowest Doing Business 2017 Nigeria 16 time recorded among all economies in the DB2016 sample that levy the 3 major taxes: profit tax, labor taxes and mandatory contributions, and VAT or sales tax. If an economy has no laws or regulations covering a specific area—for example, insolvency—it receives a “no practice” mark. Similarly, an economy receives a “no practice” mark if regulation exists but is never used in practice or if a competing regulation prohibits such practice. Either way, a “no practice” mark puts the economy at the bottom of the ranki ng on the relevant indicator. * Two or more economies share the top ranking on this indicator. A number shown in place of an economy’s name indicates the number of economies that share the top ranking on the indicator. For a list of these economies, see the Doing Business website (http://www.doingbusiness.org). Doing Business 2017 Nigeria 17 STARTING A BUSINESS Formal registration of companies has many WHAT THE STARTING A BUSINESS immediate benefits for the companies and for business owners and employees. Legal entities can INDICATORS MEASURE outlive their founders. Resources are pooled as several shareholders join forces to start a company. Procedures to legally start and operate a Formally registered companies have access to company (number) services and institutions from courts to banks as well Preregistration (for example, name as to new markets. And their employees can benefit verification or reservation, notarization) from protections provided by the law. An additional benefit comes with limited liability companies. These Registration in the economy’s largest limit the financial liability of company owners to their business city1 investments, so personal assets of the owners are not Postregistration (for example, social security put at risk. Where governments make registration registration, company seal) easy, more entrepreneurs start businesses in the formal sector, creating more good jobs and Obtaining approval from spouse to start a generating more revenue for the government. business, to leave the home to register the company or open a bank account. What do the indicators cover? Obtaining any gender specific document for Doing Business records all procedures officially company registration and operation, national required, or commonly done in practice, for an identification card or opening a bank entrepreneur to start up and formally operate an account. industrial or commercial business, as well as the time and cost to complete these procedures and the paid- Time required to complete each procedure in minimum capital requirement. These procedures (calendar days) include obtaining all necessary licenses and permits Does not include time spent gathering and completing any required notifications, information verifications or inscriptions for the company and employees with relevant authorities. The ranking of Each procedure starts on a separate day (2 economies on the ease of starting a business is procedures cannot start on the same day). determined by sorting their distance to frontier Procedures that can be fully completed scores for starting a business. These scores are the online are recorded as ½ day. simple average of the distance to frontier scores for Procedure completed once final document is each of the component indicators. received To make the data comparable across economies, No prior contact with officials several assumptions about the business and the procedures are used. It is assumed that any required Cost required to complete each procedure information is readily available and that the (% of income per capita) entrepreneur will pay no bribes. Assumptions about Official costs only, no bribes the business: No professional fees unless services required  Is a limited liability company (or its legal by law or commonly used in practice equivalent). If there is more than one type of limited liability company in the economy, the Paid-in minimum capital (% of income limited liability form most common among per capita) domestic firms is chosen. Information on the Deposited in a bank or with a notary before most common form is obtained from registration (or within 3 months) incorporation lawyers or the statistical office.  Operates in the economy’s largest business  The size of the entire office space is city. For 11 economies the data are also approximately 929 square meters (10,000 square collected for the second largest business city. feet).  Is 100% domestically owned and has five Doing Business 2017 Nigeria 18 owners, none of whom is a legal entity  Does not qualify for investment incentives or any special benefits.  Has start-up capital of 10 times income per capita  Has at least 10 and up to 50 employees one month after the commencement of operations, all  Performs general commercial or industrial of them domestic nationals. activities, such as the production or sale to the public of products or services. The business  Has a turnover of at least 100 times income per does not perform foreign trade activities and capita. does not handle products subject to a special  Has a company deed 10 pages long. tax regime, for example, liquor or tobacco. It is not using heavily polluting production The owners: processes.  Have reached the legal age of majority and are  Leases the commercial plant or offices and is capable of making decisions as an adult. If there not a proprietor of real estate. is no legal age of majority, they are assumed to be 30 years old.  The amount of the annual lease for the office space is equivalent to 1 times income per  Are sane, competent, in good health and have no capita criminal record.  Are married, the marriage is monogamous and registered with the authorities.  Where the answer differs according to the legal system applicable to the woman or man in question (as may be the case in economies where there is legal plurality), the answer used will be the one that applies to the majority of the population. Doing Business 2017 Nigeria 19 STARTING A BUSINESS Where does the economy stand today? What does it take to start a business in Nigeria? indicator sets refer to a case scenario in the largest According to data collected by Doing Business, starting a business city of an economy, except for 11 economies for business there requires 8.7 procedures , takes 25.2 days, which the data are a population-weighted average of the costs 31.0% of income per capita for men, and requires 2 largest business cities. See the chapter on distance to 8.7 procedures , takes 25.2 days, costs 31.0% of income frontier and ease of doing business ranking at the end of per capita for women. A requirement of paid-in this profile for more details. minimum capital of 0.0% of income per capita (figure . 2.1) is legally mandatory for both men and women. Most Figure 2.1 What it takes to start a business in Nigeria - Lagos Paid-in minimum capital (% of income per capita): 0.0 Doing Business 2017 Nigeria 20 What it takes to start a business in Nigeria - Kano Source: Doing Business database. Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the starting a business indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Procedures in light blue are for married women only. Doing Business 2017 Nigeria 21 STARTING A BUSINESS Globally, Nigeria stands at 138 in the ranking of 190 average ranking provide other useful information for economies on the ease of starting a business (figure 2.2). assessing how easy it is for an entrepreneur in Nigeria to The rankings for comparator economies and the regional start a business. Figure 2.2 How Nigeria and comparator economies rank on the ease of starting a business Source: Doing Business database. Doing Business 2017 Nigeria 22 STARTING A BUSINESS Economies around the world have taken steps making it they often are part of a larger regulatory reform easier to start a business—streamlining procedures by program. Among the benefits have been greater firm setting up a one-stop shop, making procedures simpler satisfaction and savings and more registered businesses, or faster by introducing technology and reducing or financial resources and job opportunities. eliminating minimum capital requirements. Many have What business registration reforms has Doing Business undertaken business registration reforms in stages—and recorded in Nigeria (table 2.1)? Table 2.1 How has Nigeria made starting a business easier—or not? By Doing Business report year from DB2011 to DB2017 DB year Reform Nigeria made starting a business easier by improving online DB2017 government portals . This reform applies to both Kano and Lagos. Source: Doing Business database. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Doing Business 2017 Nigeria 23 STARTING A BUSINESS What are the details? Underlying the indicators shown in this chapter for STANDARDIZED COMPANY Nigeria is a set of specific procedures—the bureaucratic and legal steps that an entrepreneur must complete to incorporate and register a new Legal form: Private Limited Liability Company firm. These are identified by Doing Business through collaboration with relevant local professionals and Paid-in minimum capital requirement: NGN 0 the study of laws, regulations and publicly available City: Lagos, Kano information on business entry in that economy. Following is a detailed summary of those procedures, Start-up Capital: 10 times GNI per capita along with the associated time and cost. These procedures are those that apply to a company matching the standard assumptions (the “standardized company”) used by Doing Business in collecting the data (see the section in this chapter on what the indicators measure). Table 2.2 Summary of time, cost and procedures for starting a business in Nigeria - Lagos Time to No. Procedure Cost to complete complete Reserve a unique company name The Corporate Affairs Commission (CAC) online system was launched on February 2nd, 2015. This platform enables online unique name reservation as well as enabling filing the incorporation forms for the entire registration process. Applicants can to go to the CAC branch office in Lagos (either in Yaba NGN 500 1 2 days or Alausa) to complete this procedure with the CAC accredited application form professionals, where the business founders submit Form CAC 1: Availability Check and Reservation of Name. Alternatively, they can complete the process online at: http://services.cac.gov.ng/. Agency: Corporate Affairs Commission Prepare the requisite incorporation documents and pay the stamp duty 0.75% stamp duty To prepare the requisite incorporation documents, the business paid on share founders must complete the statutory forms, prepare and print the capital + NGN 500 memorandum and articles of association, and have them stamped by for each additional the Federal Inland Revenue Service (FIRS). 7 days copy of 2 Memorandum and The stamp duty payable on share capital (ad valorem) is 0.75% and Articles of NGN 500 for each additional copy of Memorandum and Articles of Association stamped. Association stamped (2 copies) Agency: Federal Inland Revenue Service Doing Business 2017 Nigeria 24 Time to No. Procedure Cost to complete complete Sign the declaration of compliance (Form CAC 4) before a Commissioner for Oaths or a Notary Public The declaration by the barrister or solicitor engaged in the formation of the company may be sworn to before a Notary Public for a fee of NGN NGN 500 at the 4,000 - NGN 5,000 or at any of the recognized courts in the country court or NGN 4,000 3 (Magistrate Court, the State High Court, or the Federal High Court) 1 day - NGN 5,000 with a before a Commissioner for Oaths for a small fee of NGN 500 usually Notary Public chargeable by the respective courts. Agency: Notary Public Register the company and pay fees To register the company with the Corporate Affairs Commission (CAC), the following incorporation documents are submitted: • Form CAC 1: Availability Check and Reservation of Name. • Memorandum and articles of association, stamped by the commissioner for stamp duties (2 copies). • Form CAC 3: Notice of registered address. • Form CAC 4: Declaration of compliance. • Form CAC 7: Particulars of directors. • Form CAC 2: Statement of share capital and return of allotment of shares. • Form CAC 2.1: Particulars of the company secretary. Incorporation fees are: • Incorporation fees for a company whose share capital exceeds NGN 1,000,000.00 are NGN 10,000.00 for the first NGN 1,000,000.00 and see procedure 4 NGN 5,000.00 for every additional NGN 1,000,000.00 or any part 10 days details thereof. • NGN 500 incorporation forms. • NGN 3,000 for certified true copy of memorandum and articles of association. • NGN 2,000 for certified true copy of particulars of directors. • NGN 2,000 for certified true copy of particulars of shareholders. • NGN 2,000 for certified true copy of particulars of the company secretary. The payment of registration fees can be made at the bank desk at the CAC. The payment of statutory filing fees can now be processed online through Remita, an electronic payment platform. Upon making relevant payments online, the applicant is still required to verify these payments at the CAC in person. Agency: Corporate Affairs Commission Doing Business 2017 Nigeria 25 Time to No. Procedure Cost to complete complete Make a company seal Section 74 of the Companies and Allied Matters Act (CAMA) requires every company to have a common seal. NGN 4,000 - NGN 5 1 day 6,000 Agency: Sealmaker Register for income tax and VAT The Federal Inland Revenue Service (FIRS) requires the applicant to complete tax registration forms for corporate income tax registration as well as VAT. The registration process requires submitting a completed tax office– issued application (taxpayer registration input form, TRIF/2006/001 COYS) and the following documents: • Completed FIRS questionnaire. • Memorandum and articles of association (copy). • Certificate of incorporation (copy). • Directors’ names and addresses. • Tax advisor’s name and address. • Letter of appointment of a tax adviser and corresponding letter of acceptance. • The date the company commenced business; 1 day no charge 6 • Names, addresses and mobile numbers of major promoters and the chairman of the company, including their email addresses; • Other sources of income of the chairman and the promoters of the company; • Name and addresses of the principal officers of the company including the chairman, managing director, legal adviser and accountant; To register, the company must submit the taxpayer registration input form in duplicate, and the original certificate of incorporation must be presented for review by the controller. Upon the completed taxpayer registration input form and all other documents being received, a tax reference number is allocated. Agency: Federal Inland Revenue Service Register for personal income tax PAYE at the State Tax Office 2 days (simultaneous with *7 All employers shall register with the relevant state tax authority for no charge previous income tax withholding. procedure) Doing Business 2017 Nigeria 26 Time to No. Procedure Cost to complete complete The PAYE Regulations of 2003 made pursuant to the Personal Income Tax Act provides that all employers are to register with the Lagos State Board of Internal Revenue Tax Office nearest to the registered company address for the purpose of remitting income tax deducted from their employees. The employer must within 6 months of commencing a business deduct tax from emoluments of employees and remit the amount deducted to any of the designated collecting banks. The registration requirements are as follows: 1. A copy of certificate of incorporation. 2. List of staff and their annual salaries. 3. Letter of application for registration. 4. Corporate income tax and VAT tax reference number. Upon completion of registration, an Employer's Identification Number will be issued. An employer who fails or refuses to register commits an offence and is liable on conviction to pay a NGN 25,000 fine in addition to the payment of arrears of the tax due. Agency: State Tax Office Register business premises with the Lagos State Government and pay the business premises levy To register the company premises with the Lagos State Government, the entrepreneur heads to any nationalized commercial bank with some evidence of the business premises (utility bills, etc.) and pays the business premise levy to the account of the Lagos Inland Revenue Services (LIRS). The bank then issues a receipt bearing the Lagos State Government logo. 1 day Business premises in an urban area of Nigeria are required to be (simultaneous with *8 NGN 10,000 registered on the payment of a NGN 10,000 registration fee in the first previous year of registration (NGN 5,000 per annum as renewal registration fees procedure) in the subsequent years). For rural areas, the business premises registration fees is NGN 2,000 for the first year of registration (NGN 1,000 per annum as registration renewal fees for the subsequently years). Agency: Bank * Takes place simultaneously with another procedure. Source: Doing Business database. Note: Online procedures account for 0.5 days in the total time calculation. Procedures in light blue are for married women only. Summary of time, cost and procedures for starting a business in Nigeria - Kano Doing Business 2017 Nigeria 27 Time to No. Procedure Cost to complete complete Reserve a unique company name The Corporate Affairs Commission online system allows for online search of unique company names upon the purchase of an e-payment card for a flat fee of NGN 500 from an accredited bank. If the system is not fully operational due to either power fluctuations or network failures, applicants may go to the CAC office in person to complete this 1 procedure. The time to conduct the availability of name search, receive 2 days NGN 500 confirmation and reserve the company name is usually 24 hours (2 business days). The company’s name reservation lasts 60 days but can be renewed for a similar period. Agency: Corporate Affairs Commission Prepare the requisite incorporation documents and pay the stamp duty Stamp duty at 0.75% of share This procedure involves the following tasks: capital + NGN a. Preparing and printing the memorandum and articles of association; 1,000 for stamping b. Completing the requisite statutory forms; of two extra copies c. Having the memorandum and articles of association stamped by the 7 days of memorandum 2 Federal Inland Revenue Service. and articles of association (NGN There is a stamp duty office on the same premises as the CAC. 500 each) + NGN Agency: Stamp duty office 500 for incorporation forms Sign the declaration of compliance (Form CAC 4) before a Commissioner for Oaths or notary public A declaration must be sworn by: (i) a barrister or solicitor engaged in the formation of the company or (ii) a person named in the memorandum and articles of association as a director or secretary of the company. This procedure can be done before a notary public or 1 day NGN 50 3 filed at the State or Federal High Court. The common practice is for this declaration to be sworn before a Commissioner of Oaths at the State High Court. Agency: State High Court Obtain a bank draft for payment of the registration fees Payment is made to a bank designated by the Corporate Affairs Commission. see procedure 4 1 day Fees are as follows: details • Incorporation fees for a company whose share capital exceeds NGN 1,000,000.00 are NGN 10,000.00 for the first NGN 1,000,000.00 and NGN 5,000.00 for every additional NGN 1,000,000.00 or any part thereof. Doing Business 2017 Nigeria 28 Time to No. Procedure Cost to complete complete • NGN 500 incorporation forms. • NGN 3,000 for certified true copy of memorandum and articles of association. • NGN 2,000 for certified true copy of particulars of directors. • NGN 2,000 for certified true copy of particulars of shareholders. • NGN 2,000 for certified true copy of particulars of the company secretary. Agency: Designated bank Register the company at the Corporate Affairs Commission The applicant must file with the Corporate Affairs Commission the required incorporation documents and forms, which include: a. Stamped memorandum and articles of association (2 copies); b. Form CAC 3, Notice of registered address; c. Form CAC 7, Particulars of directors; d. Form CAC 4, Declaration of compliance and the prescribed registration fees; e. Copy of the reservation of company name approval; f. Form CAC 2, Statement of share capital and return of allotment of shares; g. Form CAC 2.1, Particulars of Person who is the company secretary of a company or any changes therein; h. Photocopy of information page of international passport or national identity card for each director and subscriber. The fee schedule for registration is the following: - for the first NGN 1,000,000 of nominal capital: NGN 10,000; - for every NGN 1,000,000 or less thereof of nominal capital after the NGN 60,000 for 5 10 days first NGN 1,000,000: NGN 5,000; legal fees Fees for certified true copies of some forms are paid as follows: - - NGN 3,000 for C.T.C of Memorandum and Articles of Association; - NGN 2,000 for C.T.C of Particulars of Directors (CAC 7); - NGN 2,000 for C.T.C of Allotment of Share Capital (CAC 2); - NGN 2,000 for C.T.C of particulars of the company secretary. Lawyers are usually hired to undertake the administrative incorporation procedures. On average, a lawyer will charge NGN 60,000 to handle the entire incorporation process in this state. The payment of statutory filing fees can now be processed online through Remita, an electronic payment platform. Upon making relevant payments online, the applicant is still required to verify these payments at the CAC in person. Agency: Corporate Affairs Commission Doing Business 2017 Nigeria 29 Time to No. Procedure Cost to complete complete Make a company seal Section 74 of the Companies and Allied Matters Act (CAMA) requires every company to have a common seal. It is also common in practice, especially because companies will generally have to register a deed or 1 day NGN 5,000 6 other official documents. Agency: Private company Register for income tax and VAT Entrepreneurs can register for both corporate income tax and VAT at the new Integrated Tax Office. For corporate income tax, the Federal Inland Revenue Service (FIRS) will require the applicant to complete tax registration forms. The new company registers at the nearest Federal Tax Office. A form obtained from the tax office is filled and the following documents submitted with it: a. Taxpayer registration input form (TRIF/2006/001 COYS); b. Completed FIRS questionnaire; c. Copy of memorandum and articles of association; d. Names and addresses of directors; e. Copy of the certificate of incorporation; f. Name, address of tax adviser; g. Letter of appointment of tax adviser and a letter of acceptance; h. The date the company commenced business; i. Names, addresses and mobile numbers of major promoters and the chairman of the company, including their email addresses; j. Other sources of income of the chairman and the promoters of the 7 company; 1 day no charge k. Name and addresses of the principal officers of the company including the chairman, managing director, legal adviser and accountant. The application forms must be in triplicate and the original certificate of incorporation must be presented for 'sighting' by the controller before registration can be completed. Upon receipt of the completed taxpayer registration input form and all documents, a tax reference number is allocated. The fees for the tax clearance issuance are as follows: (i) for newly registered companies within 6 months of incorporation: no fee; (ii) for companies that are yet to commence business and show up for registration after 6 months of incorporation, if they request for tax clearance certificate a pre-operation levy of NGN 25,000 is payable for the first time and NGN 20,000 is payable for subsequent years until it files a notice of commencement of business. Companies required to register for VAT complete the VAT registration form (VAT Form 001, obtainable free of charge from all FIRS offices) and return it to the integrated tax office, which will issue a taxpayer Doing Business 2017 Nigeria 30 Time to No. Procedure Cost to complete complete identification number (TIN). Companies required to register for VAT must do so within 6 months from the date of company incorporation. Since the registration for corporate income tax and VAT are done in the same place, one Tax Identification Number (TIN) is issued to companies for all federal taxes. Agency: Federal Inland Revenue Service Register for personal income tax PAYE The employers in the newly incorporated company are required to register with the relevant state tax authority for the purposes of deducting income tax from employees. Once an application is filed with 2 days a copy of the certificate of incorporation attached, a reference file is (simultaneous with *8 no charge then opened for the company. There is no cost related to this previous registration. procedure) Agency: State Tax Office Receive an inspection from the State Ministry of Commerce, Industry, Cooperatives and Tourism for business premises registration 1 day After the submission of all application documents, an inspection of the (simultaneous with *9 business premises is carried out by an officer from the State Ministry of no charge previous Commerce, Industry, Cooperatives and Tourism. procedure) Agency: State Ministry of Commerce, Industry, Cooperatives and Tourism Pay registration fees for business premises into a government account at a designated bank Fees for the business premises permit are paid into a government account at a designated bank. The fees depend on the type of activity, category of business (limited liability company, partnership or sole proprietorship), size of the business, and its location, and range from 1 day NGN 20,000 10 NGN 600 to NGN 100,000. For a medium manufacturing company located in Kano metropolis, the business premises permit costs NGN 20,000. The annual renewal fee is the same as initial registration. Agency: Designated bank Doing Business 2017 Nigeria 31 Time to No. Procedure Cost to complete complete Obtain a business premises permit Following payment of the assessed registration fees for business premises permit into a designated government account, the State Ministry of Commerce, Industry, Cooperatives and Tourism issues a 3 days no charge 11 business premises permit to the new business. Agency: State Ministry of Commerce, Industry, Cooperatives and Tourism * Takes place simultaneously with another procedure. Source: Doing Business database. Note: Online procedures account for 0.5 days in the total time calculation. Procedures in light blue are for married women only. Doing Business 2017 Nigeria 32 DEALING WITH CONSTRUCTION PERMITS Regulation of construction is critical to protect the WHAT THE DEALING WITH CONSTRUCTION public. But it needs to be efficient, to avoid excessive PERMITS INDICATORS MEASURE constraints on a sector that plays an important part in every economy. Where complying with building regulations is excessively costly in time and money, Procedures to legally build a warehouse many builders opt out. They may pay bribes to pass (number) inspections or simply build illegally, leading to Submitting all relevant documents and hazardous construction that puts public safety at risk. obtaining all necessary clearances, licenses, Where compliance is simple, straightforward and permits and certificates inexpensive, everyone is better off. Submitting all required notifications and What do the indicators cover? receiving all necessary inspections Doing Business records all procedures required for a Obtaining utility connections for water and business in the construction industry to build a sewerage warehouse along with the time and cost to complete Registering and selling the warehouse after its each procedure. In addition, this year Doing Business completion introduces a new measure, the building quality Time required to complete each procedure control index, evaluating the quality of building (calendar days) regulations, the strength of quality control and safety mechanisms, liability and insurance regimes, and Does not include time spent gathering professional certification requirements. information The ranking of economies on the ease of dealing with Each procedure starts on a separate day. Procedures that can be fully completed online construction permits is determined by sorting their are recorded as ½ day distance to frontier scores for dealing with construction permits. These scores are the simple Procedure considered completed once final average of the distance to frontier scores for each of document is received the component indicators. No prior contact with officials To make the data comparable across economies, Cost required to complete each procedure (% several assumptions about the construction of warehouse value) company, the warehouse project and the utility Official costs only, no bribes connections are used. Building quality control index (0-15) Assumptions about the construction company Sum of the scores of six component indices: The construction company (BuildCo): Quality of building regulations (0-2)  Is a limited liability company (or its legal equivalent). Quality control before construction (0-1)  Operates in the economy’s largest business city. Quality control during construction (0-3) For 11 economies the data are also collected for Quality control after construction (0-3) the second largest business city.  Is 100% domestically and privately owned. Liability and insurance regimes (0-2)  Has five owners, none of whom is a legal entity. Professional certifications (0-4)  Is fully licensed and insured to carry out construction projects, such as building warehouses. The construction company (BuildCo) (continued):  Has 60 builders and other employees, all of them nationals with the technical expertise and Doing Business 2017 Nigeria 33 professional experience necessary to obtain  Will be a new construction (there was no previous construction permits and approvals. construction on the land), with no trees, natural  Has is a licensed architect and a licensed water sources, natural reserves or historical engineer, both registered with the local monuments of any kind on the plot. association of architects or engineers. BuildCo is  Will have complete architectural and technical plans not assumed to have any other employees who prepared by a licensed architect. If preparation of are technical or licensed experts, such as the plans requires such steps as obtaining further geological or topographical experts. documentation or getting prior approvals from  Has paid all taxes and taken out all necessary external agencies, these are counted as procedures. insurance applicable to its general business  Will include all technical equipment required to be activity (for example, accidental insurance for fully operational. construction workers and third-person liability).  Will take 30 weeks to construct (excluding all delays  Owns the land on which the warehouse will be due to administrative and regulatory requirements). built and will sell the warehouse upon its completion. Assumptions about the utility connections  Is valued at 50 times income per capita. The water and sewerage connections:  Will be 150 meters (492 feet) from the existing Assumptions about the warehouse water source and sewer tap. If there is no water delivery infrastructure in the economy, a borehole The warehouse: will be dug. If there is no sewerage infrastructure, a  Will be used for general storage activities, septic tank in the smallest size available will be such as storage of books or stationery. The installed or built. warehouse will not be used for any goods  Will not require water for fire protection reasons; a requiring special conditions, such as food, fire extinguishing system (dry system) will be used chemicals or pharmaceuticals. instead. If a wet fire protection system is required  Will have two stories, both above ground, by law, it is assumed that the water demand with a total constructed area of specified below also covers the water needed for approximately 1,300.6 square meters (14,000 fire protection. square feet). Each floor will be 3 meters (9  Will have an average water use of 662 liters (175 feet, 10 inches) high. gallons) a day and an average wastewater flow of  Will have road access and be located in the 568 liters (150 gallons) a day. Will have a peak periurban area of the economy’s largest water use of 1,325 liters (350 gallons) a day and a business city (that is, on the fringes of the peak wastewater flow of 1,136 liters (300 gallons) a city but still within its official limits). For 11 day. economies the data are also collected for the  Will have a constant level of water demand and second largest business city. wastewater flow throughout the year.  Will not be located in a special economic or  Will be 1 inch in diameter for the water connection industrial zone. Will be located on a land plot and 4 inches in diameter for the sewerage of approximately 929 square meters (10,000 connection. square feet) that is 100% owned by BuildCo and is accurately registered in the cadastre and land registry. Doing Business 2017 Nigeria 34 DEALING WITH CONSTRUCTION PERMITS Where does the economy stand today? What does it take to comply with the formalities to build business city of an economy, except for 11 economies for a warehouse in Nigeria? According to data collected by which the data are a population-weighted average of the Doing Business, dealing with construction permits there 2 largest business cities. See the chapter on distance to requires 16.1 procedures, takes 106.3 days and costs frontier and ease of doing business ranking at the end of 23.6% of the warehouse value (figure 3.1). Most this profile for more details. indicator sets refer to a case scenario in the largest Figure 3.1 What it takes to comply with formalities to build a warehouse in Nigeria - Lagos Doing Business 2017 Nigeria 35 What it takes to comply with formalities to build a warehouse in Nigeria - Kano Source: Doing Business database. Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the dealing with construction permits indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Doing Business 2017 Nigeria 36 dealing with construction permits Globally, Nigeria stands at 174 in the ranking of 190 economies and the regional average ranking provide economies on the ease of dealing with construction other useful information for assessing how easy it is for permits (figure 3.2). The rankings for comparator an entrepreneur in Nigeria to legally build a warehouse. Figure 3.2 How Nigeria and comparator economies rank on the ease of dealing with construction permits Source: Doing Business database. Doing Business 2017 Nigeria 37 DEALING WITH CONSTRUCTION PERMITS What are the details? The indicators reported here for Nigeria are based BUILDING A WAREHOUSE on a set of specific procedures—the steps that a company must complete to legally build a warehouse—identified by Doing Business through Estimated value of information collected from experts in construction 25261789.8 warehouse : licensing, including architects, civil engineers, construction lawyers, construction firms, utility City : Lagos, Kano service providers and public officials who deal with building regulations. These procedures are those that apply to a company and structure matching the The procedures, along with the associated time and cost, standard assumptions used by Doing Business in are summarized below. collecting the data (see the section in this chapter on what the indicators cover). Table 3.2 Summary of time, cost and procedures for dealing with construction permits in Nigeria - Lagos Time to No. Procedure Cost to complete complete Obtain soil investigation report A soil investigation report is done by an expert for the stability of the foundation. While according to Law No 3 (implemented in August 2012), only 3-storey (or more) residential or office buildings would need such a report, it would also be needed for a commercial warehouse. Furthermore, depending on the 14 days NGN 100,000 1 location, sometimes a 2-storey building might require a soil analysis report. Agency: Private Company Obtain sworn affidavit for search at the Commissioner of Oaths Before someone can carry out a search at the Land Registry, an affidavit must be first sworn and filed at the High Court. If the affidavit is registered before noon, then the lawyer will be able to 1 day NGN 250 *2 proceed with the search. Otherwise, it will be done on the following day. Agency: High Court of Justice Obtain an Environmental Technical Analysis Report The Ministry of Environment reviews the environmental impact assessment report. This report is needed to check whether this project is viable and the impact it will have on the immediate 7 days NGN 150,000 *3 environment. All projects require this report, regardless of usage or height. Agency: Town Planner Engineer Doing Business 2017 Nigeria 38 Time to No. Procedure Cost to complete complete Obtain a certified true copy (CTC) of the survey plan and CTC of the land ownership title A certified true copy of the survey plan must be obtained from the Land Registry to show the plot and its coordinates. Proof of ownership must also be obtained; otherwise the permit application will not be accepted. The sworn affidavit obtained previously must be presented to obtain the documents. But if the land has not been surveyed, then a private surveyor would have to conduct the survey of the plot of land and this 3 days NGN 7,500 *4 survey would have to be registered with the Surveyor’s General Office. In that case, the survey would be verified against the master plan of Lagos. The black copy will be for BuildCo, the red copy will be registered with the Land Registry and a third copy will be kept at the Surveyor General Office. The cost of survey by a private surveyor can range from NGN 50,000 to NGN 100,000. Agency: Land Registry Obtain development permit from the Lagos State Physical Planning Permit Authority (LASPPPA) The development permit authorizes construction and is valid for 2 years. To obtain this permit, a building development plan portraying the intended uses and the proposed development on the site and the effect on adjacent developments and neighborhood must be prepared by a professional. Legally, a pre-approval inspection is required to verify that the land is located where the owner has stated it is and to verify that construction has not already started. BuildCo does not have to be present during the visit. An assessment of the amount to be paid will be written after that visit. All the necessary banking 5 accounts where each payment for each tax must be made must 42 days NGN 7,100,616 be listed on this letter of assessment. For construction involving a structure of more than two floors, the developer or owner must submit a general contractors all- risk insurance policy certificate to the Building Control Agency along with the application to commence building work. The Lagos State Physical Planning Authority charges a contribution levy (10% of the building permit cost) for the preparation and production of development plans, such as local, district, subject, and action plans; development guides; office maintenance; procurement and maintenance of vehicles; office equipment; and similar issues. Doing Business 2017 Nigeria 39 Time to No. Procedure Cost to complete complete The following documents must be presented: • Proof of ownership • Survey Plan – on Sun Print paper • 5 sets of architectural drawings • 5 sets of structural drawings (calculation sheets and supervision letter from a registered engineer) • 5 sets of mechanical and electrical drawings • 5 sets of sanitary and plumbing drawings • Current Income tax Clearance Certificate (CIT) • Photocopy of payment of assessment fee • Certificate of incorporation of the company • Environmental Technical Analysis Report The following is a breakdown of the costs to be paid: Assessment fees (formula is Volume of the building X NGN 120) = 3901.6 m3 x NGN 120 Local Planning Office Levy: 10% of assessment fees Spatial Enhancement Contribution: 12% of the Local Planning Office Levy Application form of NGN 5000 Cost of Certificate of Fitness for Habitation: NGN 60,000 Fencing NGN 12 000 Infrastructure Development Charge (IDC) : 1300.6 X NGN 5000) Agency: State Physical Planning Permit Authority (LASPPPA) Hire a private engineer to conduct inspections A private engineer must be hired to conduct the inspections during construction phase. According to the Doing Business methodology, BuildCo has an engineer that prepares all the 6 plans. However, this engineer cannot conduct the inspections as 1 day NGN 126,309 well, so an external engineer must be hired. Agency: Private Company Obtain certificate of structural stability (first pouring of concrete) The concrete crushing test is done as follows: 1. A sample from a block of concrete is taken and brought back to the laboratory for testing. At this stage BuildCo pays for the entire testing. The testing is done at several stages: 2. 7 days after the sample is taken, the first result is obtained. 7 3. 14 days after the sample is taken, the second result is obtained 7 days NGN 35,000 (7 days after the first result). 4. 21 days after the sample is taken, the third result is obtained (7 days after the second result is delivered). 5. 28 days later the last and final result is obtained, as well as the final report. Normally the longer the concrete is kept, the harder it will become and therefore it will have a better resistance to the crushing test. Doing Business 2017 Nigeria 40 Time to No. Procedure Cost to complete complete All payment for concrete testing is done once in this procedure. Agency: Lagos State Material Testing Laboratory Obtain certificate of structural stability (second pouring of concrete) 8 7 days no charge Agency: Lagos State Material Testing Laboratory Obtain certificate of structural stability (third pouring of concrete) 9 7 days no charge Agency: Lagos State Material Testing Laboratory Obtain certificate of structural stability of foundation 10 7 days no charge Agency: Lagos State Material Testing Laboratory Receive joint inspection during construction from the Building Control Agency and the Zonal Agency 11 1 day no charge Agency: Building Control Agency and Zonal Agency Receive inspections during construction from the Building Control Agency The Lagos State Urban and Regional Planning and Development Law from July 2010 gives the Building Control Agency the power 12 to carry out inspection(s) of building construction, when 1 day no charge necessary. Agency: Lagos State Building Control Agency Request and receive inspection by the Fire Department This certificate must be obtained at the local planning authority 1 day no charge 13 before the building can be used. It is within the discretion of the authority to conduct an on-site inspection before issuing the certificate. However, such an inspection, which normally takes Doing Business 2017 Nigeria 41 Time to No. Procedure Cost to complete complete about 45 minutes, is rarely performed. Agency: Fire Department Submit report of supervision by private engineer to request and obtain the certificate of completion and fitness 14 14 days no charge Agency: Lagos State Building Control Agency Submit application for water connection to Lagos Water Company BuildCo collects the LWC Water Connection Form ("WCF") from the nearest Zonal Office ("ZO"). There are 31 zones in Lagos. The Completed WCF is submitted to ZO and ZO sends a Site Inspection Officer ("SIO") to the customer's property. • SIO confirms address and locational details of BuildCo's property. SIO also establishes an optimal size and length of 1 day no charge * 15 connection pipes, and optimal connection materials. • SIO prepares comprehensive Site Report ("SR") including estimates of total connection costs, and submits SR to the ZO. • ZO prepares connection bill to customer. Agency: Zonal Office Pay the connection bill and submit evidence of payment to Zonal Office 16 1 day NGN 50,000 Agency: Zonal Office Receive water connection Once payment has been made, the Zonal Office (ZO) procures the connection materials and carries out the connection works. 13 days no charge 17 Agency: Zonal Office * Takes place simultaneously with another procedure. Source: Doing Business database. Note: Online procedures account for 0.5 days in the total time calculation. Summary of time, cost and procedures for dealing with construction permits in Nigeria - Kano Time to No. Procedure Cost to complete complete Doing Business 2017 Nigeria 42 Time to No. Procedure Cost to complete complete Apply for a building plan approval at the Kano Urban Planning and Development Authority In order to obtain a building plan approval, BuildCo must submit a duly completed application form to the Kano Urban Planning and Development Authority, along with the following documents: a. Proof of ownership (such as a certificate of occupancy); b. Survey plan (attached to the certificate of occupancy); c. Drawings, including: - Architectural designs (site plan, floor plans, elevations, sections, storm drainage system, construction details, doors and windows schedules), duly signed by a registered architect; - Structural designs (design calculations, foundation layout, structural details on beams, columns, staircases, etc.), duly signed by a 1 day no charge 1 registered structural engineer; - Electrical designs (lighting and power load calculation, power point layout, lighting point layout, schedule of fittings and fixtures), duly signed by a registered electrical engineer; - Mechanical engineering designs (load calculations, waste disposal layout, soil disposal layout, schedule of sanitary fittings), duly signed by a registered mechanical engineer. The documents are reviewed by the Kano Urban Planning and Development Authority. An assessment of the fees is given to BuildCo, to be paid at a designated bank. An on-site inspection will follow. Agency: Kano Urban Planning and Development Authority Pay the building plan approval fees at a designated bank BuildCo is given a payment order to be submitted to and paid at a designated bank. After payment, BuildCo is given a teller, or a bank receipt, which must be submitted back to the Kano Urban and Planning Development Authority. The authority opens a file for BuildCo, and the 1 day NGN 117,045 2 documents are submitted to the deputy director, then forwarded to the inspection officers who conduct an on-site inspection. Agency: Commercial Bank Receive a pre-approval inspection from the Kano Urban Planning and Development Authority After BuildCo's application has been reviewed, the Kano Urban Planning and Development Authority conducts an on-site inspection to verify that the plot reflects the details provided in the drawings and that the land is suitable for the proposed project. The inspectors draft a 2 days no charge 3 report in which the plot, roads, setback details, adjoining land and power and water connections are described. The report is then attached to the documents and drawings that BuildCo submitted for approval, and forwarded to the Kano Urban Planning and Development Authority for final review and approval. Agency: Kano Urban Planning and Development Authority Doing Business 2017 Nigeria 43 Time to No. Procedure Cost to complete complete Obtain a building plan approval from the Kano Urban Planning and Development Authority After the inspection and the payments have been completed, the documents submitted for approval – along with the inspection report and the 3 remaining copies of the plan – are given to the Kano Urban Planning and Development Authority (KUPD) for final approval. The documents and plans are scrutinized and countersigned by a government architect, structural engineer and electrical engineer, before being submitted to the director. The director attaches a letter to 4 the file before sending it to the managing director, who endorses the 21 days no charge application, while the director signs the drawings and issue the approval letter. If granted, KUPD issues BuildCo a building plan approval authorizing the construction of the warehouse to proceed, as well as a plaque showing the file number and expiration date of the approval (3 years). A statutory limit reduced the time taken to complete this procedure to 14 days (10 working days). Agency: Kano Urban Planning and Development Authority Hire private engineer to supervise construction work An engineer will supervise the construction work, mainly the foundation of the warehouse and the roofing. His work will also consist to write a final report certifying that the warehouse was built according to 1 day NGN 202,094 *5 approved plans and request the Certificate of Habitation Agency: Private firm Notifiy the Kano Urban Planning and Development Authority (KUPD) of commencement of work A letter notifying the Kano Urban Planning and Development Authority (KUPD) of the commencement of work must be sent one week prior to 7 days no charge 6 any construction work. Agency: Kano Urban Planning and Development Authority Submit final report of completion of work and request the final inspection The engineer will file a report notifying the Kano Urban Planning and 7 Development Authority (KNUPD) of the completion of workand 1 day no charge certifying that the warehouse was built according to the approved plans. The inspectors will then proceed with a final inspection to verify that the work has been completed according to the approved building plans. Doing Business 2017 Nigeria 44 Time to No. Procedure Cost to complete complete Agency: Kano Urban Planning and Development Authority Obtain final inspection from Kano Urban Planning and Development Authority 8 1 day no charge Agency: Kano Urban Planning and Development Authority Obtain a certificate of habitation from the Kano Urban Planning and Development Authority BuildCo's supervising architect/engineer fills out a Building Certification Form stating that the construction works have been completed according to the approved plan and submits it to KUPD. Within 7 days 9 from the receipt of the Building Certification Form (at no cost), KUPD 7 days no charge will issue a Certificate of Habitation. In practice, however, this procedure is neither adhered to nor enforced. Agency: Kano Urban Planning and Development Authority Obtain inspection from the Board of Internal Revenue for registration of building The Board of Internal Revenue service will visit the new warehouse and 10 register it for tax purposes. 1 day no charge Agency: Internal Revenue Authority Apply for water connection at the Kano State Water Board and pay application form fee In order to obtain a water connection, BuildCo must submit a commercial application form to the Kano State Water Board, which has 1 day NGN 15,000 11 offices throughout the city. Agency: Kano State Water Board Receive an inspection by the Kano State Water Board After the application has been submitted, a team of inspectors from the water board office visits the site to ascertain what needs to be done. 1 day no charge 12 Agency: Kano State Water Board Doing Business 2017 Nigeria 45 Time to No. Procedure Cost to complete complete Obtain water connection Usually, the building is connected to water supply within one month. A BuildCo employee will also install a septic tank. This usually costs about 13 NGN 200,000. 30 days NGN 250,000 Agency: Kano State Water Board * Takes place simultaneously with another procedure. Source: Doing Business database. Note: Online procedures account for 0.5 days in the total time calculation. . Doing Business 2017 Nigeria 46 DEALING WITH CONSTRUCTION PERMITS Building Quality Control Index The building quality control index is the sum of the The index ranges from 0 to 15, with higher values scores on the quality of building regulations, quality indicating better quality control and safety mechanisms in control before construction, quality control during the construction permitting system. construction, quality control after construction, The indicator is based on the same case study liability and insurance regimes, and professional assumptions as the measures of efficiency. certifications indices. Table 3.3 Summary of time quality control and safety mechanisms in Nigeria Answer Score Answer (Kano) Score (Kano) (Lagos) (Lagos) Building quality control index (0-15) 6.5 8.0 Licensed Which third-party entities are required by law to verify architect; Licensed that the building plans are in compliance with existing Licensed architect. building regulations? (0-1) engineer. Quality of building regulations index (0-2) 0.5 0.0 Free of 0.5 How accessible are building laws and regulations in your charge; Not Not easily 0.0 economy? (0-1) easily accessible. accessible. List of 0.0 List of required Which requirements for obtaining a building permit are required documents; clearly specified in the building regulations or on any documents; 0.0 Required accessible website, brochure or pamphlet? (0-1) Available only preapproval on request. s. Quality control before construction index (0-1) 1.0 1.0 Licensed 1.0 Which third-party entities are required by law to verify architect; Licensed that the building plans are in compliance with existing 1.0 Licensed architect. building regulations? (0-1) engineer. Quality control during construction index (0-3) 2.0 2.0 Inspections 1.0 Inspections by by external external engineer or engineer or firm; firm; What types of inspections (if any) are required by law to Inspections Inspections at 1.0 be carried out during construction? (0-2) at various various phases; No phases; No inspections inspections are legally are legally required required Doing Business 2017 Nigeria 47 Answer Score Answer (Kano) Score (Kano) (Lagos) (Lagos) during during constructio construction. n. Mandatory 1.0 Mandatory inspections inspections Do legally mandated inspections occur in practice during are always are always 1.0 construction? (0-1) done in done in practice. practice. Quality control after construction index (0-3) 3.0 2.0 Yes, 2.0 external Yes, final Is there a final inspection required by law to verify that engineer inspection is the building was built in accordance with the approved submits done by 2.0 plans and regulations? (0-2) report for government final agency. inspection. Final 1.0 Final inspection inspection Do legally mandated final inspections occur in practice? always does not 0.0 (0-1) occurs in always occur practice. in practice. Liability and insurance regimes index (0-2) 0.0 0.0 No party is 0.0 Which parties (if any) are held liable by law for structural No party is held liable flaws or problems in the building once it is in use (Latent held liable 0.0 under the Defect Liability or Decennial Liability)? (0-1) under the law. law. No party is 0.0 Which parties (if any) are required by law to obtain an No party is required by insurance policy to cover possible structural flaws or required by law to 0.0 problems in the building once it is in use (Latent Defect law to obtain obtain Liability Insurance or Decennial Insurance)? (0-1) insurance . insurance . Professional certifications index (0-4) 0.0 3.0 Being a 0.0 Minimum registered number of architect or years of engineer. experience; University What are the qualification requirements for the degree in professional responsible for verifying that the architecture 2.0 architectural plans or drawings are in compliance with or existing building regulations? (0-2) engineering; Being a registered architect or engineer. Doing Business 2017 Nigeria 48 Answer Score Answer (Kano) Score (Kano) (Lagos) (Lagos) Being a 0.0 University registered degree in architect or engineering, engineer. construction What are the qualification requirements for the or professional who supervises the construction on the construction 1.0 ground? (0-2) management; Being a registered architect or engineer. Source: Doing Business database. Doing Business 2017 Nigeria 49 GETTING ELECTRICITY Access to reliable and affordable electricity is vital for WHAT THE GETTING ELECTRICITY businesses. To counter weak electricity supply, many firms in developing economies have to rely on self- INDICATORS MEASURE supply, often at a prohibitively high cost. Whether electricity is reliably available or not, the first step for Procedures to obtain an electricity connection a customer is always to gain access by obtaining a (number) connection. Submitting all relevant documents and What do the indicators cover? obtaining all necessary clearances and permits Doing Business records all procedures required for a Completing all required notifications and local business to obtain a permanent electricity receiving all necessary inspections connection and supply for a standardized warehouse, Obtaining external installation works and as well as the time and cost to complete them. These possibly purchasing material for these works procedures include applications and contracts with Concluding any necessary supply contract and electricity utilities, clearances from other agencies obtaining final supply and the external and final connection works. In addition, this year Doing Business adds two new Time required to complete each procedure measures: the reliability of supply and transparency (calendar days) of tariffs index (included in the aggregate distance to Is at least 1 calendar day frontier score and ranking on the ease of doing Each procedure starts on a separate day business) and the price of electricity (omitted from these aggregate measures). The ranking of Does not include time spent gathering economies on the ease of getting electricity is information determined by sorting their distance to frontier Reflects the time spent in practice, with little scores for getting electricity. These scores are the follow-up and no prior contact with officials simple average of the distance to frontier scores for Cost required to complete each procedure (% each of the component indicators. To make the data of income per capita) comparable across economies, several assumptions are used. Official costs only, no bribes Excludes value added tax Assumptions about the warehouse The reliability of supply and transparency of The warehouse: tariffs index  Is owned by a local entrepreneur. Sum of the scores of six component indices:  Is located in the economy’s largest business city. Duration and frequency of outages For 11 economies the data are also collected for Tools to monitor power outages the second largest business city. Tools to restore power supply  Is located in an area where similar warehouses are typically located. In this area a new electricity Regulatory monitoring of utilities’ performance connection is not eligible for a special investment Financial deterrents aimed at limiting outages promotion regime (offering special subsidization Transparency and accessibility of tariffs or faster service, for example). Price of electricity (cents per kilowatt-hour)*  Is located in an area with no physical constraints. For example, the property is not near a railway. Price based on monthly bill for commercial warehouse in case study  Is a new construction and is being connected to electricity for the first time. *Price of electricity is not included in the calculation of distance to frontier nor ease of doing business ranking The warehouse (continued): Doing Business 2017 Nigeria 50  Has two stories, both above ground, with a total surface area of approximately 1,300.6 square Assumptions about the monthly consumption meters (14,000 square feet). The plot of land on which it is built is 929 square meters (10,000  It is assumed that the warehouse operates 30 days square feet). a month from 9:00 a.m. to 5:00 p.m. (8 hours a day),  Is used for storage of goods. with equipment utilized at 80% of capacity on average and that there are no electricity cuts Assumptions about the electricity connection (assumed for simplicity reasons).  The monthly energy consumption is 26,880 The electricity connection: kilowatt-hours (kWh); hourly consumption is 112  Is a permanent one. kWh.  Is a three-phase, four-wire Y connection with a  If multiple electricity suppliers exist, the warehouse subscribed capacity of 140-kilo-volt-ampere is served by the cheapest supplier. (kVA) with a power factor of 1, when 1 kVA = 1  Tariffs effective in March of the current year are kilowatt (kW). used for calculation of the price of electricity for the  Has a length of 150 meters. The connection is to warehouse. Although March has 31 days, for either the low- or medium-voltage distribution calculation purposes only 30 days are used. network and is either overhead or underground, whichever is more common in the area where the warehouse is located Requires works that involve the crossing of a 10-meter road (such as by excavation or overhead lines) but are all carried out on public land. There is no crossing of other owners’ private property because the warehouse has access to a road.  Includes only a negligible length in the customer’s private domain.  Does not require work to install the internal wiring of the warehouse. This has already been completed up to and including the customer’s service panel or switchboard and the meter base Doing Business 2017 Nigeria 51 GETTING ELECTRICITY Where does the economy stand today? What does it take to obtain a new electricity connection business city of an economy, except for 11 economies for in Nigeria? According to data collected by Doing which the data are a population-weighted average of the Business, getting electricity there requires 9.0 procedures, 2 largest business cities. See the chapter on distance to takes 195.2 days and costs 422.8% of income per capita frontier and ease of doing business ranking at the end of (figure 4.1). this profile for more details. Most indicator sets refer to a case scenario in the largest Figure 4.1 What it takes to obtain an electricity connection in Nigeria - Lagos Doing Business 2017 Nigeria 52 What it takes to obtain an electricity connection in Nigeria - Kano Source: Doing Business database. Note: Time shown in the figure above may not reflect simultaneity of procedures. For more information on the methodology of the getting electricity indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Doing Business 2017 Nigeria 53 GETTING ELECTRICITY Globally, Nigeria stands at 180 in the ranking of 190 average ranking provide another perspective in assessing economies on the ease of getting electricity (figure 4.2). how easy it is for an entrepreneur in Nigeria to connect a The rankings for comparator economies and the regional warehouse to electricity. Figure 4.2 How Nigeria and comparator economies rank on the ease of getting electricity Source: Doing Business database. Doing Business 2017 Nigeria 54 GETTING ELECTRICITY What are the details? The indicators reported here for Nigeria are based on a OBTAINING AN ELECTRICITY CONNECTION* set of specific procedures—the steps that an entrepreneur must complete to get a warehouse connected to electricity by the local distribution utility— identified by Doing Business. Data are collected from the distribution utility, then completed and verified by electricity regulatory agencies and independent Name of utility - Kano Electricity professionals such as electrical engineers, electrical Kano: Distribution Company contractors and construction companies. The electricity distribution utility surveyed is the one serving the area Name of utility - Lagos: Eko Distribution Company (or areas) in which warehouses are located. If there is a choice of distribution utilities, the one serving the largest number of customers is selected. Price of electricity (US cents per kWh) - 20.2 The procedures are those that apply to a warehouse and Kano: electricity connection matching the standard assumptions used by Doing Business in collecting the Price of electricity data (see the section in this chapter on what the (US cents per kWh) - 20.1 indicators cover). The procedures, along with the Lagos: associated time and cost, are summarized below. City: Lagos, Kano *Price is calculated as a monthly consumption of 26,880 kWh for business customers, based on a standardized case study adopted by the Getting Electricity methodology. Doing Business measures the price of electricity but does not include these data when calculating the distance to frontier score for getting electricity or the ranking on the ease of getting electricity. Table 4.2 Summary of time, cost and procedures for getting electricity in Nigeria Time to No. Procedure Cost to complete complete Submit application to Eko Electricity Distribution Company and await clearance letter The client’s electrician must collect an application form at Eko Electricity Distribution Company, complete it and submit it to the utility’s office. The information requested include the electrician’s PIN (Personal 1 Identification Number) and a letter stating that he will be in charge of 44 calendar days NGN 0 the internal installation as well as the installation of the transformer. Since the required load is higher than 100 kVA, the request will be sent to EKO Headquarters for approval. This is part of an internal process. Upon approval, the clearance letter will be provided along with the list of materials to be bought by the customer. Doing Business 2017 Nigeria 55 Time to No. Procedure Cost to complete complete During the application process, a licensed electrical contractor acts on the customer’s behalf. Contractors have to be licensed so that they can be responsible for the correspondence with the utility. Agency: Eko Electricity Distribution Company Receive tentative approval letter, submit payment and request and receive site visit Upon receipt of the application, the utility provides a clearance letter for purchase of distribution transformer and other external connection materials. The letter provides a description of the materials to be purchased: they must be new, purchased from an accredited distributor, 31 calendar days NGN 0 2 and must include a test certificate of transformer from the manufacturer. Once the customer receives the letter, the person must call the utility to request a site visit. A survey fee for the site visit is charged by the utility. Agency: Eko Electricity Distribution Company Purchase and install external connection equipment The customer needs to purchase cables, a distribution transformer, and installation accessories from the local market, and then carry out the 3 external connection works. 18 calendar days NGN 1,559,250 Agency: Electrical contractor Obtain right-of-way permit The client's contractor obtains a right of way permit at the State Ministry of Works or State Roads Maintenance Agency. This permit can be obtained while the materials are acquired. 14 calendar days NGN 0 *4 Agency: The State Ministry of Works or State Roads Maintenance Agency Request and receive inspection by inspecting engineer NEPA’s inspecting engineer must check all materials to ascertain their quality. The engineer will check if the installation has been properly 5 done. If it is in compliance with all requirements, a Certificate of 14 calendar days NGN 0 compliance will be issued. Agency: Nigerian Electricity Management Services Agency Doing Business 2017 Nigeria 56 Time to No. Procedure Cost to complete complete Submit payment to Federal Ministry of Power, Works and Housing and pick up inspection certificate Once the inspection has been carried out, the client must submit a payment to the Ministry of Power and collect the Certificate of 1 calendar day NGN 2,000 6 compliance. Agency: Ministry of Power, Works and Housing Submit inspection certificate to utility, request and receive estimate and make payment The customer must go to the utility to request an estimate letter, which is usually prepared on the spot upon request. The contractor then makes 7 the payment mentioned in the letter, and also submits the inspection 30 calendar days NGN 575,000 certificate from the Ministry to the utility. Agency: Eko Electricity Distribution Company Obtain internal wiring inspection and test of complete installation by utility Once the payment foreseen in the estimate letter is done, an internal wiring inspection and test of installation by the utility is required. This is 8 needed in order for the warehouse to be connected to the electricity 30 calendar days NGN 0 grid. Agency: Eko Electricity Distribution Company Obtain meter installation by utility and then electricity flow Once the internal wiring inspection is complete, the utility’s connection team carries out the meter installation and turns on electricity flow. 30 calendar days NGN 0 9 Agency: Eko Electricity Distribution Company * Takes place simultaneously with previous procedure. Source: Doing Business database. Summary of time, cost and procedures for getting electricity in Nigeria - Kano Doing Business 2017 Nigeria 57 Time to No. Procedure Cost to complete complete Submit application to Kano Electricity Distribution Company and await clearance letter The client’s electrician must collect an application form at Kano Electricity Distribution Company, complete it and submit it to the utility’s office. The information requested include the electrician’s PIN (Personal Identification Number) and a letter stating that he will be in charge of the internal installation as well as the installation of the transformer. Upon approval, the clearance letter will be provided along with the list of 1 materials to be bought by the customer. 44 calendar days NGN 0 During the application process, a licensed electrical contractor acts on the customer’s behalf. Contractors have to be licensed so that they can be responsible for the correspondence with the utility. Agency: Kano Electricity Distribution Company Receive tentative approval letter, submit payment and request and receive site visit Upon receipt of the application, the utility provides a clearance letter for purchase of distribution transformer and other external connection materials. The letter provides a description of the materials to be purchased: they must be new, purchased from an accredited distributor, 21 calendar days NGN 0 2 and must include a test certificate of transformer from the manufacturer. Once the customer receives the letter, the person must call the utility to request a site visit. A survey fee for the site visit is charged by the utility. Agency: Kano Electricity Distribution Company Purchase and install external connection equipment The customer needs to purchase cables, a distribution transformer, and installation accessories from the local market, and then carry out the 3 external connection works. 18 calendar days NGN 1,559,250 Agency: Electrical contractor Obtain right-of-way clearance The client's contractor obtains a right of way permit at the State Urban Planning Authority. This permit can be obtained while the materials are *4 acquired. 10 calendar days NGN 0 Agency: State Urban Planning Authority Doing Business 2017 Nigeria 58 Time to No. Procedure Cost to complete complete Request and receive inspection by inspecting engineer NEPA’s inspecting engineer must check all materials to ascertain their quality. The engineer will check if the installation has been properly done. If it is in compliance with all requirements, a Certificate of 14 calendar days NGN 0 5 compliance will be issued. Agency: Nigerian Electricity Management Services Agency Submit payment to Federal Ministry of Power, Works and Housing and pick up inspection certificate Once the inspection has been carried out, the client must submit a payment to the Ministry of Power and collect the Certificate of 1 calendar day NGN 2,000 6 compliance. Agency: Ministry of Power, Works and Housing Submit inspection certificate to utility and request and receive estimate The customer must go to the utility to request an estimate letter, which is usually prepared on the spot upon request. The contractor then makes 7 the payment mentioned in the letter, and also submits the inspection 25 calendar days NGN 575,000 certificate from the Ministry to the utility. Agency: Kano Electricity Distribution Company Obtain internal wiring inspection and test of complete installation by utility Once the payment foreseen in the estimate letter is done, an internal wiring inspection and test of installation by the utility is required. This is 8 needed in order for the warehouse to be connected to the electricity 30 calendar days NGN 0 grid. Agency: Kano Electricity Distribution Company Obtain meter installation by utility and then electricity flow Once the internal wiring inspection is complete, the utility’s connection team carries out the meter installation and turns on electricity flow. 33 calendar days NGN 0 9 Agency: Kano Electricity Distribution Company Doing Business 2017 Nigeria 59 Time to No. Procedure Cost to complete complete * Takes place simultaneously with previous procedure. Source: Doing Business database. Doing Business 2017 Nigeria 60 GETTING ELECTRICITY Reliability of supply and transparency of tariffs index The reliability of supply and transparency of tariffs Doing Business uses the system average interruption index encompasses quantitative data on the duration duration index (SAIDI) and the system average and frequency of power outages as well as interruption frequency index (SAIFI) to measure the qualitative information on the mechanisms put in duration and frequency of power outages in the largest place by the utility for monitoring power outages business city of each economy (for 11 economies the data and restoring power supply, the reporting are also collected for the second largest business city). relationship between the utility and the regulator for SAIDI is the average total duration of outages over the power outages, the transparency and accessibility of course of a year for each customer served, while SAIFI is tariffs and whether the utility faces a financial the average number of service interruptions experienced deterrent aimed at limiting outages (such as a by a customer in a year. Annual data (covering the requirement to compensate customers or pay fines calendar year) are collected from distribution utility when outages exceed a certain cap). companies and national regulators on SAIDI and SAIFI. Both SAIDI and SAIFI estimates include load shedding. The index ranges from 0 to 8, with higher values indicating greater reliability of electricity supply and greater transparency of tariffs. Table 4.3 Reliability of Supply and Transparency of Tariff Index in Nigeria Answer Score (Lagos) Answer Score (Lagos) (Kano) (Kano) Reliability of supply and transparency of tariff index 0.0 0.0 (0-8) Total duration and frequency of outages per customer 0.0 0.0 a year (0-3) System average interruption duration index (SAIDI) 3100 1421 System average interruption frequency index (SAIFI) 540 214 Mechanisms for monitoring outages (0-1) 0.0 0.0 Does the distribution utility use automated tools to No No monitor outages? Mechanisms for restoring service (0-1) 0.0 0.0 Does the distribution utility use automated tools to No No restore service? Regulatory monitoring (0-1) 1.0 1.0 Does a regulator—that is, an entity separate from the utility—monitor the utility’s performance on reliability Yes Yes of supply? Financial deterrents aimed at limiting outages (0-1) 0.0 0.0 Doing Business 2017 Nigeria 61 Answer Score (Lagos) Answer Score (Lagos) (Kano) (Kano) Does the utility either pay compensation to customers or face fines by the regulator (or both) if outages Yes No exceed a certain cap? Communication of tariffs and tariff changes (0-1) 1.0 1.0 Are effective tariffs available online? Yes Yes http://www .kedco.ng/ press.aspx =publicuse rs=referert http://www.n able=&serv ercng.org/ind er1=1&tar ex.php/media get=&toke -and- n=6783w5 publicity/pub 6C2121235 Link to the website, if available online lic- 166755723 notices/326- 100a308rsb notice-of- 24.rohost4 commencem 5i2b277117 ent-of-myto- =45d2b249 2015 117=45d2b 249117e15 0233e5ff16 f66860b6- utf99-sha5 Are customers notified of a change in tariff ahead of Yes Yes the billing cycle? Price of electricity (US cents per kWh) 20.1 20.2 Source: Doing Business database. Note: If data on power outages is not collected or if the SAIFI index or SAIDI index are above the threshold of 100, the economy is not eligible to obtain a score in the Reliability of Supply and Transparency of Tariff Index. If SAIDI and SAIFI are 12 (equivalent to an outage of one hour each month) or below, a score of 1 is assigned. If SAIDI and SAIFI are 4 (equivalent to an outage of one hour each quarter) or below, 1 additional point is assigned. Finally, if SAIDI and SAIFI are 1 (equivalent to an outage of one hour per year) or below, 1 more point is assigned. Doing Business measures the price of electricity but does not include these data when calculating the distance to frontier score for getting electricity or the ranking on the ease of getting electricity. The price of electricity is measured in cents per kilowatt-hour. On the basis of the assumptions about monthly consumption, a monthly bill for a commercial warehouse in the largest business city of the economy is computed for the month of March (for 11 economies the data are also collected for the second largest business city). As noted, the warehouse uses electricity 30 days a month, from 9:00 a.m. to 5:00 p.m., so different tariff schedules may apply if a time-of- use tariff is available. Doing Business 2017 Nigeria 62 REGISTERING PROPERTY Ensuring formal property rights is fundamental. WHAT THE REGISTERING PROPERTY Effective administration of land is part of that. If INDICATORS MEASURE formal property transfer is too costly or complicated, formal titles might go informal again. And where property is informal or poorly Procedures to legally transfer title on administered, it has little chance of being accepted immovable property (number) as collateral for loans—limiting access to finance. Preregistration (for example, checking for liens, notarizing sales agreement, paying property What do the indicators cover? transfer taxes) Doing Business records the full sequence of Registration in the economy’s largest business procedures necessary for a business to purchase city2 property from another business and transfer the property title to the buyer’s name. The transaction is Postregistration (for example, filing title with the municipality) considered complete when it is opposable to third parties and when the buyer can use the property, Time required to complete each procedure use it as collateral for a bank loan or resell it. In (calendar days) addition, this year Doing Business adds a new Does not include time spent gathering measure to the set of registering property information indicators, an index of the quality of the land administration system in each economy. The Each procedure starts on a separate day. ranking of economies on the ease of registering Procedures that can be fully completed online are recorded as ½ day. property is determined by sorting their distance to frontier scores for registering property. These scores Procedure considered completed once final are the simple average of the distance to frontier document is received scores for each of the component indicators. To No prior contact with officials make the data comparable across economies, several assumptions about the parties to the Cost required to complete each procedure transaction, the property and the procedures are (% of property value) used. Official costs only, no bribes The parties (buyer and seller): No value added or capital gains taxes included  Are limited liability companies, 100% Quality of land administration index (0-30) domestically and privately owned and perform . The parties (buyer and seller): general commercial activities in the economy’s largest business city.  Are limited liability companies, 100% domestically and privately owned and perform general  Have 50 employees each, all of whom are commercial activities in the economy’s largest nationals. business city. The property (fully owned by the seller):  Have 50 employees each, all of whom are nationals.  Has a value of 50 times income per capita. The The property (fully owned by the seller): sale price equals the value and entire property will be transferred.  Has a value of 50 times income per capita. The sale price equals the value and entire property will be  Is registered in the land registry or cadastre, or transferred. both, and is free of title disputes.  Is registered in the land registry or cadastre, or both, Is located in a periurban commercial zone, and no and is free of title disputes. rezoning is required. Doing Business 2017 Nigeria 63 REGISTERING PROPERTY Where does the economy stand today? What does it take to complete a property transfer in Most indicator sets refer to a case scenario in the largest Nigeria? According to data collected by Doing Business, business city of an economy, except for 11 economies for registering property there requires 12.1 procedures, which the data are a population-weighted average of the takes 69.6 days and costs 10.5% of the property value 2 largest business cities. See the chapter on distance to (figure 5.1). The score on the quality of land frontier and ease of doing business ranking at the end of administration index is 6.3 this profile for more details. Figure 5.1 What it takes to register property in Nigeria - Lagos What it takes to register property in Nigeria - Kano Doing Business 2017 Nigeria 64 Source: Doing Business database. Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the registering property indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Doing Business 2017 Nigeria 65 REGISTERING PROPERTY Globally, Nigeria stands at 182 in the ranking of 190 regional average ranking provide other useful economies on the ease of registering property (figure information for assessing how easy it is for an 5.2). The rankings for comparator economies and the entrepreneur in Nigeria to transfer property. Figure 5.2 How Nigeria and comparator economies rank on the ease of registering property Source: Doing Business database. Doing Business 2017 Nigeria 66 REGISTERING PROPERTY Economies worldwide have been making it easier for the time required substantially—enabling buyers to use entrepreneurs to register and transfer property—such as or mortgage their property earlier. What property by computerizing land registries, introducing time limits registration reforms has Doing Business recorded in for procedures and setting low fixed fees. Many have cut Nigeria (table 5.1)? Table 5.1 How has Nigeria made registering property easier—or not? By Doing Business report year from DB2011 to DB2017 DB year Reform Nigeria made transferring property in Lagos less costly by DB2016 reducing fees for property transactions. Source: Doing Business database. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Doing Business 2017 Nigeria 67 REGISTERING PROPERTY What are the details? The indicators reported here are based on a set of STANDARD PROPERTY TRANSFER specific procedures—the steps that a buyer and seller must complete to transfer the property to the buyer’s name—identified by Doing Business through information collected from local property lawyers, Property value: 25261789.8 notaries and property registries. These procedures are those that apply to a transaction matching the City: Lagos, Kano standard assumptions used by Doing Business in collecting the data (see the section in this chapter on what the indicators cover). The procedures, along with the associated time and cost, are summarized below. Table 5.2 Summary of time, cost and procedures for registering property in Nigeria Lagos Time to No. Procedure Cost to complete complete Sworn affidavit for search at the Commissioner of Oaths Before someone can carry out a search at the Land Registry an Affidavit must be first sworn and filed at the High Court. If the affidavit is registered before 12, then the lawyer will be able to proceed with the 1 day NGN 250 1 search. Otherwise it will be on the next day. Agency: High Court of Justice, Ministry of Justice, Notary public Conduct a Property title search at the Land Registry The application letter to conduct the search is accompanied by a sworn affidavit signed by the Commissioner for Oaths of the status of the party and purpose of search. A lawyer is generally used to perform the NGN 3,750 (search registration of property. Legal fees are charged based on the Scale of at Registry) + Fees for Conveyancing Matters [Legal Practitioners (Remuneration for Legal fees as Legal Documentation and Other Land Matters) Order 1991]. This is a sliding scale , and averages out at about 7.5% of the consideration. The follows: NGN fees include all the steps required until the new title is registered under 7,500–10,000 + the buyer’s name. 7.5% of values 2 1 day above NGN 20,000 The primary objective at this stage is to ascertain that the Vendor has a if acting for the good root of title. A good root of title in this context means the buyer (5% of following: values above NGN that the Vendor is the rightful owner of the land. 20,000 if acting for that the land is free from any encumbrance or pending litigation. the seller) that the land is not the subject of any Government acquisition. that the land is not subject to any of the overriding interests in land (e.g. short leases, easements, licenses, road or right of way). Doing Business 2017 Nigeria 68 Time to No. Procedure Cost to complete complete Agency: Lagos State Lands Registry Execution of Deed of Assignment/Conveyance and Land Form 1C Representatives of the firms (assignor and assignee) complete and affix their seals on the Land Form 1C and four (4) copies of the Deed of Assignment. The Land Form 1c is a document obtained at the Land Registry to be completed by the parties and duly notarized by a Notary Public or signed by a Commissioner for oaths. Lawyers often have the Form in 1 day no cost 3 their office. The Deed of Assignment on the other hand is as legal instrument conveying the interest/tile in a property to another. This is prepared by a lawyer and is to be executed by both parties in the presence of a witness. Agency: Lands Bureau (Form 1c) and Lawyer's office (Deed of Assignment) Obtain Certified True Copy (CTC) of title document and a Certified True Copy of the Survey plan The application letter to obtain a Certified True Copy of the title of ownership and a CTC of the land survey plan are accompanied by a sworn affidavit of purpose to support an application. Without these two documents the application for the Governor's consent would not be admitted. NGN 5,625 + NGN 1,875 4 Parties obtain a copy of the survey Plan, as approved by the Office of the 3-5 days Surveyor General, which is required for the Governor's Consent. Under Nigerian law, a clear proof of the identity of the land plot is needed. The survey plan gives the coordinates of the plot and must fit in the official map of Lagos. It identifies the boundary of the property. If using a private surveyor, he must be a registered one. Agency: Land Registry Payment of the Charting Fee, Endorsement fee and Form 1C at a Charting Fees designated bank (NGN 7,500) + 5 1 day Endorsement Fees Payment advice to be obtained from the Revenue Office for the purpose of PID Number generation after which is affected in the Bank. Payment (NGN 1,500) + for the above can be made to any Government accreditated bank either NGN 1,500 for Doing Business 2017 Nigeria 69 Time to No. Procedure Cost to complete complete by a bank draft, cheque or cash. The Bank then issues a Government Form 1C Revenue receipt. The receipts is what is submitted together with the application for Governor's Consent. Agency: Government accrediated bank Submit application for processing Governor's Consent and obtain the Title By virtue of the Land Use Act, promulgated in 1978, all land in each State in the Federation became vested in the Governor of that State, who’s prior Consent is mandatory for the legal validity of any transfers or alienation of interest in landed property. In August 2005, the Governor’s Consent procedure underwent major reform, with the aim that Consent should be granted within 30 working days following submission of a duly completed application. Incomplete applications are not accepted. New procedures and documentation requirements have been widely published. The Land Services will also conduct their own checking for encumbrances on the property and whether the land has no government dispute. Obtaining the Governor’s consent require the following documentation: • Covering letter with Address and Telephone Nos. • Completed Form 1C 61 days Administrative Fee • Certified True Copy (CTC) of Title Document of Assignor (simultaneous of NGN 3,000 6 • Current Tax Clearance Certificates of the Assignor and Assignee with procedures • For Limited Liability Companies, the Internal Revenue Certificate of 7, 8, 9, 10 and 11) PAYE Directors • Four (4) copies of the Deed of which Consent is sought should be attached. • Copy of the Survey Plan, as approved by the surveyor General office and a picture of the Building • Evidence of payment for Charting fee, Endorsement fee, Form 1C • Evidence of payment of Land Use Charge • Where the Property is covered by a State Leasehold or Certificate of Occupancy, evidence of payment of Ground Rent, up to date. • A photograph of the property • A copy of the applicant and/or his agent/legal representative’s identification " Agency: Directorate of Land Services Doing Business 2017 Nigeria 70 Time to No. Procedure Cost to complete complete Charting of survey plans attached to the Deeds Upon submission of the application documents and payment of the administrative fee, the application is given a unique reference number, processes and delivered to the Surveyor General's office for charting to 5 - 14 days ensure that plans were prepared in accordance with survey rules and the (simultaneous property is free from the government acquisition. If there are no queries, with procedures no cost *7 the Deeds are returned to the Directorate of Lands service for issuance of 6, 8, 9, 10 and 11) the Assessment Notice. Where the survey plan is queried, a notice of the query is issued to the applicant. Agency: Surveyor General's office Obtain Demand Notice for Registration fees, Consent fees, Neighborhood improvement charge at the Land Registry After investigation and assessment of the true value of the property, the applicant will be issued with an assessment letter. The Letter will contain 3 days the amount for the Registration fee, Consent fee, Neighborhood (simultaneous improvement charge and the Capital gains tax that should be paid to the with procedures no cost *8 Lagos State Government Account. 6, 7, 9, 10 and 11) Agency: Directorate of Land Services Obtain Demand Notice for Stamp Duty After investigation and assessment of the true value of the property, the applicant will be issued with an assessment letter. The Letter will contain 1 day the amount for Stamp duty verified with Federal Internal Revenue (simultaneous Service. Payment of the Stamp duty should be paid to the Lagos State with procedures *9 no cost Government Account. 6, 7, 8, 10 and 11) Agency: Lagos State Inland Revenue Service or Federal Internal Revenue service (FIRS) Payment of Stamp duty , Registration fees, Consent fees, Consent Fee 1.5% Neighborhood improvement charge at a commercial bank 1 day + Registration fee (simultaneous 0.5% + Stamp with procedures duty 0.5% * 10 The applicant pays the remaining fees at the designated bank by means of certified cheques: 6, 7, 8, 9 and 11) (Capital gains tax Consent Fee 1.5% + Registration fee 0.5% + Stamp duty 0.5% + capital of 0.5% is also gains tax of 0.5% is also paid. Receipts are provided to the applicant, paid, but are not who will make copies of those receipts before submitting the original included in the Doing Business 2017 Nigeria 71 Time to No. Procedure Cost to complete complete receipts to the Land Registry for verification. calculation). On January 5, 2015, the Government of the Lagos State of the Federal Republic of Nigeria adopted the Executive Bill No EO/BRF/001 of 2015. The Order, which takes immediate effect, reduces Consent Fees from 6 percent to 1.5 percent while Capital Gains tax, which was previously 2 percent, is reduced to 0.5 percent. Also cost of Stamp Duty has been reduced from 2 percent to 0.5 percent while Registration Fees has been reduced from 3 percent to 0.5 percent. However, the Executive Order provides, among others, that "unless otherwise indicated, the valuation of landed property for the determination of tax and other charges payable shall be by reference to the Statement of Fair market Value produced by relevant professionals, adopted by the State Government and published from time to time in the Official Government Gazette". Agency: Designated bank Submit the Receipts of the Registration fees, Consent fees, Neighborhood improvement charge, Stamp duty Receipts obtained from the bank are submitted as proof of payment to the Land Registry. These receipts are internally forwarded to the Account Department for reconciliation. The lawyer retains copies of the deposit/payment slip is retained for his/her record. The Land Registry 1 day manually confirms these payments to the relevant departments. Once (simultaneous * 11 payment is confirmed by the Accounts Department, the Land Services with procedures no cost Department sends the file directly to one of the designated 6, 7, 8, 9 and 10) commissioners to grant the Consent on behalf of the Governor. Agency: Directorate of Land Services Stamping of the deed of assignment Deeds are presented by assignee’s lawyer for stamping at the Stamp Duties Registry (agency of Inland Revenue Services). Stamping takes Already paid in place only after Registry receives confirmation of receipt of payment. 1 day Procedure 10 12 The documentation shall include: receipts confirming payment of stamp duty. Agency: Stamping duties office Doing Business 2017 Nigeria 72 Time to No. Procedure Cost to complete complete Registration of Certificate of Occupancy or Deed and Title conferred The lawyer will then follow up on the deed to be filed to the Lands Registry. The receipt and paying-in slips evidencing payment are given to the cashier at the Lands Registry. With proof of payment, a lands Already paid in 13 7 days officer is assigned to enter the Deed into the Registry records. Procedure 10 Agency: Land Registry * Takes place simultaneously with another procedure. Source: Doing Business database. Note: Online procedures account for 0.5 days in the total time calculation. Summary of time, cost and procedures for registering property in Nigeria Kano Time to No. Procedure Cost to complete complete Conduct search of property title and obtain consent application form at Lands Registry The lawyer representing the parties fills out and submits a letter, which NGN 5,000 search states the purpose of the search. The search fee is paid in cash at the 7 days fee + NGN 2,000 1 Lands Registry. consent form fee Agency: Ministry of Lands and Physical Planning Execute deed of assignment and consent application form Seller and buyer sign four (4) copies of the deed of assignment and the application for consent form. Legal fees are charged based on the Scale of Fees for Conveyancing Matters [Legal Practitioners (Remuneration for Legal Documentation and Other Land Matters) Order 1991]. This is a sliding scale based on slices of the consideration involved, and averages out at about 7.5% of the consideration. In practice, due to competition 3.75% of property 2 1 day amongst lawyers, the fees charged for property assignment in Kano are value legal fee lower than those prescribed and amount to approximately 3.75% of property value. The fees will include all the steps required until the new title is registered under the buyer's name Agency: Lawyer's Office Doing Business 2017 Nigeria 73 Time to No. Procedure Cost to complete complete Submit application for Governor's consent to the assignment at the Ministry of Lands and Physical Planning By virtue of the Land Use Act, promulgated in 1978, all land comprised in territory of each state in the federation became vested in the Governor of that state, whose prior consent is mandatory for the legal validity of any transfers or alienation of interest in landed property. In Kano, the authority to grant the consent has been delegated by the Governor to the Commissioner for Lands, who delegated it further to the Permanent 30 days processing fee of 3 Secretary for Lands. In order to obtain such consent, the following (simultaneous NGN 10,000 documents must be submitted: a. Copy of the deed for which consent is with procedure 4) sought; b. Proof of settlement of outstanding ground rates; c. Letter of clearance of the title holder and board’s resolution in case of a corporate body; d. Three years tax clearance certificates of the seller and buyer; e. Registration particulars and articles of association of the company. Agency: Ministry of Lands and Physical Planning Receive inspection of the property from the Ministry of Lands and Physical Planning The valuation includes a physical inspection of the property to assess its 7 days market value. Upon completion of valuation, a valuation report is issued, Included in cost of *4 (simultaneous based on which registration fees are assessed. procedure 3, with procedure 3) Agency: Private licensed valuator Collect letter of consent and demand order for payment of fees from the Ministry of Lands and Physical Planning The applicant receives a letter of consent, which is conditional on payment of the prescribed fees. Registration must be done within 4 5 months; failure to do so attracts a penalty of NGN 100 payable on each 1 day no cost defaulting day including weekends. Agency: Ministry of Lands and Physical Planning Assess the deed of assignment at the Stamp Duty Office (Federal Inland Revenue Services) The deed is presented by buyer's lawyer for assessment of stamp duty at the FIRS. The FIRS typically uses the figure as indicated by the Lands 1 day no cost 6 Registry in their assessment of the fees. Agency: Stamp Duty Office, Federal Board of Inland Revenue Doing Business 2017 Nigeria 74 Time to No. Procedure Cost to complete complete Pay prescribed fees and stamp duty at the designated bank The buyer or his/her agent pays the prescribed fees and stamp duty at 5% of property the designated bank. Payment of stamp duty is by bank draft payable to value registration any of the designated receiving banks. Stamp duty for property 1 day fee + 3% of 7 assignment between companies is assessed at 3% of the property value. property value stamp duty fee Agency: Commercial bank Stamp the deed of assignment at the Stamp Duty Office (Federal Inland Revenue Services) The deed is presented by buyer's lawyer for stamping at the FIRS. Stamping takes place only after the FIRS receives confirmation of receipt 1 day no cost 8 of payment. Agency: Stamp Duty Office, Federal Board of Inland Revenue Register the deed of assignment at Lands Registry Buyer's lawyer submits payment receipts to the Schedule Officer at Lands Registry, who in turn enters the deed into the Lands Registry records. 3 days no cost 9 Agency: Ministry of Lands and Physical Planning * Takes place simultaneously with another procedure. Note: Online procedures account for 0.5 days in the total time calculation. Source: Doing Business database. Doing Business 2017 Nigeria 75 REGISTERING PROPERTY Quality of land administration The quality of land administration index is the sum of If private sector entities were unable to register property the scores on the reliability of infrastructure, transfers in an economy between June 2014 and June transparency of information, geographic coverage 2015, the economy receives a “no practice” mark on the and land dispute resolution indices. procedures, time and cost indicators. A “no practice” economy receives a score of 0 on the quality of land The index ranges from 0 to 30, with higher values administration index even if its legal framework includes indicating better quality of the land administration provisions related to land administration. system. Table 5.3 Summary of quality of land administration in Nigeria Answer Answer Score Score (Lagos) (Lagos) (Kano) (Kano) Quality of the land administration index (0-30) 7.0 4.0 Reliability of infrastructure index (0-8) 2.0 0.0 Ministry of What is the institution in charge of immovable Lagos State Lands and property registration? Land Registry Physical Planning In what format are the majority of title or deed records Computer/Sc kept in the largest business city—in a paper format or in 1.0 Paper 0.0 anned a computerized format (scanned or fully digital)? Is there an electronic database for checking for encumbrances (liens, mortgages, restrictions and the Yes 1.0 No 0.0 like)? In what format are the majority of maps of land plots kept in the largest business city—in a paper format or in Paper 0.0 Paper 0.0 a computerized format (scanned or fully digital)? Is there an electronic database for recording boundaries, checking plans and providing cadastral No 0.0 No 0.0 information (geographic information system)? Is the information recorded by the immovable property registration agency and the cadastral or mapping Separate Separate 0.0 0.0 agency kept in a single database, in different but linked databases databases databases or in separate databases? Do the immovable property registration agency and cadastral or mapping agency use the same No 0.0 No 0.0 identification number for properties? Transparency of information index (0–6) 2.0 1.0 Doing Business 2017 Nigeria 76 Answer Answer Score Score (Lagos) (Lagos) (Kano) (Kano) Anyone Who is able to obtain information on land ownership at Anyone who who pays the agency in charge of immovable property pays the 1.0 1.0 the official registration in the largest business city? official fee fee Is the list of documents that are required to complete Yes, in any type of property transaction made publicly Yes, online 0.5 0.0 person available–and if so, how? http://www.la goslands.com /directorates/ directorate- of-land- Link for online access: services/docu ments- required-for- governers- consent/ Is the applicable fee schedule for any property transaction at the agency in charge of immovable Yes, in Yes, online 0.5 0.0 property registration in the largest business city made person publicly available–and if so, how? http://www.la goslands.com /directorates/ Link for online access: land-registry- directorate/sc ale-of- charges/ Does the agency in charge of immovable property registration commit to delivering a legally binding document that proves property ownership within a Yes, in person 0.0 No 0.0 specific time frame–and if so, how does it communicate the service standard? Link for online access: Is there a specific and separate mechanism for filing complaints about a problem that occurred at the No 0.0 No 0.0 agency in charge of immovable property registration? Contact information: Are there publicly available official statistics tracking No 0.0 No 0.0 the number of transactions at the immovable property Doing Business 2017 Nigeria 77 Answer Answer Score Score (Lagos) (Lagos) (Kano) (Kano) registration agency? Number of property transfers in the largest business city in 2015: Only Only intermediarie intermediar Who is able to consult maps of land plots in the largest s and 0.0 ies and 0.0 business city? interested interested parties parties Is the applicable fee schedule for accessing maps of Yes, in No 0.0 0.0 land plots made publicly available—and if so, how? person Link for online access: Does the cadastral or mapping agency commit to delivering an updated map within a specific time No 0.0 No 0.0 frame—and if so, how does it communicate the service standard? Link for online access: Is there a specific and separate mechanism for filing complaints about a problem that occurred at the No 0.0 No 0.0 cadastral or mapping agency? Geographic coverage index (0–8) 0.0 0.0 Are all privately held land plots in the economy No 0.0 No 0.0 formally registered at the immovable property registry? Are all privately held land plots in the largest business city formally registered at the immovable property No 0.0 No 0.0 registry? Are all privately held land plots in the economy No 0.0 No 0.0 mapped? Are all privately held land plots in the largest business No 0.0 No 0.0 city mapped? Land dispute resolution index (0–8) 3.0 3.0 Does the law require that all property sale transactions be registered at the immovable property registry to Yes 1.5 Yes 1.5 make them opposable to third parties? Is the system of immovable property registration Yes 0.5 Yes 0.5 subject to a state or private guarantee? Is there a specific compensation mechanism to cover No 0.0 No 0.0 Doing Business 2017 Nigeria 78 Answer Answer Score Score (Lagos) (Lagos) (Kano) (Kano) for losses incurred by parties who engaged in good faith in a property transaction based on erroneous information certified by the immovable property registry? Does the legal system require a control of legality of the documents necessary for a property transaction Yes 0.5 Yes 0.5 (e.g., checking the compliance of contracts with requirements of the law)? Registrar; Lawyer; If yes, who is responsible for checking the legality of Lawyer; Interested the documents? Interested Parties. Parties. Does the legal system require verification of the Yes 0.5 Yes 0.5 identity of the parties to a property transaction? Registrar; If yes, who is responsible for verifying the identity of Registrar; Lawyer; the parties? Lawyer. Interested Parties. Is there a national database to verify the accuracy of No 0.0 No 0.0 identity documents? For a standard land dispute between two local businesses over tenure rights of a property worth 50 High Court Lagos State times gross national income (GNI) per capita and of Kano High Court located in the largest business city, what court would be State. in charge of the case in the first instance? How long does it take on average to obtain a decision More than 3 More than from the first-instance court for such a case (without 0.0 0.0 years 3 years appeal)? Are there any statistics on the number of land disputes No 0.0 No 0.0 in the first instance? Number of land disputes in the largest business city in 2015: Equal access to property rights index (-2–0) 0.0 0.0 Do unmarried men and unmarried women have equal Yes 0.0 Yes 0.0 ownership rights to property? Do married men and married women have equal Yes 0.0 Yes 0.0 ownership rights to property? Source: Doing Business database. Doing Business 2017 Nigeria 79 Doing Business 2017 Nigeria 80 GETTING CREDIT Two types of frameworks can facilitate access to WHAT THE GETTING CREDIT INDICATORS credit and improve its allocation: credit information MEASURE systems and borrowers and lenders in collateral and bankruptcy laws. Credit information systems enable lenders to view and consider a potential borrower’s Strength of legal rights index (0–12) financial history (positive or negative) when assessing Rights of borrowers and lenders through risk and they allow borrowers to establish a good collateral laws credit history that will facilitate their access to credit. Protection of secured creditors’ rights through Sound collateral laws enable businesses to use their bankruptcy laws assets, especially movable property, as security to generate capital—while strong creditors’ rights have Depth of credit information index (0–8) been associated with higher ratios of private sector Scope and accessibility of credit information credit to GDP. distributed by credit bureaus and credit registries What do the indicators cover? Credit bureau coverage (% of adults) Doing Business assesses the sharing of credit information and the legal rights of borrowers and Number of individuals and firms listed in lenders with respect to secured transactions through largest credit bureau as percentage of adult 2 sets of indicators. The depth of credit information population index measures rules and practices affecting the Credit registry coverage (% of adults) coverage, scope and accessibility of credit Number of individuals and firms listed in information available through a credit registry or a credit registry as percentage of adult credit bureau. The strength of legal rights index population measures whether certain features that facilitate lending exist within the applicable collateral and bankruptcy laws. Doing Business uses two case scenarios, Case A and Case B, to determine the scope of the secured transactions system, involving a  Has up to 50 employees. secured borrower and a secured lender and  Is 100% domestically owned, as is the lender. examining legal restrictions on the use of movable collateral (for more details on each case, see the Data The ranking of economies on the ease of getting credit Notes section of the Doing Business 2017 report). is determined by sorting their distance to frontier These scenarios assume that the borrower: scores for getting credit. These scores are the distance to frontier score for the strength of legal rights index  Is a domestic limited liability company. and the depth of credit information index.  Has its headquarters and only base of operations in the largest business city. For the 11 economies with a population of more than 100 million, data for a second city have been added. Doing Business 2017 Nigeria 81 GETTING CREDIT Where does the economy stand today? How well do the credit information system and collateral Globally, Nigeria stands at 44 in the ranking of 190 and bankruptcy laws in Nigeria facilitate access to credit? economies on the ease of getting credit (figure 6.1). The The economy has a score of 6.0 on the depth of credit rankings for comparator economies provide useful information index and a score of 7.0 on the strength of information for assessing how well regulations and legal rights index (see the summary of scoring at the end institutions in Nigeria support lending and borrowing. of this chapter for details). Higher scores indicate more credit information and stronger legal rights for borrowers and lenders. Figure 6.1 How Nigeria and comparator economies rank on the ease of getting credit Source: Doing Business database. Doing Business 2017 Nigeria 82 GETTING CREDIT One way to put an economy’s score on the getting credit rights index for Nigeria and shows the scores for indicators into context is to see where the economy comparator economies as well as the regional average stands in the distribution of scores across economies. score. Figure 6.3 shows the same for the depth of credit Figure 6.2 highlights the score on the strength of legal information index. Figure 6.2 How strong are legal rights for borrowers Figure 6.3 How much credit information is shared — and lenders? and how widely? Economy scores on strength of legal rights index Economy scores on depth of credit information index Source: Doing Business database. Source: Doing Business database. Note: Higher scores indicate that collateral and bankruptcy Note: Higher scores indicate the availability of more credit laws are better designed to facilitate access to credit. information, from either a credit registry or a credit bureau, Source: Doing Business database. to facilitate lending decisions. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Doing Business 2017 Nigeria 83 GETTING CREDIT When economies strengthen the legal rights of lenders information, they can increase entrepreneurs’ access to and borrowers under collateral and bankruptcy laws, and credit. What credit reforms has Doing Business recorded increase the scope, coverage and accessibility of credit in Nigeria (table 6.1)? Table 6.1 How has Nigeria made getting credit easier—or not? By Doing Business report year from DB2011 to DB2017 DB year Reform Nigeria improved access to credit information by distributing DB2013 credit information from retail companies. Nigeria strengthened access to credit by creating a centralized DB2017 collateral registry. This reform applies to both Kano and Lagos. Source: Doing Business database. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Doing Business 2017 Nigeria 84 GETTING CREDIT What are the details? The getting credit indicators reported here for Nigeria The data on the legal rights of borrowers and lenders are are based on detailed information collected in that gathered through a survey of financial lawyers and economy. The data on credit information sharing are verified through analysis of laws and regulations as well collected through a survey of a credit registry and/or as public sources of information on collateral and credit bureau (if one exists). To construct the depth of bankruptcy laws. For the strength of legal rights index, a credit information index, a score of 1 is assigned for each score of 1 is assigned for each of 10 aspects related to of 8 features of the credit registry or credit bureau (see legal rights in collateral law and 2 aspects in bankruptcy summary of scoring below). law. Lagos Kano Strength of legal rights index (0–12) Index score: 7.0 Index score: 7.0 Does an integrated or unified legal framework for secured transactions that extends to the creation, publicity and enforcement of functional 0 0 equivalents to security interests in movable assets exist in the economy? Does the law allow businesses to grant a non possessory security right in a single category of movable assets, without requiring a specific description 1 1 of collateral? Does the law allow businesses to grant a non possessory security right in substantially all of its assets, without requiring a specific description of 1 1 collateral? May a security right extend to future or after-acquired assets, and may it extend automatically to the products, proceeds or replacements of the 1 1 original assets? Is a general description of debts and obligations permitted in collateral agreements; can all types of debts and obligations be secured between 1 1 parties; and can the collateral agreement include a maximum amount for which the assets are encumbered? Is a collateral registry in operation for both incorporated and non- incorporated entities, that is unified geographically and by asset type, with 1 1 an electronic database indexed by debtor's name? Can banks and financial institutions access borrowers’ credit information online (for example, through a web interface, a system-to-system 0 0 connection or both)? Does a modern collateral registry exist in which registrations, amendments, cancellations and searches can be performed online by any 0 0 interested third party? Are secured creditors paid first (i.e. before tax claims and employee 1 1 claims) when a debtor defaults outside an insolvency procedure? Doing Business 2017 Nigeria 85 Lagos Kano Strength of legal rights index (0–12) Index score: 7.0 Index score: 7.0 Are secured creditors paid first (i.e. before tax claims and employee 0 0 claims) when a business is liquidated? Are secured creditors subject to an automatic stay on enforcement when a debtor enters a court-supervised reorganization procedure? Does the law 0 0 protect secured creditors’ rights by providing clear grounds for relief from the stay and/or sets a time limit for it? Does the law allow parties to agree on out of court enforcement at the time a security interest is created? Does the law allow the secured creditor 1 1 to sell the collateral through public auction and private tender, as well as, for the secured creditor to keep the asset in satisfaction of the debt? Depth of credit information index (0–8) Credit bureau Credit registry Index score: 6.0 Are data on both firms and individuals distributed? Yes No 1 Are both positive and negative credit data distributed? Yes No 1 Are data from retailers or utility companies - in addition to data from banks and financial institutions - Yes No 1 distributed? Are at least 2 years of historical data distributed? (Credit bureaus and registries that distribute more than 10 years of negative data or erase data on Yes No 1 defaults as soon as they are repaid obtain a score of 0 for this component.) Are data on loan amounts below 1% of income per Yes No 1 capita distributed? By law, do borrowers have the right to access their No No 0 data in the credit bureau or credit registry? Can banks and financial institutions access borrowers’ credit information online (for example, through an Yes No 1 online platform, a system-to-system connection or both)? Are bureau or registry credit scores offered as a value- added service to help banks and financial institutions No No 0 assess the creditworthiness of borrowers? Note: An economy receives a score of 1 if there is a "yes" to either bureau or registry. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Doing Business 2017 Nigeria 86 Coverage Credit bureau Credit registry Number of individuals 6,498,344 0 Number of firms 996,294 0 Total 7,494,638 120,750 Total percentage of adult population 7.7 0.1 Source: Doing Business database. Doing Business 2017 Nigeria 87 PROTECTING MINORITY INVESTORS Protecting minority investors matters for the ability of companies to raise the capital they need to grow, WHAT THE PROTECTING MINORITY innovate, diversify and compete. Effective regulations INVESTORS INDICATORS MEASURE define related-party transactions precisely, promote clear and efficient disclosure requirements, require shareholder participation in major decisions of the Extent of disclosure index (0–10) company and set detailed standards of accountability Review and approval requirements for related-party for company insiders. transactions; Disclosure requirements for related- What do the indicators cover? party transactions Doing Business measures the protection of minority Extent of director liability index (0–10) investors from conflicts of interest through one set of Ability of minority shareholders to sue and hold indicators and shareholders’ rights in corporate interested directors liable for prejudicial related- governance through another. The ranking of economies party transactions; Available legal remedies on the strength of minority investor protections is (damages, disgorgement of profits, fines, determined by sorting their distance to frontier scores imprisonment, rescission of the transaction) for protecting minority investors. These scores are the Ease of shareholder suits index (0–10) simple average of the distance to frontier scores for the extent of conflict of interest regulation index and the Access to internal corporate documents; Evidence extent of shareholder governance index. To make the obtainable during trial and allocation of legal data comparable across economies, a case study uses expenses several assumptions about the business and the Extent of conflict of interest regulation index transaction. (0–10) The business (Buyer): Simple average of the extent of disclosure, extent of director liability and ease of shareholder indices  Is a publicly traded corporation listed on the economy’s most important stock exchange If the Extent of shareholder rights index (0-10) number of publicly traded companies listed on that Shareholders’ rights and role in major corporate exchange is less than 10, or if there is no stock decisions exchange in the economy, it is assumed that Buyer is a large private company with multiple Extent of ownership and control index (0-10) shareholders. Governance safeguards protecting shareholders  Has a board of directors and a chief executive from undue board control and entrenchment officer (CEO) who may legally act on behalf of Buyer Extent of corporate transparency index (0-10) where permitted, even if this is not specifically required by law. Corporate transparency on ownership stakes,  Has a supervisory board (applicable to economies compensation, audits and financial prospects with a two-tier board system) on which 60% of the Extent of shareholder governance index shareholder-elected members have been appointed (0–10) by Mr. James, who is Buyer’s controlling Simple average of the extent of shareholders rights, shareholder and a member of Buyer’s board of extent of ownership and control and extent of directors. corporate transparency indices  Has not adopted any bylaws or articles of Strength of minority investor protection association that differ from default minimum index (0–10) standards and does not follow any nonmandatory codes, principles, recommendations or guidelines Simple average of the extent of conflict of interest regulation and extent of shareholder governance relating to corporate governance. indices Doing Business 2017 Nigeria 88  Is a manufacturing company with its own distribution network. The transaction involves the following details:  Mr. James owns 60% of Buyer and elected two directors to Buyer’s five-member board.  Mr. James also owns 90% of Seller, a company that operates a chain of retail hardware stores. Seller recently closed a large number of its stores Mr. James proposes that Buyer purchase Seller’s unused fleet of trucks to expand Buyer’s distribution of its food products, a proposal to which Buyer agrees. The price is equal to 10% of Buyer’s assets and is higher than the market value.  The proposed transaction is part of the company’s ordinary course of business and is not outside the authority of the company.  Buyer enters into the transaction. All required approvals are obtained, and all required disclosures made (that is, the transaction is not fraudulent).  The transaction causes damages to Buyer. Shareholders sue Mr. James and the other parties that approved the transaction. Doing Business 2017 Nigeria 89 PROTECTING MINORITY INVESTORS Where does the economy stand today? How strong are minority investor protections against protection index (figure 7.1). While the indicator does self-dealing in Nigeria? The economy has a score of 6.5 not measure all aspects related to the protection of on the strength of minority investor protection index, minority investors, a higher ranking does indicate that an with a higher score indicating stronger protections. economy’s regulations offer stronger minority investor protections against self-dealing in the areas measured. Globally, Nigeria stands at 32 in the ranking of 190 economies on the strength of minority investor Figure 7.1 How Nigeria and comparator economies perform on the strength of minority investor protection index Source: Doing Business database. Doing Business 2017 Nigeria 90 PROTECTING MINORITY INVESTORS One way to put an economy’s scores on the A summary of scoring for the protecting minority investors protecting minority investors indicators into context indicators at the end of this chapter provides details on is to see where the economy stands in the how the indices were calculated. distribution of scores across comparator economies. Figure 7.2 highlights the scores on the various minority investor protection indices for Nigeria. Figure 7.2 Summary of the various minority investor protection indices for Nigeria and comparator economies. Source: Doing Business database. Doing Business 2017 Nigeria 91 PROTECTING MINORITY INVESTORS Economies with the strongest protections of minority result, reforms to strengthen minority investor investors from self-dealing require detailed disclosure protections may move ahead on different fronts—such and define clear duties for directors. They also have well- as through new or amended company laws, securities functioning courts and up-to-date procedural rules that regulations or civil procedure rules. What minority give minority shareholders the means to prove their case investor protection reforms has Doing Business recorded and obtain a judgment within a reasonable time. As a in Nigeria (table 7.1)? Table 7.1 How has Nigeria strengthened minority investor protections—or not? By Doing Business report year from DB2011 to DB2017 DB year Reform Nigeria strengthened minority investor protections by requiring that related-party transactions be subject to external DB2016 review and to approval by disinterested shareholders. This reform applies to both Kano and Lagos. Source: Doing Business database. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Doing Business 2017 Nigeria 92 PROTECTING MINORITY INVESTORS What are the details? The protecting minority investors indicators reported to disclosure, director liability, shareholder suits, here for Nigeria are based on detailed information shareholder rights, ownership and control and corporate collected through a survey of corporate and securities transparency in a standard case study (for more details, lawyers about securities regulations, company laws and see the Data Notes section of the Doing Business 2017 court rules of evidence and procedure. To construct the report). The summary below shows the details underlying six indicators on minority investor protection, scores are the scores for Nigeria. assigned to each based on a range of conditions relating Table 7.2 Summary of scoring for the protecting minority investors indicators in Nigeria Answer (Lagos) Score (Lagos) Answer (Kano) Score (Kano) Strength of minority investor protection index (0-10) 6.5 6.5 Extent of conflict of interest regulation index (0-10) 7.0 7.0 Extent of disclosure index (0-10) 7.0 7.0 Shareholders Shareholders Which corporate body is legally sufficient to approve the excluding excluding 3.0 3.0 Buyer-Seller transaction? (0-3) interested interested parties parties Existence of a Existence of a Must Mr. James disclose his conflict of interest to the board conflict without 1.0 conflict without 1.0 of directors? (0-2) any specifics any specifics Disclosure on Disclosure on the the transaction Must Buyer disclose the transaction in published periodic transaction and 2.0 and on the 2.0 filings (annual reports)? (0-2) on the conflict of conflict of interest interest Must Buyer immediately disclose the transaction to the No disclosure No disclosure 0.0 0.0 public and/or shareholders? (0-2) obligation obligation Must an external body review the terms of the transaction Yes 1.0 Yes 1.0 before it takes place? (0-1) Extent of director liability index (0-10) 7.0 7.0 Can shareholders representing 10% of Buyer's share capital sue directly or derivatively for the damage the transaction Yes 1.0 Yes 1.0 caused to Buyer? (0-1) Can shareholders hold the interested director liable for the Liable if unfair or Liable if unfair 2.0 2.0 damage the transaction caused to Buyer? (0-2) prejudicial or prejudicial Can shareholders hold the other directors liable for the Liable if Liable if negligent 1.0 1.0 damage the transaction caused to Buyer (0-2) negligent Must Mr. James pay damages for the harm caused to Buyer Yes 1.0 Yes 1.0 upon a successful claim by shareholders? (0-1) Must Mr. James repay profits made from the transaction Yes 1.0 Yes 1.0 upon a successful claim by shareholders? (0-1) Is Mr. James disqualifed or fined and imprisoned upon a No 0.0 No 0.0 successful claim by shareholders? (0-1) Can a court void the transaction upon a successful claim by Voidable if Voidable if 1.0 1.0 shareholders? (0-2) negligently negligently Doing Business 2017 Nigeria 93 concluded concluded Ease of shareholder suits index (0-10) 7.0 7.0 Before suing can shareholders representing 10% of Buyer's Yes 1.0 Yes 1.0 share capital inspect the transaction documents? (0-1) Documents Documents that Can the plaintiff obtain any documents from the defendant that the the defendant 1.0 1.0 and witnesses at trial? (0-3) defendant relied on relied on Can the plaintiff request categories of documents from the No 0.0 No 0.0 defendant without identifying specific ones? (0-1) Can the plaintiff directly question the defendant and Yes 2.0 Yes 2.0 witnesses at trial? (0-2) Is the level of proof required for civil suits lower than that of Yes 1.0 Yes 1.0 criminal cases? (0-1) Can shareholder plaintiffs recover their legal expenses from Yes regardless of Yes regardless 2.0 2.0 the company? (0-2) outcome of outcome Extent of shareholder governance index (0-10) 6.0 6.0 Extent of shareholder rights index (0-10) 6.0 6.0 Does the sale of 51% of Buyer's assets require shareholder No 0.0 No 0.0 approval? Can shareholders representing 10% of Buyer's share capital Yes 1.0 Yes 1.0 call for an extraordinary meeting of shareholders? Must Buyer obtain its shareholders’ approval every time it Yes 1.0 Yes 1.0 issues new shares? Do shareholders automatically receive preemption rights No 0.0 No 0.0 every time Buyer issues new shares? Must shareholders approve the election and dismissal of the Yes 1.0 Yes 1.0 external auditor? Are changes to the rights of a class of shares only possible if Yes 1.0 Yes 1.0 the holders of the affected shares approve? Assuming that Buyer is a limited company, does the sale of No 0.0 No 0.0 51% of its assets require member approval? Assuming that Buyer is a limited company, can members representing 10% call for an extraordinary meeting of Yes 1.0 Yes 1.0 members? Assuming that Buyer is a limited company, must all members No 0.0 No 0.0 consent to add a new member? Assuming that Buyer is a limited company, must a member first offer to sell his interest to the existing members before Yes 1.0 Yes 1.0 selling to a non-member? Extent of ownership and control index (0-10) 5.0 5.0 Is it forbidden to appoint the same individual as CEO and No 0.0 No 0.0 chair of the board of directors? Must the board of directors include independent and No 0.0 No 0.0 nonexecutive board members? Can shareholders remove members of the board of directors Yes 1.0 Yes 1.0 without cause before the end of their term? Must the board of directors include a separate audit Yes 1.0 Yes 1.0 committee exclusively comprising board members? Must a potential acquirer make a tender offer to all Yes 1.0 Yes 1.0 shareholders upon acquiring 50% of Buyer? Must Buyer pay dividends within a maximum period set by Yes 1.0 Yes 1.0 Doing Business 2017 Nigeria 94 law after the declaration date? Is a subsidiary prohibited from acquiring shares issued by its Yes 1.0 Yes 1.0 parent company? Assuming that Buyer is a limited company, is there a No 0.0 No 0.0 management deadlock breaking mechanism? Assuming that Buyer is a limited company, must a potential acquirer make a tender offer to all shareholders upon No 0.0 No 0.0 acquiring 50% of Buyer? Assuming that Buyer is a limited company, must Buyer distribute profits within a maximum period set by law after No 0.0 No 0.0 the declaration date? Extent of corporate transparency index (0-10) 7.0 7.0 Must Buyer disclose direct and indirect beneficial ownership Yes 1.0 Yes 1.0 stakes representing 5%? Must Buyer disclose information about board members’ other directorships as well as basic information on their Yes 1.0 Yes 1.0 primary employment? Must Buyer disclose the compensation of individual No 0.0 No 0.0 managers? Must a detailed notice of general meeting be sent 21 days No 0.0 No 0.0 before the meeting? Can shareholders representing 5% of Buyer’s share capital Yes 1.0 Yes 1.0 put items on the agenda for the general meeting? Must Buyer's annual financial statements be audited by an Yes 1.0 Yes 1.0 external auditor? Must Buyer disclose its audit reports to the public? Yes 1.0 Yes 1.0 Assuming that Buyer is a limited company, must members No 0.0 No 0.0 meet at least once a year? Assuming that Buyer is a limited company, can members Yes 1.0 Yes 1.0 representing 5% put items on the meeting agenda? Assuming that Buyer is a limited company, must Buyer's annual financial statements be audited by an external Yes 1.0 Yes 1.0 auditor? Source: Doing Business database. Doing Business 2017 Nigeria 95 PAYING TAXES Taxes are essential. The level of tax rates needs to be WHAT THE PAYING TAXES INDICATORS carefully chosen—and needless complexity in tax rules avoided. Firms in economies that rank better MEASURE on the ease of paying taxes in the Doing Business study tend to perceive both tax rates and tax Tax payments for a manufacturing company administration as less of an obstacle to business in 2014 (number per year adjusted for according to the World Bank Enterprise Survey electronic and joint filing and payment) research. Total number of taxes and contributions paid, What do the indicators cover? including consumption taxes (value added tax, sales tax or goods and service tax) Using a case scenario, Doing Business records the Method and frequency of filing and payment taxes and mandatory contributions that a medium- size company must pay in a given year as well as Time required to comply with 3 major taxes measures of the administrative burden of paying (hours per year) taxes and contributions and dealing with postfiling Collecting information and computing the tax processes. This case scenario uses a set of financial payable statements and assumptions about transactions made over the year. Information is also compiled on Completing tax return forms, filing with the frequency of filing and payments, time taken to proper agencies comply with tax laws, time taken to comply with the Arranging payment or withholding requirements of postfiling processes and time Preparing separate tax accounting books, if waiting for these processes to be completed. The required ranking of economies on the ease of paying taxes is determined by sorting their distance to frontier Total tax rate (% of profit before all taxes) scores on the ease of paying taxes. These scores are Profit or corporate income tax the simple average of the distance to frontier scores Social contributions and labor taxes paid by for each of the four component indicators – number the employer of tax payments. time, total tax rate and postfiling index – with a threshold and a nonlinear Property and property transfer taxes transformation applied to one of the component Dividend, capital gains and financial indicators, the total tax rate1. If both VAT (or GST) transactions taxes and corporate income tax apply, the postfiling index Waste collection, vehicle, road and other taxes is the simple average of the distance to frontier scores for each of the four components: the time to Postfiling Index comply with a VAT or GST refund, the time to obtain The time to comply with a VAT or GST refund a VAT or GST refund, the time to comply with a corporate income tax audit and the time to complete The time to receive a VAT or GST refund a corporate income tax audit. If only VAT (or GST) or The time to comply with a corporate income corporate income tax applies, the postfiling index is tax audit the simple average of the scores for only the two The time to complete a corporate income tax components pertaining to the applicable tax. If audit neither VAT (or GST) nor corporate income tax 1 The nonlinear distance to frontier for the total tax rate is equal to the distance to frontier for the total tax rate to the power of 0.8. The threshold is defined as the total tax rate at the 15th percentile of the overall distribution for all years included in the analysis up to and including Doing Business 2015, which is 26.1%. All economies with a total tax rate below this threshold receive the same score as the economy at the threshold. Doing Business 2017 Nigeria 96 applies, the postfiling index is not included in the Assumptions about the corporate income tax ranking of the ease of paying taxes. audit process: Taxes and mandatory contributions include  An error in the calculation of the income tax corporate income tax, turnover tax and all labor liability (for example, use of incorrect tax taxes and contributions paid by the company. A depreciation rates, or incorrectly treating an range of standard deductions and exemptions are expense as tax deductible) leads to an also recorded. incorrect income tax return and consequently All financial statement variables are proportional to an underpayment of corporate income tax. 2012 income per capita. To make the data  TaxpayerCo. discovered the error and comparable across economies, several assumptions voluntarily notified the tax authority of the are used. error in the corporate income tax return. TaxpayerCo is a medium-size business that started operations on January 1, 2014. The business starts from the same financial position in each economy. All the taxes and mandatory contributions paid during the second year of operation are recorded. Taxes and mandatory contributions are measured at all levels of government. Assumptions about the VAT refund process:  In June 2015, TaxpayerCo. makes a large capital purchase: one additional machine for manufacturing pots.  The value of the machine is 65 times income per capita of the economy.  Sales are equally spread per month (that is, 1,050 times income per capita divided by 12).  Cost of goods sold are equally expensed per month (that is, 875 times income per capita divided by 12).  The seller of the machinery is registered for VAT or general sales tax (GST).  Excess input VAT incurred in June will be fully recovered after four consecutive months if the VAT or GST rate is the same for inputs, sales and the machine and the tax reporting period is every month. . Doing Business 2017 Nigeria 97 PAYING TAXES Where does the economy stand today? What is the administrative burden of complying with tax the end of this chapter for details). Most indicator sets obligations and postfiling processes in Nigeria—and how refer to a case scenario in the largest business city of an much do firms pay in taxes? Globally, Nigeria stands at economy, except for 11 economies for which the data in the ranking of 190 economies on the ease of paying are a population-weighted average of the 2 largest taxes (figure 8.1). The rankings for comparator business cities. See the chapter on distance to frontier economies and the regional average ranking provide and ease of doing business ranking at the end of this other useful information for assessing the tax compliance profile for more details. burden for businesses in (see table 8.2 and table 8.3 at . Figure 8.1 How Nigeria and comparator economies rank on the ease of paying taxes Source: Doing Business database. Doing Business 2017 Nigeria 98 PAYING TAXES Economies around the world have made paying taxes and exemptions. Many have lowered tax rates. Changes faster, easier and less costly for businesses—such as by have brought concrete results. Some economies consolidating payments and filings of taxes, offering simplifying tax payment and reducing rates have seen electronic systems for filing and payment, establishing tax revenue rise. What tax reforms has Doing Business taxpayer service centers or allowing for more deductions recorded in Nigeria (table 8.1)? Table 8.1 How has Nigeria made paying taxes easier—or not? By Doing Business report year from DB2011 to DB2017 DB year Reform Nigeria introduced a new compulsory labor contribution paid DB2013 by the employer. Source: Doing Business database. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Doing Business 2017 Nigeria 99 PAYING TAXES What are the details? The indicators reported here for Nigeria are based on LOCATION OF STANDARDIZED COMPANY the taxes and contributions that would be paid by a standardized case study company used by Doing Business in collecting the data (see the section in this City: Lagos, Kano chapter on what the indicators cover). Tax practitioners are asked to review a set of financial statements as well as a standardized list of The taxes and contributions paid are listed in table 8.2 assumptions and transactions that the company below, along with the associated number of payments, completed during its 2nd year of operation. time and tax rate. Respondents are asked how much taxes and mandatory contributions the business must pay how The postfiling index is based on four components—the these taxes are filed and paid, how much time time to comply with a VAT or GST refund, the time to taxpayers spend preparing, filing and paying three obtain a VAT or GST refund, the time to comply with a major taxes (profit taxes, labor taxes including corporate income tax audit and the time to complete a mandatory contributions and consumption taxes) and corporate income tax audit. These components are how much time taxpayers spend complying with based on expanded case study assumptions. If only VAT postfiling processes and waiting for these processes (or GST) or corporate income tax applies for an to be completed. economy, the postfiling index is the simple average of the scores for only the two components pertaining to the applicable tax. If neither VAT (or GST) nor corporate income tax applies, the postfiling index is not included in the ranking of the ease of paying taxes. Table 8.2 Summary of tax rates and administration Total tax Notes on Lagos: Tax or mandatory Payments Notes on Time Statutory Tax base rate (% of total tax contribution (number) payments (hours) tax rate profit) rate Tertiary education trust fund taxable 0 jointly 2% 2.41 contribution profit taxable Corporate income tax 1 398 30% 17.46 profit gross Social Security Contributions 12 396 10% 11.28 salaries Employee Compensation gross Contribution paid by the 12 1% 1.13 salaries employer gross Training Tax 1 1% 1.13 salaries Doing Business 2017 Nigeria 100 Total tax Notes on Lagos: Tax or mandatory Payments Notes on Time Statutory Tax base rate (% of total tax contribution (number) payments (hours) tax rate profit) rate capital Capital gains tax 1 10% 0.47 gains interest not Tax on money market interest 0 withheld 10% 0.26 income included property Land Use Charge 1 0.132% 0.20 value 5/1000 of Stamp duty on checks 1 5% value of 0.18 check fixed fee NGN 5,000 depending Road license 1 0.04 per vehicle on type of vehicle State business levy 1 NGN 5,000 fixed fee 0.02 value not Value added tax (VAT) 12 162 5% 0.00 added included NGN 100 Infrastructure Development 1 per fixed fee 0.00 withheld Tax employee included in Fuel tax 1 0.00 fuel price Employee labor tax 0 jointly 8% 0.00 withheld gross National Housing Fund 12 2.5% 0.00 withheld salaries various small Advertising tax 1 0.00 rates amount small Stamp duty on contracts 1 0.00 amount Totals 59.0 956.0 34.3 Total tax Notes on Kano: Tax or mandatory Payments Notes on Time Statutory Tax base rate (% of total tax contribution (number) payments (hours) tax rate profit) rate Tertiary education trust fund taxable 0 jointly 2% 2.41 contribution profit taxable Corporate income tax 1 310 30% 17.46 profit Doing Business 2017 Nigeria 101 Total tax Notes on Kano: Tax or mandatory Payments Notes on Time Statutory Tax base rate (% of total tax contribution (number) payments (hours) tax rate profit) rate gross Social Security Contributions 12 320 10% 11.28 salaries Employee Compensation gross Contribution paid by the 12 1% 1.13 salaries employer gross Training Tax 1 1% 1.13 salaries capital Capital gains tax 1 10% 0.47 gains interest not Tax on money market interest 0 withheld 10% 0.26 income included property Land Use Charge 1 0.125% 0.19 value 5/1000 of Stamp duty on checks 1 5% value of 0.18 check fixed fee NGN 5,000 depending Road license 1 0.04 per vehicle on type of vehicle State business levy 1 NGN 5,000 fixed fee 0.02 value not Value added tax (VAT) 12 117 5% 0.00 added included NGN 100 Infrastructure Development 1 per fixed fee 0.00 withheld Tax employee included in Fuel tax 1 0.00 fuel price Employee labor tax 0 jointly 8% 0.00 withheld gross National Housing Fund 12 2.5% 0.00 withheld salaries various small Advertising tax 1 0.00 rates amount small Stamp duty on contracts 1 0.00 amount Totals 59.0 747.0 34.3 Source: Doing Business database. Doing Business 2017 Nigeria 102 Doing Business 2017 Nigeria 103 TRADING ACROSS BORDERS In today’s globalized world, making trade between WHAT THE TRADING ACROSS BORDERS economies easier is increasingly important for INDICATORS MEASURE FOR IMPORT & EXPORT business. Excessive use of paper documents, burdensome customs procedures, inefficient port operations and inadequate infrastructure all lead Documentary compliance – cost & time to extra costs and delays for exporters and Obtain, prepare and submit documents: importers, stifling trade potential. -During transport, clearance, inspections and port What do the indicators cover? or border handling in origin economy Doing Business records the time and cost -Required by origin, destination and transit associated with the logistical process of exporting economies and importing goods. Under the new Covers all documents by law and in practice methodology introduced this year, Doing Business Border compliance – cost & time measures the time and cost (excluding tariffs) associated with three sets of procedures — Customs clearance and inspections documentary compliance, border compliance and Inspections by other agencies if applied to more domestic transport—within the overall process of than 10% of shipments) exporting or importing a shipment of goods. The Port or border handling ranking of economies on the ease of trading across borders is determined by sorting their Processing documents during clearance, distance to frontier scores for trading across inspections and port or border handling borders. These scores are the simple average of Domestic transport* the distance to frontier scores for the time and Loading and unloading of shipment cost for documentary compliance and border compliance to export and import (domestic Transport between warehouse and terminal/port transport is not used for calculating the ranking). Transport between terminal/port and border Traffic delays and road police checks while To make the data comparable across economies, a shipment is en route few assumptions are made about the traded goods and the transactions: * Although Doing Business collects and publishes data on the time and cost for domestic transport, it does not use these Time data in calculating the distance to frontier score for trading  Time is measured in hours, and 1 day is 24 across borders or the ranking on the ease of trading across hours (for example, 22 days are recorded as 22 borders. × 24 = 528 hours). If customs clearance takes 7.5 hours, the data are recorded as is. Cost Alternatively, suppose that documents are  Insurance cost and informal payments for which no submitted to a customs agency at 8:00 a.m., are receipt is issued are excluded from the costs recorded. processed overnight and can be picked up at Costs are reported in U.S. dollars. Contributors are 8:00 a.m. the next day. In this case the time for asked to convert local currency into U.S. dollars based customs clearance would be recorded as 24 on the exchange rate prevailing on the day they answer hours because the actual procedure took 24 the questionnaire. hours. Doing Business 2017 Nigeria 104 Assumptions of the case study  If government fees are determined by the value of the shipment, the value is assumed to be $50,000.  For each of the 190 economies covered by Doing Business, it is assumed that a shipment  The product is new, not secondhand or used travels from a warehouse in the largest business merchandise. city of the exporting economy to a warehouse in the largest business city of the importing  The exporting firm is responsible for hiring and paying economy. For 11 economies the data are also for a freight forwarder or customs broker (or both) and collected, under the same case study pays for all costs related to international shipping, assumptions, for the second largest business domestic transport, clearance and mandatory city. inspections by customs and other government agencies, port or border handling, documentary  The import and export case studies assume compliance fees and the like for exports. The importing different traded products. It is assumed that firm is responsible for the above costs for imports. each economy imports a standardized shipment of 15 metric tons of containerized  The mode of transport is the one most widely used for auto parts (HS 8708) from its natural import the chosen export or import product and the trading partner—the economy from which it imports partner, as is the seaport, airport or land border the largest value (price times quantity) of auto crossing. parts. It is assumed that each economy exports the product of its comparative advantage  All electronic submissions of information requested by (defined by the largest export value) to its any government agency in connection with the natural export partner—the economy that is the shipment are considered to be documents obtained, largest purchaser of this product. Special prepared and submitted during the export or import products such as precious metal and gems, live process. animals and pharmaceuticals are excluded from the list of possible export products. However,  A port or border is defined as a place (seaport, airport the second largest product category is or land border crossing) where merchandise can enter considered as needed. or leave an economy.  A shipment is a unit of trade. Export shipments  Government agencies considered relevant are agencies do not necessarily need to be containerized, such as customs, port authorities, road police, border while import shipments of auto parts are guards, standardization agencies, ministries or assumed to be containerized. departments of agriculture or industry, national security agencies and any other government authorities. Doing Business 2017 Nigeria 105 TRADING ACROSS BORDERS Where does the economy stand today? The Trading across Borders indicator refers to a case Globally, Nigeria stands at 181 in the ranking of 190 study scenario of a warehouse in the largest business city economies on the ease of trading across borders (figure of an economy (except for 11 economies for which the 9.1). data are a population-weighted average of the 2 largest While not included in the distance to frontier or ease of business cities) trading with the main import and export doing business ranking, data on domestic transportation partner through the economy’s main border crossing. is also recorded for all economies and provided in Table 9.3. Figure 9.1 How Nigeria and comparator economies rank on the ease of trading across borders Source: Doing Business database. Doing Business 2017 Nigeria 106 TRADING ACROSS BORDERS What are the details? The indicators reported here for Nigeria are based on LOCATION OF STANDARDIZED COMPANY a set of specific predefined procedures for trading a shipment of goods by the most widely used mode of transport (whether sea or land). The information on City: Lagos, Kano the time and cost to complete export and import is collected from local freight forwarders, customs The details on the predefined set of procedures, and the brokers and traders. associated time and cost, for exporting and importing a shipment of goods are listed in the summary bellow, along with the required documents. Table 9.2 Summary of export and import time and cost for trading across borders in Nigeria Lagos Kano Sub-Saharan Africa Time to export: Border compliance 135 135 101 (hours) Cost to export: Border compliance 786 786 571 (USD) Time to export: Documentary 131 131 91 compliance (hours) Cost to export: Documentary 250 250 225 compliance (USD) Time to import: Border compliance 284 284 141 (hours) Cost to import: Border compliance 1077 1077 662 (USD) Time to import: Documentary 173 173 105 compliance (hours) Cost to import: Documentary 564 564 313 compliance (USD) Source: Doing Business database. Table 9.3 Summary of trading details, transport time and documents for trading across borders in Nigeria Lagos Kano Export Import Export Import HS 8708: Parts and HS 8708: Parts and HS 40: Rubber and HS 40: Rubber and Product accessories of accessories of articles thereof articles thereof motor vehicles motor vehicles Doing Business 2017 Nigeria 107 Lagos Kano Export Import Export Import Trade partner United Kingdom Japan United Kingdom Japan Border Apapa port Apapa port Apapa port Apapa port Distance (km) 11 11 1002 1002 Domestic transport time (hours) 5 5 100 100 Domestic transport cost (USD) 436 436 1650 1650 Source: Doing Business database. Documents used to export Bill of lading Cargo Release order EUR 1 - Certificate of origin Commercial invoice Single Goods Declaration (SGD) Form C 2010 Nigerian Export Proceeds Form (NXP Form) Clean Certificate of Inspection (CCI) Packing list Terminal handling receipt Request for information (RFI) Documents used to import Bill of lading Cargo Release Order Combined Certificate of Value and Origin (CCVO) Doing Business 2017 Nigeria 108 Commercial invoice Exit Gate e-Form "M" (valid for foreign exchange) Letter of Credit Manufacturer's certificate of production or SONCAP Packing list Payment receipt of customs fees and duties Pre-Arrival Assessment Report (PAAR) Single Goods Declaration (SGD) Terminal handling receipts Product Certificate 1 (Unregistered Status) Source: Doing Business database. Note: Doing Business continues to collect data on the number of documents needed to trade internationally. Unlike in previous years, however, these data are excluded from the calculation of the distance to frontier score and ranking. The time and cost for documentary compliance serve as better measures of the overall cost and complexity of compliance with documentary requirements than does the number of documents required. Doing Business 2017 Nigeria 109 Figure 9.2 Summary of Nigeria on the ease of trading across borders Export (Lagos) Import (Lagos) Export (Kano) Import (Kano) Source: Doing Business database. Doing Business 2017 Nigeria 110 ENFORCING CONTRACTS WHAT THE ENFORCING CONTRACTS Effective commercial dispute resolution has many benefits. Courts are essential for entrepreneurs INDICATORS MEASURE because they interpret the rules of the market and protect economic rights. Efficient and transparent Time required to enforce a contract through courts encourage new business relationships because the courts (calendar days) businesses know they can rely on the courts if a new customer fails to pay. Speedy trials are essential for Time to file and serve the case small enterprises, which may lack the resources to Time for trial and to obtain the judgment stay in business while awaiting the outcome of a long Time to enforce the judgment court dispute. Cost required to enforce a contract through What do the indicators cover? the courts (% of claim) Doing Business measures the time and cost for Attorney fees resolving a standardized commercial dispute through a local first-instance court. In addition, this year it Court fees introduces a new measure, the quality of judicial Enforcement fees processes index, evaluating whether each economy Quality of judicial processes index (0-18) has adopted a series of good practices that promote quality and efficiency in the court system. This new Court structure and proceedings (0-6) index replaces the indicator on procedures, which Case management (0-6) was eliminated this year. The ranking of economies on the ease of enforcing contracts is determined by Court automation (0-4) sorting their distance to frontier scores. These scores Alternative dispute resolution (0-3) are the simple average of the distance to frontier scores for each of the component indicators. The dispute in the case study involves the breach of a  The seller requests a pretrial attachment to secure sales contract between 2 domestic businesses. The the claim. case study assumes that the court hears an expert on  The dispute on the quality of the goods requires an the quality of the goods in dispute. This distinguishes expert opinion. the case from simple debt enforcement. To make the  The judge decides in favor of the seller; there is no data comparable across economies, Doing Business appeal. uses several assumptions about the case:  The seller enforces the judgment through a public  The dispute concerns a lawful transaction sale of the buyer’s movable assets. between two businesses (Seller and Buyer), both located in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city.  The buyer orders custom-made goods, then fails to pay.  The value of the dispute is 200% of the income per capita or the equivalent in local currency of USD 5,000, whichever is greater.  The seller sues the buyer before the court with jurisdiction over commercial cases worth 200% of income per capita or $5,000. Doing Business 2017 Nigeria 111 ENFORCING CONTRACTS Where does the economy stand today? How efficient is the process of resolving a commercial and ease of doing business ranking at the end of this dispute through the courts in Nigeria? According to data profile for more details. collected by Doing Business, contract enforcement takes Globally, Nigeria stands at 139 in the ranking of 190 509.8 days and costs 57.7% of the value of the claim. economies on the ease of enforcing contracts (figure Most indicator sets refer to the largest business city of an 10.1). The rankings for comparator economies and the economy, except for 11 economies for which the data regional average ranking provide other useful are a population-weighted average of the 2 largest benchmarks for assessing the efficiency of contract business cities. See the chapter on distance to frontier enforcement in Nigeria. Figure 10.1 How Nigeria and comparator economies rank on the ease of enforcing contracts Source: Doing Business database. Doing Business 2017 Nigeria 112 ENFORCING CONTRACTS What are the details? The data on time and cost reported here for Nigeria ECONOMY DETAILS are built by following the step-by-step evolution of a commercial sale dispute within the court, under the Claim value - Kano: NGN 976,090 assumptions about the case described above (figure 10.2). The time and cost of resolving the Claim value - Lagos: NGN 976,090 standardized dispute are identified through study of the codes of civil procedure and other court Court name - Kano: Kano Magistrates Court regulations, as well as through questionnaires completed by local litigation lawyers (and, in a quarter of the economies covered by Doing Business, Court name - Lagos: Lagos Magistrates Court by judges as well). City: Lagos, Kano Doing Business 2017 Nigeria 113 Figure 10.2 Time and cost of contract enforcement in Nigeria and comparator economies Source: Doing Business database. Doing Business 2017 Nigeria 114 Table 10.2 Details on time and cost for enforcing contracts in Nigeria Sub-Saharan Indicator Lagos Kano Africa average Time (days) 447.0 720.0 655 Filing and service 40 21 Trial and judgment 265 661 Enforcement of judgment 142 38 Cost (% of claim) 62.0 43.4 44.3 Attorney fees 45.0 25.0 Court fees 12.0 11.3 Enforcement fees 5.0 7.1 Source: Doing Business database. Doing Business 2017 Nigeria 115 ENFORCING CONTRACTS Quality of judicial processes index The quality of judicial processes index measures The scores reported here show which of these good whether each economy has adopted a series of good practices are available in Nigeria (figure 10.3). practices in its court system in four areas: court This methodology was initially developed by Djankov and structure and proceedings, case management, court others (2003) and is adopted here with several changes. automation and alternative dispute resolution. The The quality of judicial processes index was introduced in score on the quality of judicial processes index is the Doing Business 2016. The good practices tested in this sum of the scores on these 4 sub-components. The index were developed on the basis of internationally index ranges from 0 to 18, with higher values recognized good practices promoting judicial efficiency. indicating better, more efficient judicial processes. Figure 10.3 Quality of judicial processes index in Nigeria and comparator economies Source: Doing Business database. Doing Business 2017 Nigeria 116 Table 10.3 Details of the quality of judicial processes index in Nigeria Answer Answer Score Score (Lagos) (Lagos) (Kano) (Kano) Quality of judicial processes index (0-18) 8.0 6.5 Court structure and proceedings (0-5) 4.5 3.0 1. Is there a court or division of a court dedicated Yes 1.5 No 0.0 solely to hearing commercial cases? 2. Small claims court 1.5 1.5 2.a. Is there a small claims court or a fast-track Yes Yes procedure for small claims? 2.b. If yes, is self-representation allowed? Yes Yes 3. Is pretrial attachment available? Yes 1.0 Yes 1.0 Yes, but Yes, but 4. Are new cases assigned randomly to judges? 0.5 0.5 manual manual 5. Does a woman's testimony carry the same Yes 0.0 Yes 0.0 evidentiary weight in court as a man's? Case management (0-6) 1.0 1.0 1. Time standards 1.0 1.0 1.a. Are there laws setting overall time standards for Yes Yes key court events in a civil case? 1.b. If yes, are the time standards set for at least Yes Yes three court events? 1.c. Are these time standards respected in more than Yes Yes 50% of cases? 2. Adjournments 0.0 0.0 2.a. Does the law regulate the maximum number of Yes Yes adjournments that can be granted? 2.b. Are adjournments limited to unforeseen and No No exceptional circumstances? 2.c. If rules on adjournments exist, are they respected No No in more than 50% of cases? 3. Can two of the following four reports be generated about the competent court: (i) time to disposition report; (ii) clearance rate report; (iii) age of No 0.0 No 0.0 pending cases report; and (iv) single case progress report? 4. Is a pretrial conference among the case No 0.0 No 0.0 management techniques used before the competent Doing Business 2017 Nigeria 117 Answer Answer Score Score (Lagos) (Lagos) (Kano) (Kano) court? 5. Are there any electronic case management tools in No 0.0 No 0.0 place within the competent court for use by judges? 6. Are there any electronic case management tools in No 0.0 No 0.0 place within the competent court for use by lawyers? Court automation (0-4) 0.0 0.0 1. Can the initial complaint be filed electronically through a dedicated platform within the competent No 0.0 No 0.0 court? 2. Is it possible to carry out service of process electronically for claims filed before the competent No 0.0 No 0.0 court? 3. Can court fees be paid electronically within the No 0.0 No 0.0 competent court? 4. Publication of judgments 0.0 0.0 4.a Are judgments rendered in commercial cases at all levels made available to the general public No No through publication in official gazettes, in newspapers or on the internet or court website? 4.b. Are judgments rendered in commercial cases at the appellate and supreme court level made available to the general public through publication in official No No gazettes, in newspapers or on the internet or court website? Alternative dispute resolution (0-3) 2.5 2.5 1. Arbitration 1.5 1.5 1.a. Is domestic commercial arbitration governed by a consolidated law or consolidated chapter or section Yes Yes of the applicable code of civil procedure encompassing substantially all its aspects? 1.b. Are there any commercial disputes—aside from those that deal with public order or public policy— No No that cannot be submitted to arbitration? 1.c. Are valid arbitration clauses or agreements Yes Yes usually enforced by the courts? 2. Mediation/Conciliation 1.0 1.0 2.a. Is voluntary mediation or conciliation available? Yes Yes Doing Business 2017 Nigeria 118 Answer Answer Score Score (Lagos) (Lagos) (Kano) (Kano) 2.b. Are mediation, conciliation or both governed by a consolidated law or consolidated chapter or section Yes Yes of the applicable code of civil procedure encompassing substantially all their aspects? 2.c. Are there financial incentives for parties to attempt mediation or conciliation (i.e., if mediation or No No conciliation is successful, a refund of court filing fees, income tax credits or the like)? Source: Doing Business database. Doing Business 2017 Nigeria 119 RESOLVING INSOLVENCY A robust bankruptcy system functions as a filter, WHAT THE RESOLVING INSOLVENCY ensuring the survival of economically efficient companies and reallocating the resources of INDICATORS MEASURE inefficient ones. Fast and cheap insolvency proceedings result in the speedy return of businesses Time required to recover debt (years) to normal operation and increase returns to Measured in calendar years creditors. By clarifying the expectations of creditors and debtors about the outcome of insolvency Appeals and requests for extension are proceedings, well-functioning insolvency systems can included facilitate access to finance, save more viable Cost required to recover debt (% of debtor’s businesses and sustainably grow the economy. estate) What do the indicators cover? Measured as percentage of estate value Doing Business studies the time, cost and outcome of Court fees insolvency proceedings involving domestic legal Fees of insolvency administrators entities. These variables are used to calculate the recovery rate, which is recorded as cents on the Lawyers’ fees dollar recovered by secured creditors through Assessors’ and auctioneers’ fees reorganization, liquidation or debt enforcement Other related fees (foreclosure or receivership) proceedings. To determine the present value of the amount Outcome recovered by creditors, Doing Business uses the Whether business continues operating as a lending rates from the International Monetary Fund, going concern or business assets are sold supplemented with data from central banks and the piecemeal Economist Intelligence Unit. Recovery rate for creditors To make the data on the time, cost and outcome Measures the cents on the dollar recovered comparable across economies, several assumptions by secured creditors about the business and the case are used: Outcome for the business (survival or not)  A hotel located in the largest city (or cities) has determines the maximum value that can be 201 employees and 50 suppliers. The hotel recovered experiences financial difficulties. Official costs of the insolvency proceedings  The value of the hotel is 100% of the income per are deducted capita or the equivalent in local currency of USD Depreciation of furniture is taken into 200,000, whichever is greater. account  The hotel has a loan from a domestic bank, Present value of debt recovered secured by a mortgage over the hotel’s real estate. The hotel cannot pay back the loan, but Strength of insolvency framework index (0- makes enough money to operate otherwise. 16) In addition, Doing Business evaluates the adequacy Sum of the scores of four component indices: and integrity of the existing legal framework Commencement of proceedings index (0-3) applicable to liquidation and reorganization Management of debtor’s assets index (0-6) proceedings through the strength of insolvency framework index. The index tests whether economies Reorganization proceedings index (0-3) adopted internationally accepted good practices in Creditor participation index (0-4) four areas: commencement of proceedings, management of debtor’s assets, reorganization proceedings and creditor participation. Doing Business 2017 Nigeria 120 RESOLVING INSOLVENCY Where does the economy stand today? Globally, Nigeria stands at 140 in the ranking of 190 framework index. The Resolving Insolvency indicator economies on the ease of resolving insolvency (figure does not measure insolvency proceedings of individuals 11.1). The ranking of economies on the ease of resolving and financial institutions. The data are derived from insolvency is determined by sorting their distance to questionnaire responses by local insolvency practitioners frontier scores for resolving insolvency. These scores are and verified through a study of laws and regulations as the simple average of the distance to frontier scores for well as public information on bankruptcy systems. the recovery rate and the strength of insolvency Figure 11.1 How Nigeria and comparator economies rank on the ease of resolving insolvency Source: Doing Business database. Doing Business 2017 Nigeria 121 RESOLVING INSOLVENCY Recovery of debt in insolvency Data on the time, cost and outcome refer to the most scenario in the largest business city of an economy, likely in-court insolvency procedure applicable under except for 11 economies for which the data are a specific case study assumptions. population-weighted average of the 2 largest business cities. According to data collected by Doing Business, resolving insolvency takes 2.0 years on average and costs 22.0% of the debtor’s estate. The average recovery rate is 27.8 cents on the dollar. Most indicator sets refer to a case Figure 11.2 Efficiency of proceedings - time, cost and recovery rate in Nigeria and comparator economies. Source: Doing Business database. Note: The recovery rate is calculated based on the time, cost and outcome of insolvency proceedings involving domestic legal entities and is recorded as cents on the dollar recovered by secured creditors. The calculation takes into account the outcome: whether the business emerges from the proceedings as a going concern or the assets are sold piecemeal. Then the costs of the proceedings are deducted. Finally, the value lost as a result of the time the money remains tied up in insolvency proceedings is taken into account. The recovery rate is the present value of the remaining proceeds, based on end-2015 lending rates. Doing Business 2017 Nigeria 122 Table 11.1 Summary of data for the strength of insolvency framework index Nigeria Answer Explanation After Mirage's default on payment, BizBank will initiate foreclosure liquidation (after Lagos, by exercising the security interest; however other unsecured Proceeding an attempt at Kano creditors can seek to initiate a collective proceeding thus converting foreclosure) the procedure into liquidation. Upon the completion of liquidation proceeding, the hotel will stop Lagos, Outcome piecemeal sale operating and Mirage assets will be sold piecemeal usually through Kano private sale. The liquidation proceeding converted from foreclosure attempt will take approximate 2 years in total. After BizBank's application for foreclosure, the court will grant an order which would last for 6 months within which period Mirage may redeem its equity of redemption or repay. Either BizBank may not be willing to wait for that long period, or other unsecured creditors file for collective Lagos, Time (in years) 2.0 liquidation proceeding, the foreclosure procedure gets converted to Kano liquidation. It then takes half a year for the Court to review the case, notify relevant parties, hold hearing and have a liquidation order issued. The court will appoint a liquidator who will finalize creditors' claims usually within 6 months. Then the preparation and execution of the sale will take an additional half year until BizBank is repaid some or all of the money owed to it. The costs associated with the case would amount to approximately 22% of the value of the debtor's estate. Cost incurred during the Cost (% of Lagos, entire insolvency process mainly include attorney fees (8%), 22.0 estate) Kano insolvency representative or receiver fees(7%), fees of accountants, assessors, inspectors and other professionals (1-3%), fees of auctioneers (2-3%), and cost of notification and publication (2-4%). Recovery rate: 27.8 Source: Doing Business database. Doing Business 2017 Nigeria 123 RESOLVING INSOLVENCY Strength of resolving insolvency index The strength of insolvency framework index is the with higher values indicating insolvency legislation that is sum of the scores on the commencement of better designed for rehabilitating viable firms and proceedings index, management of debtor’s assets liquidating nonviable ones. Nigeria scores 5.0 out of 16 index, reorganization proceedings index and creditor on the strength of resolving insolvency index. participation index. The index ranges from 0 to 16, Figure 11.3 Strength of insolvency framework index (0-16) in Nigeria and comparator economies Source: Doing Business database. Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice”. Doing Business 2017 Nigeria 124 Table 11.2 Summary of data for the strength of insolvency framework index Nigeria Answer Answer Score Score (Lagos) (Lagos) (Kano) (Kano) Strength of insolvency framework index (0-16) 5.0 5.0 Commencement of proceedings index (0-3) 2.0 2.0 (b) Debtor (b) Debtor What procedures are available to a DEBTOR when may file for may file for 0.5 0.5 commencing insolvency proceedings? liquidation liquidation only only (b) Yes, but a (b) Yes, but creditor may a creditor Does the insolvency framework allow a CREDITOR to file for 0.5 may file for 0.5 file for insolvency of the debtor? liquidation liquidation only only (a) Debtor (a) Debtor is is generally What basis for commencement of the insolvency generally unable to proceedings is allowed under the insolvency unable to pay 1.0 pay its 1.0 framework? its debts as debts as they mature they mature Management of debtor's assets index (0-6) 2.0 2.0 Does the insolvency framework allow the continuation of contracts supplying essential goods and services to No 0.0 No 0.0 the debtor? Does the insolvency framework allow the rejection by Yes 1.0 Yes 1.0 the debtor of overly burdensome contracts? Does the insolvency framework allow avoidance of Yes 1.0 Yes 1.0 preferential transactions? Does the insolvency framework allow avoidance of No 0.0 No 0.0 undervalued transactions? Does the insolvency framework provide for the possibility of the debtor obtaining credit after No 0.0 No 0.0 commencement of insolvency proceedings? (c) No priority (c) No is assigned to priority is Does the insolvency framework assign priority to post- assigned to post- 0.0 0.0 commencement credit? post- commencem ent creditors commence ment Doing Business 2017 Nigeria 125 Answer Answer Score Score (Lagos) (Lagos) (Kano) (Kano) creditors Reorganization proceedings index (0-3) 0.0 0.0 Which creditors vote on the proposed reorganization N/A 0.0 N/A 0.0 plan? Does the insolvency framework require that dissenting creditors in reorganization receive at least as much as No 0.0 No 0.0 what they would obtain in a liquidation? Are the creditors devided into classes for the purposes of voting on the reorganization plan, does each class No 0.0 No 0.0 vote separately and are creditors in the same class treated equally? Creditor participation index (0-4) 1.0 1.0 Does the insolvency framework require approval by the creditors for selection or appointment of the insolvency Yes 1.0 Yes 1.0 representative? Does the insolvency framework require approval by the No 0.0 No 0.0 creditors for sale of substantial assets of the debtor? Does the insolvency framework provide that a creditor has the right to request information from the insolvency No 0.0 No 0.0 representative? Does the insolvency framework provide that a creditor has the right to object to decisions accepting or No 0.0 No 0.0 rejecting creditors' claims? Source: Doing Business database. Doing Business 2017 Nigeria 126 LABOR MARKET REGULATION Doing Business studies the flexibility of regulation of  Operates a supermarket or grocery store in the employment, specifically as it relates to the areas of economy’s largest business city. For 11 hiring, working hours and redundancy. Doing Business economies the data are also collected for the also measures several aspects of job quality such as the second largest business city. availability of maternity leave, paid sick leave and the  Has 60 employees. equal treatment of men and women at the workplace.  Is subject to collective bargaining agreements if such agreements cover more than 50% of the Doing Business 2017 presents the data for the labor food retail sector and they apply even to firms market regulation indicators in an annex. The report that are not party to them. does not present rankings of economies on these  Abides by every law and regulation but does not indicators or include the topic in the aggregate distance grant workers more benefits than those to frontier score or ranking on the ease of doing mandated by law, regulation or (if applicable) business. Detailed data collected on labor market collective bargaining agreements. regulation are available on the Doing Business website (http://www.doingbusiness.org). The data on labor market regulation are based on a detailed questionnaire on employment regulations that is completed by local lawyers and public officials. Employment laws and regulations as well as secondary sources are reviewed to ensure accuracy. To make the data comparable across economies, several assumptions about the worker and the business are used. The worker:  Is a cashier in a supermarket or grocery store, age 19, with one year of work experience.  Is a full-time employee.  Is not a member of the labor union, unless membership is mandatory. The business:  Is a limited liability company (or the equivalent in the economy). Doing Business 2017 Nigeria 127 LABOR MARKET REGULATION What are the details? The data reported here for Nigeria are based on a Employment laws and regulations as well as secondary detailed survey of labor market regulation that is sources are reviewed to ensure accuracy. completed by local lawyers and public officials. Hiring Data on hiring cover five areas: (i) whether fixed-term minimum wage to the average value added per worker contracts are prohibited for permanent tasks; (ii) the (the ratio of an economy’s GNI per capita to the maximum cumulative duration of fixed-term contracts; working-age population as a percentage of the total (iii) the minimum wage for a cashier, age 19, with one population). year of work experience; and (iv) the ratio of the Lagos Kano Hiring Data Data Fixed-term contracts prohibited for permanent tasks? No No Maximum length of a single fixed-term contract (months) No limit No limit Maximum length of fixed-term contracts, including renewals (months) No limit No limit Minimum wage applicable to the worker assumed in the case study 100.5 100.5 (US$/month) Ratio of minimum wage to value added per worker 0.2 0.2 Source: Doing Business database. Doing Business 2017 Nigeria 128 LABOR MARKET REGULATION Working hours Data on working hours cover nine areas: i) the maximum and nonnursing women can work the same night hours number of working days allowed per week; (ii) the as men; (vii) whether there are restrictions on weekly premium for night work (as a percentage of hourly pay); holiday work; (viii) whether there are restrictions on (iii) the premium for work on a weekly rest day (as a overtime work; and (ix) the average paid annual leave for percentage of hourly pay); (iv) the premium for overtime workers with 1 year of tenure, 5 years of tenure, and 10 work (as a percentage of hourly pay); (v) whether there years of tenure. are restrictions on night work; (vi) whether nonpregnant Lagos Kano Working Hours Data Data Maximum number of working days per week 6.0 6.0 Premium for night work (% of hourly pay) 0.0 0.0 Premium for work on weekly rest day (% of hourly pay) 0.0 0.0 Premium for overtime work (% of hourly pay) 0.0 0.0 Restrictions on night work? No No Whether nonpregnant and nonnursing women can work the same Yes Yes night hours as men Restrictions on weekly holiday? No No Restrictions on overtime work? No No Paid annual leave for a worker with 1 year of tenure (working days) 6.0 6.0 Paid annual leave for a worker with 5 years of tenure (working days) 6.0 6.0 Paid annual leave for a worker with 10 years of tenure (working days) 6.0 6.0 Paid annual leave (average for workers with 1, 5 and 10 years of tenure, 6.0 6.0 in working days) Source: Doing Business database. Doing Business 2017 Nigeria 129 LABOR MARKET REGULATION Redundancy rules Data on redundancy cover nine areas: (i) the length of whether the employer needs approval from a third party the maximum probationary period (in months) for to terminate one redundant worker; (vi) whether the permanent employees; (ii) whether redundancy is employer needs approval from a third party to terminate allowed as a basis for terminating workers; (iii) whether a group of nine redundant workers; (vii) whether the law the employer needs to notify a third party (such as a requires the employer to reassign or retrain a worker government agency) to terminate one redundant worker; before making the worker redundant; (viii) whether (iv) whether the employer needs to notify a third party to priority rules apply for redundancies; and (ix) whether terminate a group of nine redundant workers; (v) priority rules apply for reemployment. Lagos Kano Difficulty of redundancy index Data Data Maximum length of probationary period (months) 3.0 3.0 Dismissal due to redundancy allowed by law? Yes Yes Third-party notification if one worker is dismissed? No No Third-party approval if one worker is dismissed? No No Third-party notification if nine workers are dismissed? Yes Yes Third-party approval if nine workers are dismissed? No No Retraining or reassignment obligation before redundancy? No No Priority rules for redundancies? Yes Yes Priority rules for reemployment? No No Source: Doing Business database. Doing Business 2017 Nigeria 130 LABOR MARKET REGULATION Redundancy cost Redundancy cost measures the cost of advance notice severance payments applicable to a worker with 1 year requirements and severance payments due when of tenure, a worker with 5 years and a worker with 10 terminating a redundant worker, expressed in weeks of years is considered. One month is recorded as 4 and salary. The average value of notice requirements and 1/3 weeks. Lagos Kano Redundancy cost indicator (in salary weeks) Data Data Notice period for redundancy dismissal for a worker with 1 year of 1.0 1.0 tenure Notice period for redundancy dismissal for a worker with 5 years of 4.3 4.3 tenure Notice period for redundancy dismissal for a worker with 10 years of 4.3 4.3 tenure Notice period for redundancy dismissal (average for workers with 1, 5 3.2 3.2 and 10 years of tenure) Severance pay for redundancy dismissal for a worker with 1 year of 0.0 0.0 tenure Severance pay for redundancy dismissal for a worker with 5 years of 0.0 0.0 tenure Severance pay for redundancy dismissal for a worker with 10 years of 0.0 0.0 tenure Severance pay for redundancy dismissal (average for workers with 1, 5 0.0 0.0 and 10 years of tenure) Source: Doing Business database. Doing Business 2017 Nigeria 131 LABOR MARKET REGULATION Job quality Doing Business introduced new data on job quality in 2015. Doing Business 2017 covers eight questions on job quality (i) whether the law mandates equal remuneration for work of equal value; (ii) whether the law mandates nondiscrimination based on gender in hiring; (iii) whether the law mandates paid or unpaid maternity leave; (iv) the minimum length of paid maternity leave (in calendar days); (v) whether employees on maternity leave receive 100% of wages; (vi) the availability of five fully paid days of sick leave a year; (vii) whether a worker is eligible for an unemployment protection scheme after one year of service; and (viii) the minimum duration of the contribution period (in months) required for unemployment. Lagos Kano Job Quality Data Data Equal remuneration for work of equal value? No No Gender nondiscrimination in hiring? No No Paid or unpaid maternity leave mandated by law? Yes Yes Minimum length of maternity leave (calendar days)? 84.0 84.0 Receive 100% of wages on maternity leave? No No Five fully paid days of sick leave a year? Yes Yes Unemployment protection after one year of employment? No No Minimum contribution period for unemployment protection (months)? n.a. n.a. Source: Doing Business database. Doing Business 2017 Nigeria 132 DISTANCE TO FRONTIER AND EASE OF DOING BUSINESS RANKING Doing Business presents results for two aggregate even though it is no longer at the frontier in a measures: the distance to frontier score and the ease of subsequent year. doing business ranking, which is based on the distance For scores such as those on the strength of legal rights to frontier score. The ease of doing business ranking index or the quality of land administration index, the compares economies with one another; the distance to frontier is set at the highest possible value. For the total frontier score benchmarks economies with respect to tax rate, consistent with the use of a threshold in regulatory best practice, showing the absolute distance calculating the rankings on this indicator, the frontier is to the best performance on each Doing Business defined as the total tax rate at the 15th percentile of the indicator. When compared across years, the distance to overall distribution for all years included in the analysis frontier score shows how much the regulatory up to and including Doing Business 2015. For the time to environment for local entrepreneurs in an economy has pay taxes the frontier is defined as the lowest time changed over time in absolute terms, while the ease of recorded among all economies that levy the three major doing business ranking can show only how much the taxes: profit tax, labor taxes and mandatory regulatory environment has changed relative to that in contributions, and value added tax (VAT) or sales tax. For other economies. the different times to trade across borders, the frontier is defined as 1 hour even though in many economies the Distance to Frontier time is less than that. The distance to frontier score captures the gap between In the same formulation, to mitigate the effects of an economy’s performance and a measure of best extreme outliers in the distributions of the rescaled data practice across the entire sample of 36 indicators for 10 for most component indicators (very few economies Doing Business topics (the labor market regulation need 700 days to complete the procedures to start a indicators are excluded). For starting a business, for business, but many need 9 days), the worst performance example, the former Yugoslav Republic of Macedonia is calculated after the removal of outliers. The definition and New Zealand have the smallest number of of outliers is based on the distribution for each procedures required (1), and New Zealand the shortest component indicator. To simplify the process two rules time to fulfill them (0.5 days). Slovenia has the lowest were defined: the 95th percentile is used for the cost (0.0), and Australia, Colombia and 103 other indicators with the most dispersed distributions economies have no paid-in minimum capital (including minimum capital, number of payments to pay requirement (table 14.1 in the Doing Business 2016 taxes, and the time and cost indicators), and the 99th report). percentile is used for number of procedures. No outlier is removed for component indicators bound by definition Calculation of the distance to frontier score or construction, including legal index scores (such as the Calculating the distance to frontier score for each depth of credit information index, extent of conflict of economy involves two main steps. In the first step interest regulation index and strength of insolvency individual component indicators are normalized to a framework index) and the recovery rate. common unit where each of the 36 component In the second step for calculating the distance to frontier indicators y (except for the total tax rate) is rescaled score, the scores obtained for individual indicators for using the linear transformation (worst − y)/(worst − each economy are aggregated through simple averaging frontier). In this formulation the frontier represents the into one distance to frontier score, first for each topic best performance on the indicator across all economies and then across all 10 topics: starting a business, dealing since 2005 or the third year in which data for the with construction permits, getting electricity, registering indicator were collected. Both the best performance and property, getting credit, protecting minority investors, the worst performance are established every five years paying taxes, trading across borders, enforcing contracts based on the Doing Business data for the year in which and resolving insolvency. More complex aggregation they are established, and remain at that level for the five methods—such as principal components and years regardless of any changes in data in interim years. unobserved components—yield a ranking nearly Thus an economy may set the frontier for an indicator Doing Business 2017 Nigeria 133 identical to the simple average used by Doing Business2. The nonlinear transformation is not based on any Thus Doing Business uses the simplest method: economic theory of an “optimal tax rate” that minimizes weighting all topics equally and, within each topic, giving distortions or maximizes efficiency in an economy’s equal weight to each of the topic components3. overall tax system. Instead, it is mainly empirical in nature. The nonlinear transformation along with the An economy’s distance to frontier score is indicated on a threshold reduces the bias in the indicator toward scale from 0 to 100, where 0 represents the worst economies that do not need to levy significant taxes on performance and 100 the frontier. All distance to frontier companies like the Doing Business standardized case calculations are based on a maximum of five decimals. study company because they raise public revenue in However, indicator ranking calculations and the ease of other ways—for example, through taxes on foreign doing business ranking calculations are based on two companies, through taxes on sectors other than decimals. manufacturing or from natural resources (all of which are The difference between an economy’s distance to outside the scope of the methodology). In addition, it frontier score in any previous year and its score in 2015 acknowledges the need of economies to collect taxes illustrates the extent to which the economy has closed from firms. the gap to the regulatory frontier over time. And in any Calculation of scores for economies with 2 cities given year the score measures how far an economy is covered from the best performance at that time. For each of the 11 economies in which Doing Business Treatment of the total tax rate collects data for the second largest business city as well The total tax rate component of the paying taxes as the largest one, the distance to frontier score is indicator set enters the distance to frontier calculation in calculated as the population-weighted average of the a different way than any other indicator. The distance to distance to frontier scores for these two cities (table frontier score obtained for the total tax rate is 13.1). This is done for the aggregate score, the scores for transformed in a nonlinear fashion before it enters the each topic and the scores for all the component distance to frontier score for paying taxes. As a result of indicators for each topic. the nonlinear transformation, an increase in the total tax rate has a smaller impact on the distance to frontier score for the total tax rate—and therefore on the distance to frontier score for paying taxes—for economies with a below-average total tax rate than it would have had before this approach was adopted in Doing Business 2015 (line B is smaller than line A in figure 14.2 in the Doing Business 2016 report). And for economies with an extreme total tax rate (a rate that is very high relative to the average), an increase has a greater impact on both these distance to frontier scores than it would have had before (line D is bigger than line C in figure 14.2 in the Doing Business 2016 report). 2 See Djankov, Manraj and others (2005). Principal components and unobserved components methods yield a ranking nearly identical to that from the simple average method because both these methods assign roughly equal weights to the topics, since the pairwise correlations among indicators do not differ much. An alternative to the simple average method is to give different weights to the topics, depending on which are considered of more or less importance in the context of a specific economy. 3 For getting credit, indicators are weighted proportionally, according to their contribution to the total score, with a weight of 60% assigned to the strength of legal rights index and 40% to the depth of credit information index. Indicators for all other topics are assigned equal weights Doing Business 2017 Nigeria 134 Table 13.1 Weights used in calculating the distance to implemented regulatory reforms making it easier to do frontier scores for economies with 2 cities covered business in 3 or more of the 10 topics included in this year’s aggregate distance to frontier score. Changes Economy City Weight (%) making it more difficult to do business are subtracted Dhaka 78 Bangladesh from the total number of those making it easier to do Chittagong 22 São Paulo 61 business. Twenty-four economies meet this criterion: Brazil Armenia; Azerbaijan; Benin; Costa Rica; Côte d’Ivoire; Rio de Janeiro 39 Shanghai 55 Cyprus; Hong Kong SAR, China; Indonesia; Jamaica; China Beijing 45 Kazakhstan; Kenya; Lithuania; Madagascar; Mauritania; Mumbai 47 Morocco; Romania; the Russian Federation; Rwanda; India Delhi 53 Senegal; Togo; Uganda; the United Arab Emirates; Jakarta 78 Uzbekistan; and Vietnam. Second, Doing Business sorts Indonesia Surabaya 22 these economies on the increase in their distance to Tokyo 65 Japan frontier score from the previous year using comparable Osaka 35 data. Mexico City 83 Mexico Monterrey 17 Selecting the economies that implemented regulatory Lagos 77 reforms in at least three topics and had the biggest Nigeria Kano 23 improvements in their distance to frontier scores is Karachi 65 intended to highlight economies with ongoing, broad- Pakistan Lahore 35 based reform programs. The improvement in the Moscow 70 Russian Federation distance to frontier score is used to identify the top St. Petersburg 30 New York 60 improvers because this allows a focus on the absolute United States improvement—in contrast with the relative improvement Los Angeles 40 Source: United Nations, Department of Economic and Social shown by a change in rankings—that economies have Affairs, Population Division, World Urbanization Prospects, made in their regulatory environment for business. 2014 Revision. http://esa.un.org/unpd/wup/CD- ROM/Default.aspx. Ease of Doing Business ranking Economies that improved the most across 3 or more Doing Business topics in 2014/15 The ease of doing business ranking ranges from 1 to 190. The ranking of economies is determined by sorting the Doing Business 2016 uses a simple method to calculate aggregate distance to frontier scores, rounded to 2 which economies improved the ease of doing business decimals. the most. First, it selects the economies that in 2014/15 Doing Business 2017 Nigeria 135 RESOURCES ON THE DOING BUSINESS WEBSITE Current features Law library News on the Doing Business project Online collection of business laws and regulations http://www.doingbusiness.org relating to business http://www.doingbusiness.org/law-library Rankings How economies rank—from 1 to 190 Contributors http://www.doingbusiness.org/rankings More than 11,400 specialists in 190 economies who participate in Doing Business Data http://www.doingbusiness.org/contributors/doing- All the data for 190 economies—topic rankings, business indicator values, lists of regulatory procedures and details underlying indicators Entrepreneurship data http://www.doingbusiness.org/data Data on business density (number of newly registered companies per 1,000 working-age Reports people) for 136 economies Access to Doing Business reports as well as http://www.doingbusiness.org/data/exploretopics/ent subnational and regional reports, case studies and repreneurship customized economy and regional profiles http://www.doingbusiness.org/reports Distance to frontier Data benchmarking 190 economies to the frontier Methodology in regulatory practice and a distance to frontier The methodologies and research papers underlying calculator Doing Business http://www.doingbusiness.org/data/distance-to- http://www.doingbusiness.org/methodology frontier Research Information on good practices Abstracts of papers on Doing Business topics and Showing where the many good practices identified related policy issues by Doing Business have been adopted http://www.doingbusiness.org/research http://www.doingbusiness.org/data/good-practice Doing Business reforms Short summaries of DB2017 business regulation reforms and lists of reforms since DB2008 http://www.doingbusiness.org/reforms Historical data Customized data sets since DB2004 http://www.doingbusiness.org/custom-query Doing Business 2017 Nigeria 136