PRESIDENTIAL EXECUTIVE ORDERS: IMPACTS ON BUSINESSES IN NIGERIA
The Acting President, Professor Yemi Osinbajo, recently signed 3 Executive Orders, on the 18th of May, to improve the budget process of the country, support the implementation of the Local Content policy in public procurement and promote transparency and efficiency in the business environment. The Acting President also addressed civil servants, permanent secretaries and ministers on the need to implement these orders on Wednesday, May 24, 2017.
Analysis and impact
- Executive Order On Budget Process
The executive order to improve the budget process placed emphasis on the timelines of submission of the annual budget estimates of the ministries, departments and agencies.
The order directs the agencies to submit their schedule of revenue and expenditure estimates for the next three years to the Minister of Finance and Minister of Budget and National Planning on or before the end of May. It further directs the agencies to forward their annual budget estimates to the Minister of Finance and Minister of Budget and National Planning on or before the end of July every year.
In addition, agencies would no longer be allowed to make any payments in respect to any capital or recurrent liability unless it has an approved budget and the payment conforms to its budget.
Finally, it directs that the revenue or other funds of an Agency in excess of the amounts budgeted and duly expended shall accrue to the consolidated revenue fund of the Federal Government.
Impacts on Government
The executive order is expected to improve the budgeting process in the country. In the past, challenges associated with delayed submission of budget and lack of planning of budget estimates over the short and medium terms have contributed to suspended projects, delay in the payment of government contractors and sometimes delay in the payments of salaries.
It is expected that the implementation of this order would reduce these challenges and reduce the delay associated with the review and approval at the National Assembly.
Impact on Businesses
The order on the budget process does not have a direct impact on businesses in Nigeria. However, the effect which it can have is that potential partnerships with the government in terms of funds might be released earlier for implementation as a result of a faster budget process.
The executive order might have an indirect effect on government contractors and suppliers.
- Executive Order on Local Content in Public Procurement
While there have been several discussions on promotion of local content by the Nigerian government, the executive order signed by the Acting President Yemi Osinbajo clearly directs all Ministries, Departments and Agencies (MDAs) of the FGN to grant preference to local manufacturers of goods and service providers in their procurement of goods and services. Local content, as used in the order, means the amount of Nigerian or locally produced human and material resources utilized in the manufacture of goods or rendering of services.
This directive will be implemented by including in the solicitation of offers, bids or proposal, the stated preference to local manufacturers and service providers. The claim of local content use by a supplier or consultant will be verified through the provision of a verifiable statement on the local content of the goods or services to be provided.
Some items that are made-in-Nigeria will be given special preference during procurement by ministries and agencies. At least 40% of the procurement expenditure for these items will be directed to locally produced or made-in-Nigeria items. These items include Uniforms and Footwear; Food and Beverages; Furniture & Fittings; Stationery; Motor Vehicles; Pharmaceuticals; Construction Materials; and Information and Communication Technology.
The heads of the agencies will monitor and access the implementation, enforcement and compliance to this order. The Minister of Industry, Trade & Investment, in consultation with the Director-General of the Bureau for Public Procurement, will submit a report on the Made-in-Nigeria initiative to the President within 180 days of issuance of the order. This is expected to be in October, 2017.
Impacts on Government
The government believes that the local content policy would drive the growth of local SMEs and large organizations, thus the issuance of the executive order on local content. This will likely increase the acceptability of the government by the local SMEs and business owners. However, this would create a huge level of concerns amongst the major importers who are also registered suppliers and contractors to government ministries, departments and agencies.
The government anticipates that this will reduce its spending on imported commodities as most local alternatives are cheaper than the imported commodities. Furthermore, patronizing locally manufactured products and reliance on same, as the government is seeking to achieve with this portion of the orders, will help boost the economy and help the Naira appreciate.
Impact on Businesses
The executive order on local content would have positive effects on businesses, especially the local manufacturers in terms of patronage. Also inclusive, is the fact that this initiative will encourage SMEs and entrepreneurs to engage more effectively in their manufacturing businesses. In addition, there will be an increase in the rate of employment as manufacturers would employ more hands in an attempt to produce more to meet with demand.
- Executive Order On Promotion of Transparency and Efficiency in the Business Environment
A major focus of this administration as stated in the Economic Recovery and Growth Plan is to create an enabling environment for businesses in Nigeria, thus, improving the ease of doing businesses in Nigeria. In February, 2017, the Presidential Enabling Business Environment Council (PEBEC) approved a 60-day National Action Plan which was implemented across Entry and Exit of goods; Entry and Exit of people and Government Transparency and Procurement. Recently, PEBEC released its results of the implementation of the action plan having achieved 70% of its target – with improved transparency in the public sector being an important achievement.
Following this, the Acting President, Professor Yemi Osinbajo, issued an executive order to drive transparency in the public sector as well as build on the successes of PEBEC action plan.
In this order, federal agencies and ministries are required to publish a complete list of all requirements or conditions for obtaining products and services within the MDA’s scope of responsibility. These are not limited to fees, timelines and processes.
Another important aspect of this order is the issuance of default approvals to applications during instances when government officials fail to respond within stipulated dates. Erring government officers will be subjected to appropriate disciplinary proceedings in accordance with the civil service law and regulations
As part of the order, bottlenecks and delays associated with multiple verifications by different government agencies have been removed as applicants working with the government would be required to provide photocopies of document while the verification of such document would be carried out by the government agencies.
In addition to the above, immigration processes would be more transparent while doing businesses as port entry would be easier. The executive order has directed all government bodies at the airports to merge their respective departure and arrival interfaces into a single customer interface and harmonize their operations into one single interface station domiciled in one location in the port and implemented by a single joint task force.
Agricultural development was also captured in the order as all ports in Nigeria have been directed to dedicate an existing export terminal to the exportation of agricultural produce while the Apapa Port will resume 24-hour operations before June 18 (30 days or order issuance).
Lastly, all registration processes at the CAC will be fully automated through the CAC website and online payment solutions would be provided where necessary.
Impacts on Government
Improving the ease of doing business has been a focus for this administration. By issuing this executive order, the government anticipates a better and more transparent business environment for investors. We believe that the government hopes to boost investors’ confidence and create an enabling environment for SMEs and large corporations which are mostly faced with bureaucracies and several bottlenecks created by government officials.
We also believe that in a little while from this implementation of this order, investors would find Nigeria as an investment destination.
Impact on Businesses
The executive order has direct impact on businesses in Nigeria. The business environment in Nigeria is challenging as there are lots of bureaucracies and several bottlenecks in the system. We anticipate that relationships with ministries and government agencies would be smoother and more transparent upon full implementation of this order.
We expect that the directive to commence a 24-hour operation at the Apapa port will immensely reduce backlog and improve processing and clearing associated with importation of raw materials and machinery at the port. We believe that challenges associated with clearance and approval delays would be significantly reduced.