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Chapter 6: Other aspects of the investment climate: functioning of the labor market, micro enterprises, and gender differences.

To what extent are enterprises in Nigeria constrained by labor market regulations and skills availability? Do micro firms or firms managed by female entrepreneurs face different constraints? The Investment Climate Survey can provide some guidance in response to these.

Labor Market

An overwhelming majority of firms in Nigeria do not perceive either a shortage of skilled workers or labor regulations to be a major or very severe impediment to growth. Only about 1 percent of all manufacturing firms report either constraint to be a major or very severe impediment. The same holds true for the retail and services sector.

Labor skills. As table 6.1 shows nearly half of manufacturing firms in Nigeria report that their typical worker has more than 12 years of schooling. This is higher than all the comparator countries. However, for most countries the typical manufacturing sector worker has between 7 and 12 years. In contrast, only 31 percent of Nigerian manufacturing firms have workers with that level of schooling. Relative to its comparators, only about a fifth of Nigerian firms' typical workers have fewer than six years of schooling.

About 26 percent of firms provide training to their workers. In the firms that provide training, nearly 60 percent of skilled workers and about 23 percent of unskilled workers received training. Among manufacturing firms, a firm that provides training has a value added per worker that is nearly 25 percent higher than firms that do not. However, this effect is driven largely by the size of the firm. Figure 6.1 shows the proportion of firms with on-the-job training and the percentage of workers trained across a range of firm characteristics. There is a modest "firm size-training provision" correlation: firms with 100 plus employees are more than twice as likely to provide training as firms with fewer than 20 workers. Holding other factors constant, only the firm-size correlation is significant. Unlike results from similar analyses in South and East Africa, firms that are active in HIV prevention or testing of their workers appear no more likely to provide training (Ramachandran and others 2005). There was also no evidence for a particular state having a particular effect on training.

Conditional on providing training, firms in Nigeria compare favorably with comparator countries with respect to the proportion of the skilled workforce that is trained. Only Kenya reports a higher proportion. It is important to point out once again, that the data used in table 6.2 are unable to illustrate any differences in the quality of training provided.

Labor regulations. Labor regulations are considered even less of an impediment. Less than 1 percent of all sampled firms find labor regulations to be a major constraint: manufacturing (1.3), retail (0.4), and services (0.1). Just over 2 percent of firms reported that labor regulations had affected hiring or firing decisions. This is consistent with other evidence. The Doing Business report collects detailed information on how labor regulations affect hiring, firing, and rigidity of employment. On the basis of these regulations, the report calculates measures of labor regulation. Nigeria is ranked in the top one-third of all countries with respect to labor regulations. This ranking is considerably higher than that of all other comparators.

[FIGURE 6.1 OMITTED]

Wage comparisons across firms in Nigeria. Understanding the wage-setting mechanisms operating in the labor market is vital to the design of policies to improve the performance of the labor market. Table 6.3 shows tentative evidence that very large firms pay wages for production workers that are nearly 70 percent higher than firms with fewer than 20 employees. The same is true of nonproduction worker remuneration which is twice as much in large firms relative to smaller firms.

The location of a firm exerts an important effect on compensation. Consistent with the literature on agglomeration, firms located in the more industrialized states pay nearly 35 percent more for production workers and 49 percent more for nonproduction workers than firms in the less industrialized states.

Micro Firms

Constraints to business. Table 6.4 indicates that the main obstacles faced by micro firms (1) are the same as those faced by firms in the formal sector: (2) electricity, access to finance, and cost of finance followed by corruption, transportation, and crime.

There is a significant variation in these results across states (table 6.5). For instance, 92 percent of firms in Anambra perceive electricity to be a significant constraint, whereas in Ogun, Sokoto, and Cross River about 60 percent of firms do. The variation across states is higher when we look at some of the other main constraints: 79 percent of firms in Abia perceive access to finance as a significant constraint, compared with only 20 percent of firms in Sokoto; 73 percent of firms in Abia and Anambra perceive the cost of finance to be a significant constraint, versus only 13 percent of firms in Sokoto; and no firms in Sokoto identify corruption as a major problem, whereas it is ranked as significant by 77 percent in Bauchi. As for transportation, it is reported to be a significant constraint by 14 percent of firms in Kaduna and by 53 percent of firms in Bauchi.

The impact of some of these constraints on micro firms' costs is similar to that seen in the formal economy. The breakdown of indirect costs amounts to approximately 12 percent of total sales (table 6.6). Electricity (7.5 percent of sales) and production lost while in transit (2 percent of sales) are the two main drivers of such costs. These affect different types of firms in different ways. Electricity is more of a problem for manufacturing micro firms (8 percent). As for the production lost while in transit, which represents a loss of 2.1 percent of sales, it affects registered firms in particular (2.8 percent versus 1.5 percent) and firms located in the less industrialized states (3.1 percent of sales versus 1.1 percent). Bribes represent a loss of 1.4 percent of sales. Finally, theft, robbery, and arson are responsible for a loss of 1.1 percent of sales, varying according to the level of industrialization (1.4 percent in the less industrialized states versus 0.7 percent in the remaining).

Comparison between formal sector and micro firms. As we can see from figure 6.2 and figure 6.3, there are minor differences between firms in the formal sector and micro firms in the identification of their main constraints and in regard to indirect costs.

Micro firms and firms in the formal sector are equally affected by power outages ( table 6.7). The most significant difference is that more firms in the formal sector have generators (86 percent versus 53 percent of micro firms).

[FIGURE 6.2 OMITTED]

On Regulatory Burden

Not surprisingly, firms from the formal sector also face a heavier regulatory burden. They spend a higher percentage of senior management time with regulations, and they have a higher probability of being visited by officials. Table 6.8 shows that, on average, 4.5 percent of senior management time of micro firms is spent with government regulations. Obviously this burden falls more heavily on registered firms. State/local government-level regulation appears to be slightly more of a burden than federal-level regulation. Even though the cost associated with regulations, as a percentage of annual sales, is relatively stable across states, it reaches its maximum in Enugu (4.7 percent of sales) and its minimum in Sokoto (0.8 percent). It is higher for registered firms and for those located in states with a better regulatory environment. On average close to 77 percent of all firms were visited by officials, and on average this occurred 3.8 times each year. The probability of having been visited is higher for registered firms. This probability also varies across states, ranging from 44 percent in Enugu to 93.8 percent in Abia. The number of visits per year is higher for registered firms.

[FIGURE 6.3 OMITTED]

The percentage of annual sales spent on gifts/informal payments, as well as the percentage of the contract value paid, are higher for firms in the formal sector (table 6.9). However, government officials are held in higher regard in the formal sector, where 43.5 percent of firms believe them to have a consistent and predictable interpretation of the law, compared with 32.5 percent of micro firms.

On average, micro firms identify the difficulty of getting information on what needs to be done to register a business as the most significant obstacle, followed by the time needed to complete registration procedures (38 percent and 33 percent, respectively). The financial cost of completing registration is a lesser burden (table 6.10). On average, only 30 percent of micro firms complain about registration costs. An even lower percentage identify the minimal capital requirements for registration (25 percent) and the financial burden of taxes on registered enterprises (19 percent) as the most significant obstacle.

Women Entrepreneurs in Nigeria

National levels of participation. In Nigeria, about 20 percent of formal enterprises are run by women--14 percent of all manufacturing firms and 26 percent of firms operating in the services sector. As such, Nigeria does not rank high in comparison with other African countries, as figure 6.4 shows. The share of women entrepreneurs is higher in Nigeria than in Niger, Mauritius, DRC, and Mauritania, but it is lower than in Madagascar, Angola, Uganda, and Cameroon, not to mention Botswana and Cape Verde.

Sector characteristics. A fundamental difference between men and women entrepreneurs exists in the type of sector in which they operate. Women operating in the formal sector are highly concentrated in a few specific activities--mostly retail (23 percent) and the garment industry (37 percent). Men are more evenly distributed across industrial sectors. Women are almost absent from sectors such as wood, metal, chemicals, construction, and transport, areas in which men dominate.

[FIGURE 6.4 OMITTED]

Regional variations. The level of female participation in entrepreneurship varies widely across regions of Nigeria (table 6.11). The states that are part of the southeast region (Abia, Anambra, Enugu), which is traditionally a region of traders rather than farmers, as well as the capital state of Abuja and Nigeria's biggest city, Lagos, are all characterized by high rates of female entrepreneurship in the formal sector--in manufacturing, services, or both. At the other extreme, Bauchi, in the northeast, is the state with the lowest share of formal businesses run by women (manufacturing and services combined). Low rates of female entrepreneurship are also found in the north central states, such as Kaduna and Kano. Table 6.12 provides more sub-sector detail. It shows the percentage of female entrepreneurs in the garment industry and retail by state, it is evident that in the northern states, the percentage of entrepreneurs operating in the garment industry who are women is lower than the national average, at 7 percent in Sokoto, 13 percent in Kaduna, and 17 percent in Bauchi. Similarly, the percentage of women entrepreneurs in retail in the northern states tends to be lower than the national average.

However, as table 6.11 portrays, female entrepreneurship is not systematically higher in more or less industrialized regions (20 percent versus 21 percent). The micro enterprise sector is different. At 30 percent, the rate of female entrepreneurship is higher than it is in the formal sector and rates of female entrepreneurship in the micro sector are higher in more industrialized states (36 percent versus 23 percent).

Age and education levels. Male and female entrepreneurs operating in the formal sector do not differ much with respect to their personal traits, such as age and education. Women are only slightly younger than men, and there are no remarkable differences in education (see table 6.13). In the micro sector, although the education level is lower than in the formal sector for both men and women, women have a higher education level than men. Although 31 percent of men do not go beyond the primary education level in the micro sector, this percentage is only 21 percent among women, with a higher share of women in this sector with vocational training. Moreover, unlike for men, the percentage of women with a graduate degree is as high in the micro sector as in the formal sector.

Gender Differences in Investment Climate Constraints

Figure 6.5 shows the percentage of male and women entrepreneurs who believe that a constraint is "major" or "very severe," for the formal sector (manufacturing and services combined) (3) and the micro sector. In the formal sector, men and women tend to agree on the level of severity of many constraints. Electricity, access to finance, and cost of finance stand out as the three most severe constraints for both men and women. In the micro sector, the most severe constraints are the same as in the formal sector--electricity, access to finance, and cost of finance. Moreover, corruption and crime are relatively more important than in the formal sector, and this is true for both men and women.

[FIGURE 6.5 OMITTED]

The results presented in figure 6.5, although giving a summary picture of the differences in perceived constraints by gender of the business owner, do not take into account that women and men entrepreneurs are not all the same--as noted, they operate in different industrial sectors and have different personal characteristics. This can affect their opinions about the severity of the obstacles they face. Controlling for these variables, the gender gap in the formal sector is usually small in percentage points. The gender gap in perceptions (adjusted for individual and firm-level characteristics) is very different in the micro sector.

In the micro sector men judge almost all constraints as more severe than women do, and the gender gap for several constraints is larger than in the formal sector. The biggest differences exist for corruption, crime, and cost of finance (10 or more percentage points difference), but substantial gaps are also found for tax administration, access to finance, access to land, and macro and political instability.

Because perceptions could be misleading, in what follows we provide some evidence of the difference between men and women business owners in "objective" measures of the quality of the business environment, focusing on those constraints that in the opinion of the entrepreneurs are the most pressing ones--electricity, access to finance, and cost of finance.

Electricity. Both men and women are extremely likely to have experienced a power outage. Ownership of a generator is similar for men and women in manufacturing, whereas in the micro sector the percentage of female entrepreneurs owning a generator is much lower (45 percent vs. 56 percent). Although women operating in manufacturing experienced on average 10 hours a month longer (or +4 percent) power outages than did men in the same sector, they do not appear to have been more affected by those power outages in regard to average percentage of sales lost (table 6.14). However, in the garment subsector, in which a large percentage of female entrepreneurs operate, women do indeed claim larger losses than men because of power outages (10.7 percent vs. 8.2 percent of sales, on average). In looking at retail--which is another "female-intensive" sector--there are differences depending on whether this activity is formal or informal (micro). In the formal retail sector women appear to have experienced lower losses, whereas in the informal, micro sector women experienced larger losses than men as a consequence of power outages.

Access to finance. Men and women rely largely on internal funds and retained earnings for operating capital (66 percent-67 percent in manufacturing, 72 percent-76 percent in services, 76 percent in the micro sector) as well as credit from suppliers and using advance payments from customers (about 30 percent in manufacturing and about 20 percent in services and the micro sector) (see table 6.15). An extremely small minority uses the formal financial sector (less than 1 percent), and only 9 percent of men and 8 percent of women in the manufacturing and service sector applied for a loan in 2006.

For long-term finance, there is again very little difference between men and women (see table 6.16). Both rely almost exclusively on internal funds and retained earnings in manufacturing, services, and the micro sector. The only small difference is that women are more likely in manufacturing and the micro sector to rely on family, friends, and informal networks.

The evidence also indicates that the percentages of men and women with an overdraft or line of credit are extremely small (see table 6.17), with little differences in the formal manufacturing and services sectors. However, in the micro sector, women are much less likely than men to have overdrafts (eight times less) and lines of credit (about three times less). For those who considered access to finance to be a very serious problem, men were equally divided across three main reasons--high interest rates, lack of collateral, and complex application procedures. Conversely, women were far more likely to blame the complexity of the application procedures (about 35 percent vs. 26 percent of men). Women are also more likely to indicate that they did not believe the loan would have been approved when they decided not to apply for it.

Gender Differences in Productivity

In those activities in which women's participation levels are high, there are no substantial differences between the performance of female-owned and male-owned enterprises. Figure 6.6 shows the ratio of the value added per worker in male-owned over female-owned enterprises. In food and retail this ratio ranges between 0.9 and 1; in garments it is more than 1.2, that is, female-owned enterprises have on average a 20 percent higher value added per worker than male-owned enterprises. This suggests that female-owned enterprises are no less efficient than male-owned enterprises. Women may be capital constrained, but it affects the selection of the type of activity, not the productivity of the firm once the business has been set up.

To verify this, total factor productivities in manufacturing are also estimated, using one-step Cobb-Douglas production functions. (4) The results further confirm that there are no significant differences in productivity between male- and female-owned manufacturing enterprises. But that is not the case at the state level. In three states (Bauchi, Kano, and Sokoto) female-owned enterprises are significantly and substantially less productive than male-owned enterprises.

Summary

This chapter has analyzed a range of other variables affecting firm performance and investment climate differences. Clearly labor market regulations are a minor issue relative to other investment climate constraints. The results for labor skills merit further analysis--looking in more depth at the sector and industry context. The similarities in the ranking of constraints between informal and formal firms and "lack of information" constraints to registration provide important insights for prioritizing reform agendas and designing implementation arrangements. The most relevant differences between men and women entrepreneurs in Nigeria are threefold: (i) propensity to become entrepreneurs, given that only 2 of 10 entrepreneurs are women; (ii) the regional differentials between the southern and northern regions and the concentration of women in specific sectors--essentially garments and retail (in both the formal and micro sectors); and (iii) although women may have greater hurdles entering into business, they do at least as well as men once the enterprise is established.

[FIGURE 6.6 OMITTED]

Notes

(1.) Micro firms are firms with fewer than five full-time employees.

(2.) Formal sector consists of small, medium, and large firms.

(3.) The differences between manufacturing and services in the levels and the gender gap of the business constraints are very small, so we pooled the two sectors in the descriptive analysis.

(4.) With the logarithm of the value added as the dependent variable as a function of labor (logarithm of the number of permanent employees) and capital (logarithm of the book value of assets).
Table 6.1 Percent of Firms Saying That the Average Worker in the Firm
Has Completed Different Levels of Schooling

                       0-6 years     7-12 years      >12 years

Kenya (2006)              15             68             17
South Africa (2003)       10             78             12
Brazil (2003)             33             59              8
India 2002                26             55             19
Nigeria (2007)            21             31             48

Source: Investment Climate Surveys.

Note: Cross-country comparisons are only for manufacturing
enterprises. Comparable data are unavailable for the other
comparator countries.

Table 6.2 Firm-Based Training: Prevalence and Percent of Workers Trained

                   % firms offer     % production     % nonproduction
Country               training     workers trained    workers trained

India 2005               16                7                  6
Indonesia 2003           23               --                 --
Kenya 2006               41               66                 50
Venezuela 2006           49               --                 --
Nigeria 2006             26               58                 24
South Africa 2003        64               45                 47
China 2003               72               48                 25

Source: Investment Climate Surveys.

Note: Cross-country comparisons are only for manufacturing enterprises.

Table 6.3 Median Monthly Wages by Occupation in 2005 U.S. Dollars

                Production        Nonproduction
Firm Category     workers            workers

<20                  70                 86
20-99                91                109
>99                 120                179
Domestic             77                 98
Foreign             151                116
Total                78                 98

Note: All wages are converted to 2005 dollars using the exchange
rate from the World Development Indicators.

Table 6.4 Major or Very Severe Constraints as Reported by
Micro Firms State

                                         Registered

Constraint                        TOTAL   Yes   No

Electricity                        72%    68%   75%
Access to finance
  (e.g., collateral)               64%    66%   62%
Cost of finance
  (e.g., interest rates)           56%    58%   54%
Corruption                         35%    39%   33%
Transportation                     33%    32%   33%
Crime, theft, and disorder         32%    35%   29%
Tax rates                          25%    33%   18%
Access to land for
  expansion / relocation           24%    22%   26%
Macroeconomic environment          20%    25%   15%
Tax administration                 19%    26%   13%
Business licensing and permits     14%    14%   14%
Political environment              14%    16%   12%
Practices of competitors
  in informal sector               14%    20%    9%
Customs and trade regulations       8%    10%    7%
Inadequately educated workforce     5%     6%    4%
Telecommunications                  4%     6%    3%
Labor regulations                   2%     2%    3%

                                           Industry

Constraint                        Manuf.    Retail    Other

Electricity                        82%       68%       80%
Access to finance
  (e.g., collateral)               66%       63%       69%
Cost of finance
  (e.g., interest rates)           59%       54%       60%
Corruption                         35%       35%       40%
Transportation                     41%       32%       24%
Crime, theft, and disorder         39%       30%       36%
Tax rates                          36%       24%       18%
Access to land for
  expansion / relocation           27%       23%       25%
Macroeconomic environment          25%       18%       22%
Tax administration                 29%       17%       18%
Business licensing and permits     17%       14%        4%
Political environment              11%       14%       13%
Practices of competitors
  in informal sector               14%       14%       18%
Customs and trade regulations       5%       10%        2%
Inadequately educated workforce     4%        5%        7%
Telecommunications                  6%        4%        4%
Labor regulations                   2%        2%        4%

                                       More              Less
Constraint                        industrialized    industrialized

Electricity                             66%               78%
Access to finance
  (e.g., collateral)                    61%               67%
Cost of finance
  (e.g., interest rates)                52%               60%
Corruption                              34%               38%
Transportation                          30%               35%
Crime, theft, and disorder              29%               35%
Tax rates                               25%               26%
Access to land for
  expansion / relocation                25%               23%
Macroeconomic environment               23%               16%
Tax administration                      19%               20%
Business licensing and permits          14%               14%
Political environment                   14%               13%
Practices of competitors
  in informal sector                    17%               11%
Customs and trade regulations           11%                5%
Inadequately educated workforce          7%                3%
Telecommunications                       4%                5%
Labor regulations                        3%                2%

                                              State

                                     Better         Worse
                                   regulatory     regulatory
Constraint                        environment    environment

Electricity                           72%            71%
Access to finance
  (e.g., collateral)                  58%            70%
Cost of finance
  (e.g., interest rates)              50%            60%
Corruption                            36%            35%
Transportation                        31%            34%
Crime, theft, and disorder            26%            37%
Tax rates                             22%            28%
Access to land for
  expansion / relocation              24%            24%
Macroeconomic environment             22%            18%
Tax administration                    19%            19%
Business licensing and permits        11%            17%
Political environment                 16%            12%
Practices of competitors
  in informal sector                  16%            12%
Customs and trade regulations          7%             9%
Inadequately educated workforce        4%             6%
Telecommunications                     5%             3%
Labor regulations                      4%             1%

Source: Investment climate survey in Nigeria.

Table 6.5 Major or Very Severe Constraints as Reported
by Micro Firms--by State

                                                   State

Constraint                               TOTAL   Abia   Abuja

Electricity                               72      79     64
Access to finance (e.g., collateral)      64      79     68
Cost of finance (e.g., interest rates)    56      73     56
Corruption                                35      29     28
Transportation                            33      29     32
Crime, theft, and disorder                32      42     16
Tax rates                                 25      23     12
Access to land for expansion/
  relocation                              24      17     20
Macroeconomic environment                 20       8     44
Tax administration                        19      19     16
Business licensing and permits            14      10      4
Political environment                     14      10     20
Practices of competitors in
  informal sector                         14       2     28
Customs and trade regulations              8       0     24
Inadequately educated workforce            5       0     12
Telecommunications                         3       2      0
Labor regulations                          2       2     20

                                               State

Constraint                               Anambra   Bauchi

Electricity                                92        83
Access to finance (e.g., collateral)       71        63
Cost of finance (e.g., interest rates)     73        57
Corruption                                 25        77
Transportation                             35        53
Crime, theft, and disorder                 35        13
Tax rates                                  21        30
Access to land for expansion/
  relocation                               27        30
Macroeconomic environment                   8         3
Tax administration                         17        20
Business licensing and permits             15         0
Political environment                       6        27
Practices of competitors in
  informal sector                          21         0
Customs and trade regulations               6         3
Inadequately educated workforce             0         0
Telecommunications                          2         7
Labor regulations                           2         0

                                                       State

Constraint                               Cross River   Enugu   Kaduna

Electricity                                  61         80       62
Access to finance (e.g., collateral)         76         60       48
Cost of finance (e.g., interest rates)       67         44       46
Corruption                                   43         40       14
Transportation                               22         48       14
Crime, theft, and disorder                   33         54       24
Tax rates                                    43         18       20
Access to land for expansion/
  relocation                                 31         18       24
Macroeconomic environment                    29         28       20
Tax administration                           39          8       16
Business licensing and permits               16         24        2
Political environment                        18         12       18
Practices of competitors in
  informal sector                            12         20       10
Customs and trade regulations                 8          2        4
Inadequately educated workforce               4         10        0
Telecommunications                            6          8        4
Labor regulations                             0          4        0

                                                 State

Constraint                               Kano   Lagos   Ogun

Electricity                               75     68      58
Access to finance (e.g., collateral)      65     73      52
Cost of finance (e.g., interest rates)    62     59      32
Corruption                                43     43      32
Transportation                            24     46      36
Crime, theft, and disorder                24     41      32
Tax rates                                 29     32      22
Access to land for expansion/
  relocation                              31     25      20
Macroeconomic environment                 22     25      16
Tax administration                        32     14      10
Business licensing and permits            16     21      20
Political environment                     13     19       4
Practices of competitors in
  informal sector                         25     14      10
Customs and trade regulations              7     19       8
Inadequately educated workforce            3     16       8
Telecommunications                         4      5       2
Labor regulations                          4      0       0

Constraint                               Sokoto

Electricity                                60
Access to finance (e.g., collateral)       20
Cost of finance (e.g., interest rates)     13
Corruption                                  0
Transportation                             20
Crime, theft, and disorder                  0
Tax rates                                  13
Access to land for expansion/
  relocation                                0
Macroeconomic environment                   7
Tax administration                         13
Business licensing and permits              7
Political environment                       0
Practices of competitors in
  informal sector                           0
Customs and trade regulations              13
Inadequately educated workforce             0
Telecommunications                          0
Labor regulations                           0

Source: Investment climate survey in Nigeria.

Table 6.6 Indirect Costs--Micro Firms

Indirect costs               Registered           Industry

as % sales         TOTAL   Yes     No    Manuf.    Retail    Other

Electricity         7.5    8.2    6.9      8.4        7.1     9.5
Production
  lost while
  in transit        2.1    2.5    1.5      1.8        2.1     2.5
Bribes              1.4    1.7    1.2      1.7        1.3     1.3
Theft, robbery,
  or arson          1.1    1.1    1.0      1.2        1.0     0.9
Total indirect
  costs            12.1    13.8   10.5    13.1       11.5    14.2

                                  State
Indirect costs
                      More in       Less indus-
as % sales         industrialized    trialized

Electricity                  7.8           7.2
Production
  lost while
  in transit                 1.1           3.1
Bribes                       1.1           1.7
Theft, robbery,
  or arson                   0.7           1.4
Total indirect
  costs                     10.8          13.5

Source:Investment climate survey in Nigeria.

Table 6.7 Infrastructure Perceptions--Formal Sector versus Micro Firms

              Quality measure                     Formal   Micro

Electricity   % firms experienced power outages     96       98
              Average duration of outages
                per month (hours)                  196      207
              % firms with own generator            66       53
              % electricity coming from
                own generator                       61       60

Source: Investment climate survey in Nigeria.

Table 6.8 Regulatory Burden--Micro Firms

                                  Registered

Quality measure        TOTAL     Yes       No

% senior man-
  agement time
  spent with
  regulations           4.5      5.4      3.6
    at the
      state/local
      government
      level             2.7      3.3      2.2
    at the
      federal
      level             1.8      2.1      1.4
Cost associated
  with regula-
  tions (% annual
  sales)                2.3      3.0      1.8
    at the
      state/local
      government
      level             1.4      1.7      1.2
    at the federal
      level             0.9      1.3      0.6
% firms
  visited by
  officials             77      86.2      69.1
Number of
  inspection vis-
  its (last 12
  months)               3.8      4.2      3.3

                                 Industry

Quality measure        Manuf.  Retail    Other

% senior man-
  agement time
  spent with
  regulations           4.0      4.3      6.1
    at the
      state/local
      government
      level             2.5      2.6      3.6
    at the
      federal
      level             1.5      1.7      2.5
Cost associated
  with regula-
  tions (% annual
  sales)                2.5      2.1      3.6
    at the
      state/local
      government
      level             1.3      1.4      1.8
    at the federal
      level             1.2      0.7      1.8
% firms
  visited by
  officials            77.1     77.2      75.6
Number of
  inspection vis-
  its (last 12
  months)               3.5      3.9      3.4

                                        State

                                   More              Less
Quality measure            industrialized    industrialized

% senior man-
  agement time
  spent with
  regulations                    4.1              5.0
    at the
      state/local
      government
      level                      2.4              3.1
    at the
      federal
      level                      1.7              1.9
Cost associated
  with regula-
  tions (% annual
  sales)                         2.1              2.7
    at the
      state/local
      government
      level                      1.1              1.8
    at the federal
      level                      1.0              0.9
% firms
  visited by
  officials                     76.6              77.5
Number of
  inspection vis-
  its (last 12
  months)                        3.5              4.2

Source: Investment climate survey in Nigeria.

Table 6.9 Perception of Government and Regulations--Formal
Sector versus Micro Firms

% firms that agree with statement                      Formal    Micro

Consistent and predictable interpretation of the law    43.5     32.5
Informal payments/gifts commonplace                     33.2     30.0
Advance knowledge of informal payment/gift              24.6     20.0
Percentage of annual sales spent on informal
  payments/gifts                                        2.0       1.4
Percentage of contract value paid to secure contract    5.3       4.3

Source:Investment climate survey in Nigeria.

Table 6.10 Percentage of Firms Reporting Major or Very
Severe Obstacles to Registering a Business--Micro Firms

                               Registered             Industry

Obstacle               TOTAL   Yes   No    Manuf.   Retail    Other
Difficulty of get-
  ting information
  on what you
  need to do to
  register              38%    34%   41%    37%       38%      33%
Time to complete
  registration
  procedures            33%    24%   40%    33%       23%      38%
Financial cost of
  completing
  registration          30%    27%   34%    29%       31%      31%
Minimum capital
  requirements
  for registered
  enterprises           25%    21%   28%    24%       24%      31%
Financial burden
  of taxes on
  registered
  enterprises           19%    18%   19%    17%       20%      13%
Administrative
  burden of com-
  plying with all
  tax laws              15%    7%    22%    13%       15%      16%
Other administra-
  tive burdens
  imposed on
  registered
  businesses            15%    10%   18%    14%       16%      7%
Strict labor mar-
  ket rules regis-
  tered businesses
  must comply
  with                  12%    13%   11%    12%       12%      11%

                          State
                         Better          Worse
Obstacle               regulatory     regulatory
Difficulty of get-     environment    environment
  ting information
  on what you
  need to do to
  register                 45%                31%
Time to complete
  registration
  procedures               42%                24%
Financial cost of
  completing
  registration             39%                22%
Minimum capital
  requirements
  for registered
  enterprises              30%                20%
Financial burden
  of taxes on
  registered
  enterprises              24%                14%
Administrative
  burden of com-
  plying with all
  tax laws                 16%                15%
Other administra-
  tive burdens
  imposed on
  registered
  businesses               17%                12%
Strict labor mar-
  ket rules regis-
  tered businesses
  must comply
  with                     16%                 8%

Source:Investment climate survey in Nigeria.

Table 6.11 Percentage of Formal Firms Owned by Women,
by State and Sector

                         Region *  Manufacturing    Services

Sokoto                     NC           9.0           24.7
Kaduna                     NC           9.7           21.6
Kano                       NC           12.8          19.4
Bauchi                     NE           10.3          16.2
Abuja                      MB           14.1          42.9
Lagos                      SW           14.1          25.5
Ogun                       SW           15.3          23.1
Cross River                SS           13.4          20.6
Anambra                    SE           12.0          25.9
Enugu                      SE           22.2          27.9
Abia                       SE           21.7          23.7
All                                     13.8          24.7
More industrialized
  states ([dagger])                     13.3          25.3
Less industrialized
  states                                15.0          24.0
Number of observations                 898            900

                           Formal
                         (manufac-
                         turing and
                         services)     Micro

Sokoto                      21.0       35.7
Kaduna                      15.9       49.0
Kano                        15.9       23.9
Bauchi                      13.5       17.2
Abuja                       30.8       36.4
Lagos                       20.1       25.0
Ogun                        19.7       50.0
Cross River                 18.2       20.4
Anambra                     21.1       22.9
Enugu                       25.9       30.6
Abia                        22.9       18.8
All                         20.2       29.5
More industrialized
  states ([dagger])         19.7       35.5
Less industrialized
  states                    21.0       23.2
Number of observations    1,798        485

Source: Investment climate survey in Nigeria.

Note: The sample does not include public and foreign-owned enterprises.
Percentages in italics calculated for samples with less than 30 obs.
States are ordered according to their north-south location.

* NC: north central; NE: northeast; MB: midbelt; SW: southwest; SS:
south south; SE: southeast.

([dagger]) More industrialized states are Lagos, Abuja, Kano, Kaduna,
Ogun.

Table 6.12 Percentage of Female Entrepreneurs by
State and Selected Subsectors

State          Garment     Retail

Sokoto           7.1        17.6
Kaduna          12.5        13.9
Kano            31.3        18.9
Bauchi          16.7        10.5
Abuja           33.3        28.6
Lagos           53.8        37.7
Ogun            66.7        29.0
Cross River     30.0        22.9
Anambra         60.0        20.0
Enugu           64.0        18.6
Abia            40.0        14.8
All Nigeria     37.3        23.1

Source:Investment climate survey in Nigeria.

Table 6.13 Education Level of the Business Owner, by
Industrial Sector

                        Formal (manufacturing
                            and services)

                   Male-owned      Female-owned

Up to primary          13.3            14.4
High school            42.7            41.6
Vocational             37.0            40.5
Graduate degree         7.0             3.5
Total                 100.0           100.0

                             Micro

                   Male-owned      Female-owned

Up to primary          30.8            20.9
High school            48.8            48.5
Vocational             18.7            27.6
Graduate degree         1.8             3.0
Total                 100.0           100.0

Table 6.14 Percent of 2006 Sales Lost as a Consequence of Power
Outages, by Industrial Sector and Sex of the Business Owner

                                  Male      Female

Manufacturing                     10.1        9.4
Services                           8.9        7.2
Micro                              8.6        8.6
Selected industrial sectors:
Garment industry                   8.2       10.7
Retail (formal sector)             8.6        6.4
Retail (micro sector)              8.1        8.6

Source: Investment climate survey in Nigeria.

Table 6.15 Composition of Working Capital, by Sector and
Sex of Business Owner

                                 Manufacturing      Services

                               Male    Female   Male    Female

Internal funds                  66.9    65.6     72.3    76.4
Purchases on credit/advances
  from customers                28.9    30.8     22.4    18.7
Borrowed from:
  private commercial banks       0.8     0.1      1.2     0.7
  state-owned banks              0.1     0.0      0.0     0.0
  nonbank institutions           0.1     0.0      0.0     0.0
  family and friends             2.9     3.3      3.6     3.7
  informal sources               0.4     0.2      0.4     0.4
Other                            0.0     0.0      0.1     0.0
Total                          100.0   100.0    100.0   100.0

                                    Micro

                                Male    Female

Internal funds                  75.7     76.0
Purchases on credit/advances
  from customers                19.6     19.3
Borrowed from:
  private commercial banks       0.6     0.2
  state-owned banks              0.0     0.0
  nonbank institutions           0.0     0.0
  family and friends             3.7     4.4
  informal sources               0.4     0.1
Other                            0.0     0.0
Total                          100.0   100.0

Source: Investment climate survey in Nigeria.

Table 6.16 Purchase of Fixed Assets and Sources of Long--Term
Financing, by Sector and Gender

                      Manufacturing      Services         Micro

                      Male   Female   Male    Female   Male    Female
% purchasing fixed
  assets              47.3    45.5    40.9     32.3    24.9     15.4
Sources of financing
Internal funds        91.6    90.3    93.0     93.9    94.4     88.2
Purchases on
  credit/advances
  from customers       2.6     2.5     1.8      1.8     3.5      5.5
Borrowed from:
  private commercial
    banks              0.7     0.6     1.1      1.4     0.0      0.0
  state-owned banks    0.3     0.0     0.1      0.3     0.1      0.0
  nonbank              0.2     0.0     0.1      0.0     0.0      0.0
    institutions
  family and friends   4.1     5.9     3.0      2.4     2.0      5.5
  informal sources     0.3     0.3     0.5      0.3     0.0      0.9
  Issued new equity    0.2     0.2     0.0      0.0     0.0      0.0
  Issued new debt      0.0     0.1     0.0      0.0     0.0      0.0
Other                  0.0     0.0     0.4      0.0     0.0      0.0
Total                100.0   100.0    100.0   100.0    100.0   100.0

Source: Investment climate survey in Nigeria.

Table 6.17 Percentage of Entrepreneurs with Overdraft and Line of
Credit, by Sector and Sex of the Business Owner

                       Manufacturing         Services

                   Male       Female     Male      Female

Overdraft           5.9        4.2        8.5       8.3
Line of credit      2.6        2.8        4.0       3.8

                           Micro

                   Male       Female

Overdraft           5.6        0.7
Line of credit      4.1        1.4

Source: Investment climate survey in Nigeria.
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Title Annotation:An Assessment of the Investment Climate in Nigeria
Publication:An Assessment of the Investment Climate in Nigeria
Article Type:Company overview
Date:Jan 1, 2009
Words:6198
Previous Article:Chapter 5: Entrepreneurship and managerial capacity in Nigerian firms.
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