On March 10, 2020, the Senate passed the Companies and Allied Matters Act (Repeal and Re-enactment) Bill. The Bill became Act on the 7th August, 2020, when President Muhammadu Buhari signed it into law. From the public analysts to economists and business managers, the passage into law is a welcome development.
Despite seeing it as a good omen for the economic development and growth, especially industries with a large number of small and medium businesses, some analysts still believe that some of the new provisions against effective and efficient operations of non-governmental organisations. However, this piece is not about x-raying the views of the supporters of the new provisions and those who against the provisions. It aims at interrogating the moderating roles of the provisions in the country’s possible place on 2021 Ease of Doing Business.
Provisions that Aid Ease of Doing Business
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- Provision of single-member/shareholder companies
- Restriction on multiple directorships in public companies
- Appointment of Company Secretary now optional
- A Director can’t hold the office of a Chairman, CEO
- Procurement of Common seal not mandatory
- Concept of Limited Liability Partnership and Limited Partnership
- Virtual AGMs
- SMEs exempted from appointing auditors
- Enhancement of Minority Shareholder Protection and Engagement
- Business Rescue provisions for Insolvent Companies
- Disclosure of persons with significant control in companies
- Merger of Incorporated Trustees
- Reduction of Filing Fees for Registration of Charges
- Provision for electronic filing, electronic share transfer and e-meetings for private companies
Our Data and Measures
The CAMA Act 2020 and Nigeria’s position on Ease of Doing Business in 2019 and 2020 were our data sources. The first CAMA Act was enacted in 1990. Then, it was believed that the provisions and sections were enough for the country to have a better business environment and making businesses thrive without significant frictions. In spite of this, public analysts and business owners intensified campaigns against some of the provisions, most importantly provisions that contradicted sections and provisions stated in the Nigerian Code of Corporate Governance.
In 2020, Nigeria was ranked 131 on the World Bank’s Doing Business 2020 Index. According to the Index, the country moved up 15 places from its 2019 spot [see Exhibit 1]. Based on the rank, the agency concluded that the country is one of the most improved economies in the world for running a business. The improvement, according to the agency, happened after reforms carried out by the Federal Government.
The total number of words and most frequently used words were the specific data extracted from the CAMA Act 2020. Exploratory analysis of the data shows that 207,386 words were used for stating sections and provisions in the new Act. Analysis also reveals that company (3696), shall (2863), section (1228), act (1183), court (1085), person (816), shares (767), liquidator (731), meeting (712) and winding (653) were the most frequently used words. Relatively, analysis shows that the new Act was structured towards making companies/businesses strong legally [see Exhibit 2].
Exhibit 1: Movement in Nigeria’s rankings
Exhibit 2: Trends in CAMA Act 2020
Moderating Roles of New Provisions on Ease of Doing Business
Since public affairs analysts and business managers believe that the new provisions will enhance the business environment. In this regard, our analyst examines the influence of the provisions on the country’s positions in 2019 and 2020 using extrapolation analysis [using previous data to advance future knowledge and insights].
Analysis indicates that if Nigeria has added the new provisions before the World Bank released its 2019 and 2020 Ease of Doing Business ranks, the provisions could have ensured 31.6% connection with moving up on the ranking ladder [first connection scenario]. From the second connection scenario, analysis shows that the provisions should have brought the country down by 10%.
These results indicate there are positive and negative consequences of the provisions on the rankings. With these results, our analyst notes the negative consequence could have emerged due to lack of political will and enabling legal and corporate framework to implement the new provisions effectively.
To understand the possible place of the country on 2021 Ease of Doing Business Ranking, our analyst constructed two scenarios using a polarity approach [since connections have established positive and negative impacts of the provisions] [see Exhibit 5]. In the first scenario within the positive consequence [S1-PC], analysis indicates that the ranking would increase by 57.9%, while it would be reduced by 18.3% [S1-PN]. In the second scenario within the positive consequence, mixed insights emerged as the expected positive consequence turned negative. Our analysis shows that the new provisions would reduce the ranking by 3%, while the expected negative consequence would be 27.9%.
Exhibit 3: Word Adequacy Ratio Trends
Exhibit 5: Possible Effects of New Provisions on Nigeria’s 2021 Ease of Doing Business