By Tunji Olaopa

Introduction: Asking the Right Questions 

Let me start with an axiomatic fact that should serve as the fundamental basis for everything we will be discussing here today. The fact is that Ondo State is uncontroversially blessed in terms of human and mineral resources. And we do not need any comparison with other states in the Southwest to be able to accept that fact. And at the risk of preaching to the choir—of convincing you of what is already a fact which you all know—permit me a little outline. 

Ondo state is situated at the juncture of three critical natural resources—agricultural produce, oil and natural gas, and solid mineral deposits, from gold and marble to granite and lignite. In crop production, Ondo is the number one producer of cocoa. And it is the fifth largest producer of crude oil. It possesses one of the largest deposits of natural gas all over the world, and the second largest bitumen deposits too. And overall, Ondo State has the sixth largest economy in Nigeria. These are all great and inspiring facts that undergird the possibilities that the promotion of investments in the state can unleash.

However, and as the organizers of this lecture must have realized, nothing good comes easy. And not least in Nigeria where the economic progress of any state is tied in with the sociopolitical and socioeconomic fortune of the Nigerian economic performance. And so, opening up the opportunities and finding the strategies that enhance and promote investments in Ondo State require not only that all minds but hands must be on deck. It also demands some tasking institutional and governance reforms that must backstop such promotion. 

There are two correlated reasons for this. The first is that investments lie at the fundamental base as a key source of capital that all states need to finance their economic and productive activities, achieve technology transfer, enhance human resource capacities and other skills and competences development, and jumpstart internally generated revenue. All this, including the imperative of income poverty reduction, are all implicated in a state’s determination to achieve socioeconomic growth and development for her citizens. And the significance of drawing in capital investment that enables infrastructural development is what drives governors and presidents to put in strenuous efforts in wooing investors into the critical sectors of their economies. However, and this is the second reason for the need for urgent institutional and governance reforms, investors are too shrewd to be drawn in by mere political and economic rhetoric. As rational calculators, the demand of the rational choice theory implies that they must make the most calculated and self-interested decisions that will bring in the maximum benefits for them. 

And this means that in investing their capital, they will critically investigate the political, social and economic environments of where they are prospecting, and this applies especially to a state’s business environment. We can say that investment does not come by patriotism. Rather, it comes through doing due diligence to ensure that my investment does not go down the drain due to a state’s unproductive business environment. In fact, it has been argued that such an assessment is done around four critical clusters:

• Security and law enforcement;
• Infrastructures and utilities like power, road and the public transportation networks, water and sanitation, and social welfare system;
• Business development supports from the availability of industrial parks and zones to access to finance, and entrepreneurial facilities;
• Optimal and functional regulatory services like property registration, tax administration, contract enforcement, the justice delivery system, and so on. 

Thus, an unstable political clime or volatile security situation will drive off any willing investors. And no amount of wooing will succeed. Given these concerns, we therefore need to reassess how we need to proceed not only in the context of this lecture, but also on the larger matter of enhancing the environment for investment in Ondo State. This allows us to raise and foreground some crucial questions:

1. In grounding the core of what is at issue here today, should we be concerned with “creating” a climate for investment or “promoting” the already existing climate of investment? Is there any need, given the timeline of this administration’s tenure, to reinvent the wheel?
2. If it is better to talk about promoting an already existing climate of investment (rather than creating a new one), what are the perceived gaps and loopholes in this investment climate, especially based on the perception surveys of past investors, as well as a critical assessment of the business and investment realities on ground in Ondo State? For instance, to what extent can the investors already on ground be said to be satisfied with the business environment sufficiently for them to become the state’s brand promoters?
3. Since most critical investors think largely in regional terms when it suits their calculations, to what extent can we say that Ondo State has harnessed her significant economies of scale vis-à-vis other states in the southwest?
4. Is Ondo State involved in any existing or forthcoming collaborative economic and investment arrangements, especially with sister states in the southwest? Or do these states see themselves more as competitors rather than collaborators in opening up the southwest as a corridor of business opportunities whose cumulative benefits rebound to the advantage of all? 

Beyond the ambit of this lecture, these are questions that I presume ought to be cogent within the governance efforts of the Ondo State government to make the state a haven for investors. In the rest of the lecture, I will (a) look critically at how the larger Nigeria’s governance context affects Ondo State’s business environment; (b) the critical role that an institutionally reformed and functional public bureaucracy, like the Ondo State Investment Promotion Agency (OSIPA), can play in facilitating the objective of the state government; and finally (c) engage with other critical reform issues that the Ondo State government needs to factor into its objective of reforming its bureaucracy for an effective promotion of investment drive in the state.  0

The Ease of Doing Business in Nigeria

Whatever we have to say about promoting investment in Ondo State cannot be divorced from the larger context of what the Nigerian business environment denotes. This is because within Nigeria’s federal arrangement, the federating states are equally drawn into federal framework that could either make or mar any individual investment efforts by the states. And all the states, for example, are drawn into Nigeria’s monocultural economy and its dependence on crude oil, with all the challenges that generate. Unfortunately, however, the demands for fossil fuel have drastically diminished all across the world and the dependence of other states on Nigeria’s crude oil has taken a serious dwindle in the world market. This immediately tells us that there is practically no future in carbon-based non-renewable energy as the mainstay for the national economy of any country with the ambition of amounting to being a significant player in the fourth and fifth industrial revolutions. 

The consequences of Nigeria’s dependence on crude oil are many. The least of these consequences, as consecutive Nigerian governments have realized, is the constant adverse shocks that come from global price fluctuations in the oil market. The most worrisome of the consequences is the vulnerability of the Nigerian economy to global economic recession and the foreign exchange depletion, high inflation and the other critical macroeconomic challenges that Nigeria has had to keep contending with, and which have kept her comatose for sixty-three years. This is made more significant because of the lack of an optimal productive capacities in manufacturing and any substantive industrialization process. The PricewaterhouseCoopers (PwC) recently reported a downward trend in Nigeria’s foreign direct investment profile as well as inflows in her foreign portfolios. This speaks dismally to a growing vulnerability whose impact on the GDP cannot be underestimated.       

And in response to this gloomy statistics, successive Nigerian governments have been responding as energetically as they can to the urgent challenge of diversifying the monocultural economic framework to meet the global turn away from fossil fuel. Both the federal and state governments are now actively reconstituting their institutional and economic dynamics in ways that are meant to deliver on creating favorable business environments that will induce ease of doing business in Nigeria. For example, the establishment of the Presidential Enabling Business Environment Council (PEBEC) in 2016 came with the objective of removing “bureaucratic constraints to doing business in Nigeria, and make the country a progressively easier place to start and grow a business.”  And as a consequence, Nigeria’s ranking in the Ease of Doing Business (EoDB) Index improved from 146 in 2018 to 131 in 2020. This improvement has been due to the concerted effort to reform the processes involved in the business environment, especially the automation of the company incorporation processes which now enables self-service, as well as the institutional collaboration between the FIRS and the CAC that ensures (i) the introduction of the automatic electronic stamping of incorporation documents and issuance of Tax Identification Number (TIN); (ii) the issuance of a single application form for incorporation; and (iii) the decentralisation of the CAC application completion process. 

Despite the improvement that various administrations have achieved in reducing the challenges involved in attracting foreign investment into the Nigerian economy, the challenges and bottlenecks are still significant, especially when viewed across the states. These include the following: 

• Lack of clarity on registration procedures for new businesses
• High cost of land acquisition and difficulty in obtaining land title
• Sanctity of agreements and enforceability of contracts
• Inadequacy of intra-state transport infrastructure (road and rail)
• Low level of automation of business processes within the civil service
• Lack of clarity of investment protection laws
• Raw materials shortages
• Weak public private partnership framework

In the PEBEC 2023 assessment of the ease of doing business in Nigeria, Gombe maintained her first position in 2021 (7.69) and 2023 (7.15). Ondo State was on the 8th position in 2021 (6.16) and a distant 19th position in 2023 (5.47). this downward trend is certainly enough reason for action for the state government. 

Ondo Development and Investment Promotion Agency and the Challenge of Institutional Reform

No significant discernment is required to know that achieving an optimal business environment that attracts investment is in direct proportion to the existence of a reformed, effective and efficient public administration system, functional infrastructures and reliable regulatory services. An efficient public service therefore becomes a key and fundamental institutional factor in reinvigorating the Ondo State efforts to boost and promote her business environment. This is because, as is the case all over the world, the effectiveness of the government is assessed through its bureaucracy in terms of (a) the quality of bureaucratic efficiency, (b) quality of service delivery, and (c) the professionalism of the public servants and frontline managers.

The case can then be made for two related bureaucratic backends, involving MDAs, that service the efforts to sanitize, decentralize and make efficient the business environment. These are the direct and the indirect business environments. The indirect and larger environment involves the macroeconomic climate—industrial, security and infrastructural—which delivers policies that indirectly affect the investment environment. This policy environment concerns MDAs and their regulatory functions in terms of taxes, tariffs, licenses and permits, product standardization and quality assurance, customer satisfaction, environmental protection, financial services, etc. We must also not forget the critical issue of industrial relations and labour productivity that touch on recruitment, wage and incentives, labour-employer relations, etc.    

In terms of the direct bureaucratic framework, no other institution in Ondo State represents the core of the structures that the government needs to force into the forefront of institutional reform than the Ondo Development and Investment Promotion Agency (ONDIPA) to correct whatever structural anomalies limits the capacity of Ondo State, with all her human and natural resources, to achieve the number one position in the ease of doing business in Nigeria. Established as the institutional arrowhead for the promotion of investment in the state as well as multilateral cooperation, ONDIPA was given the mission to “actively facilitate, promote, manage and support domestic investment, foreign direct investment, foreign portfolio investment and grant investments to help nurture new and foster existing industries for social and economic development of Ondo State.” And this is to be achieved in seven key areas: investor and sector targeting/marketing, policy formulation and advocacy, promotion of tourism, business facilitation, support and aftercare, partnerships and sectoral cooperation, multilateral and donor relations, and management of economic zones. In simple terms, ONDIPA is expected to simplify the administrative procedures involved in investment in the state, improve the regulatory transparency and channel private sector collaborations. However, given the dismal performance in the ease of doing business index, the general question to ask is, to what extent ONDIPA has fared in the achievement of its vision and mission? I will now proceed to break this general question into three clusters of interrogation that pose critical queries to the Ondo State government and ONDIPA.

The first set of queries goes to the Ondo State government. First, and given the urgency with which the government is pursuing its objective of promoting investment, the question to ask is: what is the level of budgetary funding that ONDIPA enjoys? It would seem logical that if the government wants to improve its investment profile, it would give priority attention to the agency in charge of making it happen. But, does it? In the 2023 sectoral budgetary allocation, ONDIPA receives approximately N1.1b., which is very low compared to allocations to other sectors. Second, we can ask about the scope and depth of the administrative and institutional reforms that the Ondo state government has put in place (in terms of the ease of doing business) and their impact on both the ONDIPA and other correlated MDAs. These reforms will be in terms of (a) streamlining administrative procedures; (b) reduction in the cost of establishing new investments; (c) seamless access to information and guidelines in establishing new businesses; (d) the enabling capacity of the legal and regulatory instruments, financing options, land access/grant of certificates of occupancy (C-of-O); (e) the competences of the personnel in charge of making the business environment friendly and efficient; (f) the availability of post-investment facilitation and advisory supports; and most fundamental (g) the involvement of ONDIPA and other related MDAs in policy conversations, especially at strategic and tactical levels of decision-making on investment possibilities.

The second clusters of interrogation targets ONDIPA itself and its institutional strategies and operational tactics.  

• What is ONDIPA’s professionalism quotient in terms of its competences, result-oriented and innovative capacities to attract investment? For instance, if benchmarked against other high-performing investment promotion agencies across Nigeria and beyond, how innovative would it be in terms of (i) the information facilitation, brand advocacy and projection of Ondo State as the state of choice in investment, and (ii) concrete investment generation? Ondo State’s position in the 2023 PEBEC index is an indication of an answer to this question. 
• What corporate strategy undergirds its investment mission statement and marketing programs?

The last set of question is direct. One: what institutional linkages and leveraging has ONDIPA achieved in terms of attracting, expanding and connecting shareholders, especially the private sector, foreign investors and local players in the investment space in Ondo State through profiling and projecting Ondo’s comparative advantages and the government policy successes and breakthroughs? Two: does the private sector possess a visible representation in ONDIPA’s operation? 

Conclusion: Strengthening Ondo State Public Service Performance

In concluding this lecture, I will briefly outline ten core reform areas that will assist the government in its search for an optimal and functional public service that will backstop the investment drive in the state. 

As I see it, the first order of reform business for the Ondo State government is the urgency of a system-wide capacity building and performance-enhancing re-professionalization and improvement of workplace ethic for all public managers. This will involve productivity audits that eliminate internal processes that hinder efficiency, as well as series of trainings and capacity development programmes which will include financial and economic analysis of investment scenarios; methodologies and tools for project formulation appraisals; analysis of investment environment; analytical tools on investment options e.g. joint venture, rehabilitation projects, cost centres, project finance, financial modelling and evaluation, risk management and risk sharing, and so on.

As a second order of business, government needs to focus on enhancing the public service’s capacity for policy intelligence on investment as well as stakeholders’ engagement skills. This will enable government officials to deploy multiple perspectives into their investment policy analyses through different techniques and procedures that test different investment scenarios. These officials and public managers will also be able to adopt creative and strategic communication skills in building a friendly business environment for stakeholders, while also designing and adjusting contracts and investment agreements as the environmental indicators will demand.  

The next set of reform activities are specifically targeted at the transformation of the general business environment and specifically the ease of doing business dynamics. First, government reforms whose objective will be to reengineer the business and investment environment processes, especially through the review and reform of the standard operating procedures and guidelines is imperative. This will not only achieve the objective of dispensing with non-value-adding licencing regulations in order to speed up the cycle time in investment licencing. It will also eliminate hindrances involved in the bureaucratic and legal processes for granting land permits for investment purposes.

Finally, the Ondo State government must necessarily review the baseline frameworks and modalities regarding her ease of doing business. First, it is imperative to strengthen statistics involving investment and other related matters. This will involve putting in place more systematic and evidence-based models and machinery for collecting data, establishing databases and information systems that enhance better decisions with regard to investments. This automatically places information and statistics at the core of the EoDB reform. 

Second, it is crucial to conduct regular sector analyses that will automatically benefit from the improved data collection and statistical frameworks. This will enable the Ministry for Economic Planning and Budget, as well as ONDIPA, to conduct periodic sector analyses, through a reprofiled monitoring and evaluation (M&E) system, to generate helpful information required by investors, targeted business communities, development partners, research institutions, and the general public. For example, the government can facilitate an EoDB portal, upgraded into a public-private web platform that 

1. collates information real-time on starting or operating a business in the state, 
2. provides information on business registration process and fees, the process to renew a business permit, tax exemption, and other tax-related information, and 
3. provide downloadable form for citizens to submit questions, complaints, and feedback regarding business processes.

And then, there is the need to review cost centres to significantly reduce investors’ transaction costs. This review will focus on issues such as the cost of registration and other administrative bottlenecks involved in registering businesses, the rationalization of multiple and constraining tax regimes, and the elimination of all forms of illegal payment schedules. The last leg of the reform is concerned with strengthening the government’s post-investment support systems through the provision of technical supports and advisory services that will be periodically reviewed in ways that ensure that existing investors are not only duly satisfied and their re-investment and project expansion assured, they eventually become the state’s brand ambassadors to other potential investors.

   . Being Lecture Delivered by Prof. Tunji Olaopa, retired Federal Permanent Secretary, professor of public administration and Executive Vice-Chairman, Ibadan School of Government and Public Policy – ISGPP – as Guest Speaker at the 2023 Ondo State Public Service Week on the Theme “Bureaucratic Impact on Investment Promotion in Ondo State” held on Thursday, 19th October, 2023 at the International Culture and Event Centre (The DOME), Akure).