A recent report by the World Bank has shown that the cost of doing business in Nigeria is significantly higher—four to five times more—than in the United States.
This disparity is driven by a combination of factors including insecurity, high transportation costs, and poor infrastructure.
The report, part of the World Bank’s latest “Africa Pulse,” identified key issues like poor road conditions, inadequate market integration, and a non-competitive transportation sector as major contributors to the high costs of doing business in Nigeria.
It noted that these factors lead to high price differentials in both food and non-food imported goods across the continent, signifying a lack of integration in African markets.
“Similarly, access to product markets is constrained, which prevents firms and farms from scaling up production. In particular, the lack of connectivity and market integration means that markets are segmented, allowing firms or farms with market power to capture benefits, contributing to income inequality,” the World Bank stated.
Spatial price differences within the region, especially for non-traded agricultural staples, underscore the fragmented nature of markets.
This segmentation is exacerbated by food inflation and weakening domestic currencies, which remain crucial in driving inflation across Nigeria and other Sub-Saharan countries.
The findings also revealed the broader economic implications of such market distortions, including a disincentive for African producers to export, which hampers economic growth.
Labour market frictions, high transport costs, and regulatory barriers further strain the economic environment.
“Global analysis of World Bank and Organisation for Economic Co-operation and Development indicators of product market regulations suggest that barriers to competition in product markets tend to be higher in African countries, due to a high degree of state involvement in markets, legal and administrative barriers to entrepreneurship, as well as barriers to trade and investment,” the report concluded, indicating that these conditions stifle innovation and economic expansion.
