This investment climate analysis reviewsthe experiences of over 3000 surveyed business owners in 26states of Nigeria about the aspects of the business climatethat affect their businesses. It complements a similar studyin 2007 that covered 11 other Nigerian states. The surveyasks business owners about both their perceptions and theactual costs of selected constraints. The analysisbenchmarks Nigeria against comparator countries, andprovides detailed data for each state. Nigerian firms havelow productivity, as measured by their output in relation totheir labor and capital inputs. Firms in Kenya are about 40percent more efficient, firms in Russia almost twice asproductive, and firms in South Africa almost four times asproductive. Nigerian firms that export are about 90 percentmore productive than non-exporters. Although labor inNigeria is inexpensive, it is not inexpensive enough tocompensate for this low productivity. The poor performanceof Nigerian firms reflects many factors. This study focuseson constraints in the business climate and the serious coststhey impose on Nigerian firms. Taken together, the totalindirect costs of poor quality infrastructure, crime andsecurity, and corruption amount to over 10 percent of salesfor Nigerian firms. This is twice as high as in SouthAfrica, Brazil, Russia and Indonesia. Microenterprises firmswith fewer than five workers face similar constraints aslarger firm's unreliable power, limited access tofinance, corruption, and transportation bottlenecks. But theconsequences for their businesses are far more severe. Forinstance, most microenterprises cannot afford generators, sopower outages are more likely to shut down their operation.Lacking collateral, almost no microenterprises have accessto formal external financing.
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