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Business Registration in Rwanda: How Digitization Improved Business Environment and Spurred Economic Growth

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Kigali, Rwanda Convention Centre

When it comes to doing business in Africa, the continent has grown and improved dramatically over the last decade or so, but the majority of nations are still dealing with inefficient tax collection and business registration, corruption, lack of infrastructure, and other issues. Yet Rwanda, together with partners like NRD Companies and others, has managed to transform itself into one of the leading economies in the developing world.

A country not long ago plagued by civil war and political instability, Rwanda is currently ranked second in the Sub-Saharan region and 38th globally in the World Bank’s Ease of Doing Business rankings. It is the only low-income country ranked among the first 100 countries.

But it took more than a decade of successful reforms to reach the stage the country is now at. Richard Kayibanda, who has been Registrar General at Rwanda Development Board (RDB) since 2018, talks about Rwanda’s transformation in more depth.

What were the most inefficient procedures that stalled business development in Rwanda a decade or two ago?

The most inefficient procedures were to do with business registration. Before implementing reforms in 2008, the legal system was outdated, with some legal aspects dating back to the 1960s. On top of that, all services were delivered manually, and many government institutions had overlapping responsibilities, which furthered unnecessary costs and overregulation. During this period, the country struggled to incentivize local entrepreneurs to start businesses or attract foreign investors.

What were the main challenges when registering a business prior to the reforms?

You needed an Article of Association (AoA) to register a business, which a lawyer could only do. The drafting of AoAs took approximately two days and cost at least US$300. Additionally, the documents required authentication by a public notary at the cost of US$150 and took at least one week to complete. So, in total, you are looking at more than two weeks and more than US$450 just to legally open your business. The cost of opening a business was largely prohibitive.

When did the first catalyst for change come about?

The first significant indicator of the changes coming came in 2007. The government established the Doing Business Steering Committee, bringing together representatives from different ministries and public agencies to lead the way towards implementing business-related reforms. Since then, Rwanda has introduced more than 50 legal and institutional reforms to improve the business environment. This has made the country the top reformer in the world in the last ten years.

What were the most important areas that the reforms aimed to improve?

The main goal was to introduce a digitized and automated version of the registry to incentivize business creation. An equally important objective was to make the process as timely and cost-efficient as possible. The new business registration system introduced free online registration for all companies. It presented the option to register a business without Articles of Association and removed the minimum capital requirements.

The online business registration, acting as a one-stop-shop for everything business registration-related, also made post-registration procedures like VAT registration online faster and enforcing contracts easier. In a few years, registering a business in Rwanda became free and fast: four procedures and five days compared to nine procedures and 16 days in 2008.

Did the changes require outside partnerships? If yes, who were your partners? Why did you choose them?

We have had many partners throughout our reforming journey. We partnered with NRD Companies to work on the technological part of the project. Since 2009, the company has helped Rwanda with the design, implementation, operation, and monitoring of the Rwandan commercial registration services. This included company registration, business information, registration of secured transactions and registration of intellectual property rights.

What made NRD stand out was that they recognized the importance of educating and informing society about such a significant change in their lives. NRD Companies prepared an awareness and outreach campaign, which allowed us to navigate the transition as smoothly as possible. They also offered continuous technological support after the project was implemented. We are still in contact with them and are invited to share our experience with other countries from time to time.

Seems like the reform framework and the digitization of business-related services has been successful. Rwanda is now the second-fastest growing economy in Africa, with 10.3% growth per year in the last 15 years. What advice would you give to other countries eyeing similar reforms?

The first thing I would say is that government support is essential. Resistance from stakeholders and beneficiaries is something you will most likely face in your journey, so having backing from the government helps ease the process. Also, reforms and infrastructure cost money. Additionally, sufficient ICT knowledge is paramount.

But at the end of the day, big changes are always accompanied by significant challenges, so try to be one step ahead of time and plan everything accordingly. I think soon we will see an increasing number of governments around the world introducing technological solutions to spur societal, political, and economic growth.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Experts Predict Nigeria’s Free Trade Zones Could Generate More Than N11.11tn

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lekki free Zone

Economic experts are optimistic about the potential of Nigeria’s Free Trade Zones (FTZs) to boost the nation’s economy significantly.

According to recent analysis, these zones could generate more than the N11.11 trillion they have already remitted to the Federation Account as of October 2023.

The Director of the Centre for the Promotion of Private Enterprise (CPPE), Muda Yusuf, said the FTZs will help facilitate forex.

“Nigeria’s urgent need for foreign exchange necessitates leveraging our free zones to enhance non-oil export revenue and reduce dependency on crude oil earnings,” Yusuf stated.

He pointed out the success stories of other countries, notably Dubai, which has effectively utilized its free zones to generate foreign exchange and attract significant investments.

“Our free zones must strive to do more, as we are still heavily reliant on oil and gas for our foreign exchange earnings. Increased investment in these areas is crucial,” he added.

Supporting this perspective, the Managing Director of the Nigeria Export Processing Zones Authority (NEPZA), Olufemi Ogunyemi, recently highlighted the economic contributions of the FTZs while addressing the Senate Committee on Industry, Trade, and Investment.

Ogunyemi noted that these zones have created substantial wealth for the states hosting them and generated significant revenue for various agencies.

“Agencies such as the Nigeria Customs Service, the Immigration Services, and the Nigerian Ports Authority have seen revenues of N59.38 billion, N828.7 million, and N8.738 billion, respectively, while states have received N998 million in Pay As You Earn (PAYE) remittances,” Ogunyemi reported.

He also highlighted the broader impact of the FTZs, noting that as of the end of 2023, the 46 licensed zones had provided 38,429 direct jobs and an additional 172,930 indirect jobs.

Foreign direct investment (FDI) worth $491.8 million and local direct investment amounting to N1.15 trillion have flowed into these zones, with N1.62 trillion worth of cargo imported from 2019 to 2023, saving scarce foreign exchange.

David Adonri, Vice President of Highcap Securities Limited, praised NEPZA’s achievements, suggesting that the government use these successes to encourage more Nigerians to start manufacturing businesses within the FTZs.

“The remittances from the free trade zones are commendable and should be a marketing tool to attract more investments,” Adonri said.

However, some experts believe there is room for improvement. Professor Olusegun Ajibola of Babcock University argued that while the remittances are noteworthy, they are not yet at a level worth celebrating.

“The government needs to intensify efforts in revenue generation from these zones as they were established at a significant cost to the host states,” Ajibola remarked.

He called for a review of the 32-year-old NEPZA Act to address any challenges and enhance the performance of the FTZs.

As Nigeria continues to seek ways to diversify its economy and reduce reliance on oil, the FTZs present a promising avenue. With strategic investments and robust management, these zones could indeed surpass their current contributions, fostering economic growth and stability for the nation.

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Nigeria’s Dangote Refinery Breaks Into Asian Market with LSSR Shipment

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Aliko Dangote - Investors King

In a historic move, Dangote Refinery is set to ship low-sulfur straight-run fuel oil (LSSR) from Nigeria to Singapore this week, its entry into the Asian market.

This development represents a significant milestone for the refinery, which began operations in January following a $20 billion investment.

According to ship tracking data and market sources, the refinery will initiate a new trade route from Nigeria to Asia, a region that consistently demands low-sulfur fuel oil for ship refueling at Singapore, the world’s largest bunker hub.

The Glencore-chartered vessel, Front Brage, will deliver approximately 124,000 metric tons (787,400 barrels) of LSSR to Singapore, with the shipment expected to arrive on Wednesday.

The Dangote Refinery, with a processing capacity of up to 650,000 barrels of products per day, is poised to become the largest refinery in Africa and Europe once it reaches full capacity.

Since March, the refinery has increased its LSSR exports, primarily sending cargoes to the Americas and Europe, as reported by ship tracking data from Kpler and Vortexa.

“This first shipment to Asia marks a new chapter in Dangote Refinery’s expansion strategy,” said a market analyst. “Breaking into the Asian market underscores the refinery’s growing influence and its capability to meet diverse global fuel demands.”

Market sources suggest that the cargo was redirected to Asia due to weaker demand in Europe. Data from LSEG indicates that the east-west spread for front-month 0.5 percent LSFO, reflecting the price difference between these regions, stayed above $40 per ton this week.

Dangote’s LSSR cargoes are priced against Rotterdam’s 0.5 percent LSFO quotes on a free-on-board basis, although the specific pricing differential for this shipment was not disclosed by market sources.

This pioneering shipment is the beginning of a series of exports to Asia. Another LSSR shipment from the Dangote refinery, containing around 157,000 tons, is expected to reach Singapore in July aboard the vessel Stena Suede, based on ship tracking data.

LSSR is typically blended with other fuels to create low-sulfur fuel oil (LSFO) for bunkering or used as feedstock in various refinery processes.

This export initiative not only diversifies Dangote Refinery’s market reach but also enhances Nigeria’s position in the global energy market.

In February, Dangote began exporting oil products and started purchasing crude oil, mainly from the Nigerian National Petroleum Company (NNPC) Ltd, in December 2023.

The refinery’s successful entry into the Asian market is anticipated to drive further growth and establish new trade relationships, reinforcing its status as a key player in the global oil industry.

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This landmark export not only demonstrates Dangote Refinery’s operational capabilities but also signals Nigeria’s expanding influence in the global energy sector. As the refinery continues to innovate and expand, it is well-positioned to meet the increasing global demand for cleaner, more efficient fuels.

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Nigerian Refiners Pursue Afreximbank Financing Amid $18bn Funding Plan

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Iran oil

Investors in Nigeria’s modular refineries are actively engaging with the African Export-Import Bank (Afreximbank) to secure a portion of the $18 billion fund earmarked by the bank for the development of refineries in Nigeria and other African nations.

This initiative follows the successful financial backing provided by Afreximbank to the $19 billion Dangote Petroleum Refinery, which has commenced production of refined petroleum products for both domestic use and export.

Sources within the modular refining sector confirmed that discussions are underway, with significant interest from Clairgold Refinery and Shinjin Petro Chemicals.

Both companies have initiated talks with Afreximbank officials to source funds for their refinery projects in Nigeria.

However, the modular refinery operators have expressed concerns regarding the feedstock supply for their plants, which is a critical guarantee required by financial institutions for funding.

The operators, represented by the Crude Oil Refinery Owners Association of Nigeria (CORAN), praised Afreximbank’s support for the Dangote Petroleum Refinery during its construction phase.

“We are in active discussions with Afreximbank, although no modular refinery has received financing from the bank yet,” said Eche Idoko, Publicity Secretary of CORAN. “Shinjin Petro Chemicals, which is constructing a 3,000 barrels per day plant, and Clairgold Modular Refineries are among those in talks with Afreximbank and the Bank of Industry. We are hopeful for positive outcomes.”

Afreximbank’s commitment to supporting refinery construction was reiterated at the 2024 Afreximbank annual meetings in Nassau, The Bahamas.

The bank’s president, Benedict Oramah, highlighted the strategic objective to refine 50% of Africa’s crude oil production within the continent.

Oramah emphasized the bank’s role in the successful financing of the Dangote refinery as a model for future projects.

“We are proud to be associated with these transformational projects, which demonstrate the critical role of African capital in financing our development,” Oramah stated. “Our broader strategy includes supporting the construction of a new refinery in Cabinda, Angola, and refurbishing the Port Harcourt refinery in Nigeria. Our goal is to ensure that at least 50% of the crude oil produced in the Gulf of Guinea is refined in Africa.”

Despite the optimism, modular refinery operators have identified several challenges in accessing these funds.

These include securing guarantees related to feedstock supply and completing necessary engineering designs.

“The issue of feedstock remains a significant hurdle, as financiers require assurances on this front,” Idoko noted. “We are optimistic that Afreximbank will address these concerns given their recent declaration to support modular refineries.”

The ongoing discussions come at a time when Nigeria is grappling with its highest inflation rate in 28 years, driven largely by food costs.

The economic strain is exacerbating poverty and reducing the purchasing power of the nation’s 231 million residents, 60% of whom are classified as multidimensionally poor.

Modular refineries, which require significantly less capital investment compared to traditional full-scale refineries, are seen as a viable solution to boost local refining capacity and reduce dependence on imported refined petroleum products.

However, the operators have raised alarms about systemic issues within the oil sector that impede in-country refining, echoing concerns voiced by Aliko Dangote regarding the influence of entrenched interests.

As negotiations with Afreximbank continue, the modular refinery operators remain cautiously optimistic, hoping that the bank’s support will pave the way for enhanced domestic refining capabilities and contribute to Nigeria’s economic resilience.

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