What Did You Contribute To GDP Today?

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OUTSIDE THE BOX BY ALEX OTTI , Email: alex.otti@thisdaylive.com

‘The critical ingredient is getting off your butt and doing something. It’s as simple as that. A lot of people have ideas, but there are a few who decide to do something about them now. Not tomorrow. Not next week. But today” Nolan Bushnell.

In layman’s English, the term Gross Domestic Product (GDP) refers to the monetary value of all economic activities carried out within a country over a period of time, usually quarterly and/or annually. In calculating GDP, the monetary value of all the goods and services produced across the country, over the relevant period is summed up and can be compared with the value over the previous quarter to determine the percentage change which represents economic growth or decline. The size of the economy is therefore determined by the size of the GDP over a period of one year. In Economics, there are two ways to calculate GDP. The first is by adding up all the income earned by residents in the country whether they are by foreigners or locals. The second approach is by adding up all the expenditures of residents in the country. Both the income and expenditure approaches should give the same result. It means that activities that do not have economic value will not make it into the GDP calculation. One thing readily comes to mind when discussing GDP. While some people would be making heavy contributions to GDP, others may be making little or no contributions. Theoretically, the harder people work, the more they contribute to GDP. In practice, however, it does not work that way and we shall return to this shortly.

Like we all know, Nigeria rebased her GDP in 2014 and became notionally, the largest economy in Africa. Ordinarily, there shouldn’t be any problems with this as GDP is supposed to be rebased about every five years and the last time that was done for the Nigerian economy, was in the 1990s. Whichever way you look at it, a $510b economy is a large economy. The only issue was the hysteria and euphoria that followed the exercise which seemed to have ignored more fundamental issues, the first of which is that ‘biggest’ doesn’t necessarily mean ‘best’. It is therefore instructive that even with the largest GDP we were still dealing with what Abraham Maslow in his famous theory of needs hierarchy, referred to hygiene issues of food and survival. So, we became the biggest economy but still had the biggest problems. The second was that we conveniently forgot to focus on the more useful data: GDP Per Capita. The concept of GDP Per Capita refers to comparing the total cake baked with the number of mouths available to eat it.

When we rebased the economy in 2014, and became the largest economy in Africa, we also became the 26th largest economy in the world. However, on the basis of GDP Per Capita, our position was a distant 17th largest economy out of the 53 African countries ranked. According to the IMF, while 2017 estimates of our GDP at $395b have reduced our global ranking from No. 26 to No. 29, we still maintained our position as the largest economy in Africa, in absolute terms. However, Per Capita GDP of $2,902 places Nigeria as the 139th out of the 185 countries ranked worldwide. For purposes of comparison, Luxembourg came first with its GDP Per Capita of $107,708. Two countries in Africa that stood out were Seychelles and Equatorial Guinea who placed 52nd and 62nd with GDP Per Capita of $15,658 and $12,000 respectively. Considering the foregoing, my contention is that we must redirect our attention to the productivity of the average Nigerian rather than to the total productivity represented by GDP. Bringing this point home dramatically, we can liken it to a farmer who at the end of the season, harvested 30 tubers of yam while his counterpart harvested only 10 tubers of yam. If the first farmer has 10 mouths to feed, it means that each person in his household can only get a share of 3 tubers of yam. Compare this with the second farmer who has only 2 mouths to feed, then it is clear that he is relatively richer because each of his dependents would take home 5 tubers of yam. The first farmer would have behaved like us if he went on a celebration spree boasting with his 30 tubers of yam, without attempting to compare oranges with oranges by considering how many people will eat out of his yams.

We must be able to place the productivity problem in its correct context. A simplistic reasoning would recommend reduction in our population to increase GDP Per Capita. This is a lazy man’s solution to the challenge. How about getting the population to contribute maximally to the GDP like in the countries mentioned above? This takes us to the concept of GDP per hour of work. This concept measures labour productivity in and around countries. It measures how efficiently labour, combined with other factors of production would yield results. On this score, Luxembourg has continued to remain the world’s most productive country in the last three years. Current data shows that the country has a GDP per hour of work of about $94 and interestingly, it has an average work week of only 29 hours. Most countries have a 40-hour work week, save for France, which has maintained a 35-hour work week in the last 17 years. The latest figures on productivity in Nigeria show that as at the end of 2016, our GDP per hour of work was less than $3. This is not very cheering news and may be one of the reasons for the biting poverty in the country. Given the level of unemployment, which is chasing 15% officially, it would not be difficult to understand why we have a gap of over $90 in productivity, between us and the most productive country in the world. It is therefore important to understand why we are one of the least productive countries in the world and what can be done to change this situation.

The usual suspects in our blame game are infrastructural deficits including roads, rail and power. While we concede to the overriding constraining effects of these challenges to productivity, we must also agree that we have over-flogged these issues and I will therefore not spend time on them in this discourse. One major problem in our system is the availability of work, or lack thereof, in the first place. That is the reason for the very high unemployment and underemployment figures. A lot of people who are able and willing to work cannot find jobs because the jobs are simply not there. Our economy is not structured to create jobs and sadly, job creation gets mentioned glibly as part of government deliverables, while hardly are governments measured on the basis of job creation nor are they held responsible for failing to do so. In the recent times, private investments, particularly foreign private investments, have plummeted owing to the exchange rate management policy and the sustained economic crisis. Private investment goes with job creation. The few investments that we attract are hardly channeled to job creating opportunities. Some go to speculative activities and others follow non-labour intensive activities. Again, all our attempts at industrializing the economy have not yielded any reasonable results. Without industrialization, the number of jobs that can be created would remain limited.

The next challenge is the ability of the entrepreneurial cadre to create jobs for itself. This is where the country has not done very well, frankly speaking. This is also the whole essence of this intervention. We must rise above folding our arms and looking for alms. I believe that with the proper incentives, a lot more of our people could get involved in economic activities and therefore job creation. This should be located within what is described as small and medium scale enterprises, – the SME space. Even though SMEs contribute over 40% to our GDP and employ a lot of people, we can do a whole lot more by encouraging many of our unemployed and underemployed people to find something to do to ensure that they contribute to the GDP and thereby reduce unemployment. If we are able to push more people into this sector, it is possible for SMEs to contribute over 80% to GDP and take more people out of the unemployment line.

For those that have something to do, there is also the argument that our work culture or attitude is poor. While this cannot apply across board, there is no denying the fact that a lot of workers, particularly in the public sector do not put in equal day’s work for equal day’s pay. The level of truancy and absenteeism in the public sector is simply alarming and unacceptable. In addition, the sector has a lot of bureaucratic bottlenecks that slow down service delivery and therefore productivity. High productivity cannot be guaranteed under this kind of atmosphere. This may just be one of the reasons for low productivity. We also don’t seem to work smarter, rather, we tend to work harder. From the story of Luxembourg and in fact other high productivity countries like Norway and Ireland, who do not necessarily have a longer work week, the need to work smarter cannot be overemphasized. Putting in longer hours does not necessarily guarantee better results nor higher productivity. The difference is that they are simply more productive per hour of work done. Closely related to this is the idea of work/life balance. Under a situation that guarantees work/life balance, workers have enough time to rest, go on vacation and attend to other forms of leisure and when they are at work, their productivity is at its peak. They also tend to be less affected by fatigue and sickness, even while producing better results.

Again, the kind of tasks that the country focuses on is also very important. Higher value tasks are naturally more rewarding and impact productivity much better than low value tasks. A study of the tasks undertaken by the high productivity countries would easily prove this point. This may be moderated by the argument that we have a lot of people that we need to get busy. But it is also correct to say that there are some tasks which are labor-intensive, require a lot of intensity but yield poor results in terms of productivity. At the point where a country has a choice, such tasks should go down on the table of preference.

All said and done, I believe that Nigeria has a lot of job to do in creating the enabling environment to get most of our people busy with rewarding economic activities that would impact GDP more positively. These would include setting up the necessary infrastructure, monetary and fiscal policies, including tax breaks, to encourage investments into the productive and job creating sectors of the economy. Most importantly, I also think that Nigerians should begin to focus more on ensuring that each and every one of us should consciously bring ourselves into the economic activity framework and consciously ensure that we make an impact that would translate to positive contributions to the nation’s GDP. We can complain and make excuses the much we can. The truth, however, is that if some people are able to contribute, then all of us, with sheer determination, can. You may not succeed immediately, but as the saying goes, you must continue to try and succeed, you will. As highlighted above, we must make a decision to do something, no matter how little you think it is. And that should be now rather than later. The clarion call is for all of us in our big and small pursuits.

  • K Edede

    Nugerians politician , Top military men, both retired and serving, top civil servants have bllions stolen from the treasury, but they cannot invest here because of reprisal, Govt should give amnesty to all so that there can bring in the monies to work for us through job creating investments, thereby reducing unemployment and raising our individual GDP.
    WE are starting with the Author, how many factories do you have?

  • Samson Judah

    Bank of Industry and other commercial banks have in the beginning of the year before President Buhari fell ill, demonstrated willingness through empowerment and funding initiatives to SMEs, but that have changed since they realized the president is not mentally alert to check most of this initiatives that will benefit and empower youths to create millions of jobs through this funding projects as the Tony Elumelu Entrepreneurship programme and similar schemes. Its like eye service to please the stick-carrying oga-at-the-top. This hypocrisy is typical to most corporate and public-office holding leaders in position to lift its people out of abject penury, it’s simple, black people are not known with integrity and vision nor self sufficiency programmes to benefit its people, always-crude, selfish, low imagination and ostentatious. I don’t expect us to be better as a nation, our sentiment and other complex will not allow us to, because no black nation has ever lift its people out of sheer impoverishment and beggarly attitude, I doubt this multi ethnic mess of a nation has any messiah to reorient and redeem us on progress and growth lessons.

  • Aydee

    In the move to improve our country’s GDP, it will also be important for us to consider the institutions (rules of the game ) that guide the operations and systems of the country. These institutions can be both formal and informal. In practice terms, How are people regulated to ensure that they are productive? Are they regulations (formal institutions) in place to ensure that every civil servant is adequately employed to justify their day’s remuneration?
    Also considering that we are such a backward country with pockets of industrialization (not a bad thing), what are the cultural rules (informal institutions) that guide the way we work. What are our rulers,communities and families celebrating? diligence, hard work?

    These are things that as a forward thinking country, we will need to ponder about. It may not be easily attainable though for our generation, but are we applying the right steps to make it better for the next generations?

    And after all that pondering I reckon that refurbishing our educational systems will be a good place to start- ****The move away from credentialism to contextually relevant knowledge****

    • William Norris

      The best place to start is to FLOAT the naira.

      I’ve provided reasonable arguments why this is the case

      If possible, ALSO resume the PDP era drive for more and wider privatization & deregulation.

      WHY do Nigerians tend to have a CREDENTIALIST attitude to education?

      Because

      1. it is massively SUBSIDIZED and
      2. a requirement for employment in a government dominated formal sector.

      Make Nigerians PAY for their education and attitudes will change.

  • Netanyahu

    Atiku should hire this guy right away before APC conscripts and destroys him. We non-economists have immensely benefited from these simple definitions for GDP, GDP per capita and GDP per hour. I really enjoyed this “online lecture” today. On a serious note, Buhari needed someone like this to brush him up as he lacks basic education except marching left-right-right any dung head can do in the military.

    • Toby

      Buhari is unbrushable my dear.

      • Christian Christian

        Bubu is not in short of good economist both real, imaginary and armchair types, they all carry a common baggage, corruption. Put all of them through polygraph test and ask a simple questions on corruption, the result will tell you why the sweetly crafted economic blue prints never wok in Nigeria. When you combine the intellectual deficit and the intrinsic corruption of this government and the previous ones, you should know that Alex Otti can only try.

  • Anne Mumuney

    Interesting article, but I think a big part of our problem is that as a country, our economy is very primitive. We are mainly peasant farmers, with a very very low level of technological or industrial development. We do have pockets of industrialisation no doubt, but what percentage of our population is engaged in this. I think in some of the urban areas, such as Lagos, there is definitely some development in SMES, especially in moving agric produce towards semi processed and finished products for local consumption, and you really see this at the food fairs and farmers markets held, which do give great exposure to these products, but what percentage of the population has access to the knowledge, skills and finance and infrastructure needed to take them past that peasant farmer level? And we tend to have a propensity for the get rich quick schemes, which lead so many of our youth to paths through the Sahara desert, and lack of education and skills further keeps them down. So developing enterprenuers who can positively impact on our gdp is a long, slow task, and has to start with a serious government.

  • RumuPHC

    It is indeed a welcome development that a most serious issue like GDP of the country is the subject of intervention today by Alex Otti.

    This is certainly much better and refreshing than spending valuable time reading opinions on an utterly sobering prospect of Buhari vs Atiku presidential contest in 2019 or APC vs PDP supremacy.

    For a country, GDP is everything . Therefore every policy of government must necessarily be about growing GDP. Unfortunately this appear not to be so in Nigeria; government in our clime is about seizing political power for the sake of power to acquire wealth- no more no less. Hence the relevance of Alex Otti’s simplification of this important concept so that perhaps it will be clearer to the political class why GDP matters.

    Why are we so unproductive when the country is so blessed with resources? Texas a state in the US with almost the same geographical size as Nigeria, but with just a population of 22m americans , boast of a GDP of about $1.3trn. Here in Nigeria our GDP is $0.5 trn ( about a third of Texas economy) meanwhile our population is touted as 180m ( about 9 times Texas’s) .

    A family that cannot farm and harvest enough yams to feed all family members will certainly end in poverty, internal disharmony and ruins. Our economy is certainly not big enough for our huge population going by our meager per capital figures. The result is the excruciating poverty across the land, frightening insecurity and drift towards failed state status.

    Growing the economy of Nigeria to its full potential is the only panacea to our woes . Curbing ballooning population growth is equally important. Clearly , contemplating policies and stratergies for success in these areas requires not just good leadership but smart and professional public service . Unfortunately we lack both today.

    • Country man

      “Clearly , contemplating policies and stratergies for success in these areas requires not just good leadership but smart and professional public service”

      It’s good you are recognizing that building a nation does not just involve good leadership. Soon I believe, you will come full circle.

      You asked WHY Nigeria is so unproductive while blessed with resources? Simple answer:- the RENT SEEKING system we operate has made everyone docile, as well as the LAWS that vests all natural resources in the hands of government instead of the people

      CHANGE THE ABOVE SCENARIO AND WATCH NIGERIA DEVELOP

      • RumuPHC

        Who created such rent seeking system and who can change it ?

        Leadership shape the future by their action or inaction. The good leader will easily identify what you pointed out and build the team necessary to help achieve those desirable objectives leading to success in achieving goals.

        A leader that is unable to determine real priorities and create the proper system is a poor leader. Without doubt the most critical task for leadership in Nigeria is to rebuild the public service.

        • William Norris

          In Jan 2012, the PEOPLE of Nigeria forced PDP to stop the economic progress that was being made via privatization & deregulation.

          The PEOPLE of Nigeria protested, rioted and went on strike to FORCE their government to continue giving them free kerosene & petrol. If they were TRULY PATRIOTIC and intelligent, they would do the same today and DEMAND that the government must FLOAT the naira.

          The events of Jan 2012 and Occupy Nigeria are a lesson that every Nigerian should take to heart. No matter what you say of Jonathan, he PREDICTED the future. It wasn’t even part of an election campaign, he analyzed information and told Nigerians the bitter truth even when crude oil prices were relatively high.
          Jonathan understood what was good policy and tried to do the right thing when it would have been easier and done the most good
          ————————————————
          Subsidy Removal: I’m Ready For Mass Revolt -Jonathan
          -Find alternative – Agbakoba, Falana, others tell President
          From IHEANACHO NWOSU, Abuja
          Sunday, December 11, 2011

          President Goodluck Jonathan, at the weekend, vowed to take the option of social revolt from Nigerians than back down on his plan to withdraw the subsidy on fuel.
          He said his insistence was informed by his knowledge that Nigeria’s economy will collapse in two years if the subsidy is sustained.
          Sunday Sun learnt President Jonathan stated this at a meeting with the leadership of some civil society organizations at the President Villa in Abuja, which was also attended by Vice President Namadi Sambo, the Minister of Finance and Coordinator of the Economic Team, Dr Ngozi Okonjo-Iweala, and her Petroleum Resources counterpart, Mrs Diezani Alison-Madueke.
          __________________________
          From Jan 2012 to the time Buhari supposedly “abolished” subsidy in 2016, Nigeria spent at least $25 billion buying fuel that never reached the people. Yet this APC government has been running around trying to borrow $30 billion. Today the government still spends at least $2 billion per year on fuel subsidies, IN ADDITION TO LOSSES THAT CONTINUOUSLY ACCUMMULATE IN THE NNPC.

          The above is the genesis of the current economic crisis. The APC government made it worse by trying to regulate forex prices at a very unrealistic level.

          Nigerians had ample warning. That’s all the EVIDENCE needed to reach a rational conclusion.

  • John Paul

    Corruption is the number one killer of GDP – “the monetary value of all the goods and services produced across the country” – in Nigeria

    As an example, during the years of the locust, by some estimates, over $25 billion was looted from the public till, as fuel subsidy loot, by vermin who neither produced any goods, nor rendered any services

    In Nigeria, many of our billionaires have no products, produced nothing and rendered no services to make their billions. They simply made all their money from either stealing from the Nigerian government, a State government, or a Parastatal, like NNPC

    These are people that the Emir of Kano, Mallam Mohammadu Sanusi, II described as briefcase billionaires:
    ———————————————————————————————————–
    “When people get wealth they did not work for, what follows would be disastrous for the nation…How many of our briefcase billionaires can show you their business plants and the number of people they employ in their companies? The companies are non-existent in the first place. So, what are we talking about. The more the society produces briefcase billionaires, the more the masses would get more impoverished”
    ————————————————————————————————————-
    In contrast, real billionaires added billions to the GDP of their countries – and even changed the world – by the quality of goods or services that they produced, which led them to become billionaires: Bill Gates (Microsoft); Steve Jobs (Apple); Sergey Brin and Larry Page (Google); Michael Dell (Dell Technologies); Jeff Bezos (Amazon); Ted Turner (CNN); Mark Zuckerberg (Facebook); etc

    Our briefcase billionaires are different

    They reaped where they did not sow. Subtracted from our GDP, instead of adding to our GDP. Caused our infrastructure to decay : bad roads, 4000 MW for a population of 180 million, etc. And, worse, they are the main cause of our insecurity problems in Nigeria – including kidnapping and armed robbery – because they created a culture of reaping without sowing in Nigeria

    The FGN can make two quick moves that can increase productivity in Nigeria.

    First, Nigeria should move away from paying workers a monthly salary, to paying workers an hourly wage. Most of the most productive countries on earth pay their workers hourly wages, as opposed to a monthly salary, because employees that are paid hourly wages are more productive.

    They come to work, complete their assignment for the day, and go home or go to their second job, instead of hanging around the office, gisting, selling wares, having lunch for two hours, and being unproductive.

    So instead of an ₦18,000 per month minimum wage, Nigeria should have a ₦113 per hour minimum wage, based on a 40 hours work week. That way, the minimum wage regime can be enforced in the private sector.

    Many Nigerians do not pay their domestic staff minimum wage – ₦18,000/month – because they cannot afford to do so. And the house help still hangs around because they have no choice

    But with a ₦113 per hour, ₦150 per hour, or even ₦200 per hour minimum wage, that is enforced by civil penalties, people can hire their domestic staff hourly, and their domestic staff can work for more than one employer, to make ends meet

    Another thing that the FGN and State Governments can do to increase productivity is to deemphasize the certificate-acquisition mentality that pervades most of our education system. In the internet age, churning out thousands graduates, who simply acquired their certificates by memorizing information, that is a click away on google, makes no sense, at all

    Our education system should place emphasis on skill acquisition, that is relevant to our economy. Like Fingerprint technology, DNA technology, swimming pool construction, kitchen and bathroom remodeling, other types of construction, web design, computer programming, etc

    After all China went from a $60 billion GDP economy in 1960 ($492 billion in today’s dollars) to a $11 trillion economy, in 2017, by having their teaming population to produce something, anything, from pencils, to toys, to rice, to bottles, to toothpick, to VCR’s, etc., as opposed to becoming fuel marketers, kidnappers, briefcase billionaires and armed robbers

  • FrNinja

    To kickstart productivity you need three things – quality human resources, a savings pool for investment and infrastructure. Its not an accident the most successful developing nations instituted family planning, increased expenditure on education, boosted savings and improved infrastructure. South Korea, China, Singapore, Taiwan, Malaysia all followed this model.

    Nigeria? High fertility rates puts pressure on providing quality education (from need for teachers to classrooms, books, etc), oil boom resources are not saved as a foundation for investment but consumed or looted, infrastructure is not prioritized both in build out and maintenance.

    As a result Nigeria cycles from booms to busts with little improvement in productivity. Booms are defined by massive consumption via importation and capital flight. The investment in factories are not there because the supportive infrastructure is not there. Agriculture remains a hoe and machete affair with far too little inputs of technology and infrastructure.

    With a gdp per capita of 2,000 Nigeria is practically a hand-to-mouth primitive economy relying heavily on external capital flows for its growth prospects.

    • William Norris

      All those issues can be largely ameliorated with privatization & deregulation.

      There’s too much DEPENDENCE on government. Government in EVERY COUNTRY is corrupt and inefficient.

      Nigerians unproductive because they lack INCENTIVES to be productive.

      If the reforms needed are too difficult, just one can suffice. FLOAT the naira. And watch the miracle unfold.

      • FrNinja

        China, korea started with family planning and education not forex policy. They built infastructure that made manufacturing and exports possible.

        • William Norris

          China & South Korea were DICTATORSHIPS when they started their march to development.

          China is still a DICTATORSHIP and it has REVERSED the family planning rules because it has implanted a DEMOGRAPHIC and SEXUAL time bomb in their society. You should go and research the topic, how YOUNG CHINESE MEN are killing each other over wives and going to remote areas and KIDNAPPING brides.

          The ONE CHILD POLICY has led to SURPLUS NUMBERS OF MEN because couples overwhelmingly ABORTED female fetuses.

          The Nigerian government did institute a family planning policy that recognized FOUR CHILDREN as the maximum ideal family size and based their Civil Service and tax payment policy on that size. It didn’t work very well because Nigeria is not that kind of ABSOLUTE DICTATORSHIP as in China.

          Right now the fertility rate in Nigeria and Africa is FALLING, again, go do the research. People are NATURALLY changing their behavior according to ECONOMIC IMPERATIVES.
          By the way, Canada, Italy, Switzerland, Japan and many other developed countries have declared DEMOGRAPHIC EMERGENCIES because they are NOT HAVING ENOUGH BABIES. Again, go and check, get informed.

          Go and check. NOBODY, not even an ABSOLUTE DICTATORSHIP LIKE CHINA, can erase human nature.

  • William Norris

    In the past you endorsed the 5,000 naira stipend for the poor. That’s definitely not an inducement to productivity.

    This article today is SUPERLATIVE, you said it as it REALLY is.

    And thank you for not mentioning God.

    You’re finally getting it. Bravo!

    • Michael Kadiri SocioPolitical

      Thank you for not mentioning God……lol
      Are you afraid he will ask you for tithe soon after?