Recession Takes Toll on Productivity

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As economic recession takes toll on the Nigerian economy, dwindled level of job creation seems to have affected the level of the nation’s productivity, Paul Obi writes

In its recent report on the performance of jobs and productivity, the National Bureau of Statistics (NBS) highlighted that about 4.2 million jobs have been lost since 2015. In the same vein, the NBS rolled out indices on labour productivity between first quarter (Q1) 2015 and second quarter (Q2) 2016.

Though, the economic recession remains a poor economic credential of President Muhammadu Buhari’s administration, the staggering productivity has also not helped matters. The crisis of productivity is not just about the appalling indicators of the economy, the monetary policy of the Central Bank of Nigeria (CBN) appears to be having a telling effect on the performance of the manufacturing sector. This has had a ripple effect on the nation’s productivity as well.

The NBS, which began its rating in Q1 2015 and measures the relationship between nominal GDP and the total hours worked in the period, said, “Chart shows productivity peaking in the period under review in Q3 2015, declining for two quarters and then recovering by 5.3 per cent quarter on quarter in Q2 2016.

“The improvement was the consequence of nominal GDP rising by 5.7 per cent over the quarter and hours worked by just 0.3 per cent. (The labour force expanded by 1.8 per cent over the period and the unemployment rate from 12.1 per cent to 13.3 per cent),” the report stressed.

But analysts at FBN Capital held that some constraints might not have been taken into account in the computation of the nation’s current productivity ratio. They argued that “because these have become regular constraints, a person is likely to remain “working” in Nigeria and the employer to continue paying his/her salary. In other jurisdictions and under similar constraints, we suspect that the position would generally be axed.

“This is very much vanilla analysis of productivity. It measures only one input and makes no distinction between sectors of the economy. Indeed, we have to allow for some “wiggle room” in the calculation of hours worked in the informal sector. The ultimate goal on the horizon is a measure of multi-factor productivity to include capital and labour inputs. That said, the NBS should be applauded for making the first steps in that direction,” they maintained.

Also, the Nigerian Labour Congress (NLC) argued that the indexes surrounding productivity ratio could not be taken in isolation of the overall performance of the economy. The union added that the devaluation of the naira, the forex quagmire and the lack of a clear-cut economic stimulus plan to boost the ailing economy have automatically precipitated the crisis bedevilling Nigeria’s productivity ratio.

NLC President, Comrade Ayuba Wabba, contended that “many of them (manufacturing companies) have closed. They cannot afford the cost of raw materials because of the difficulty in accessing foreign exchange (forex) and the pressure from the free fall of the naira,” he said.

Wabba stated that the ultimate goal to soar up the nation’s productivity and revive the sinking economy is by assisting manufacturers to source raw materials within affordable cost. He maintained that there was an urgency to ensure that forex is redirected to funnel manufacturers’ business pursuit with regards to production and other components that will improve productivity.

“Government can also establish modular refineries to ensure money used for the importation of petroleum products would be saved and used to develop the economy by providing the infrastructure required to drive productive economic activities to create jobs for the people,” Wabba stated.

That said, the productivity ratio might have picked up in the Q2 of 2016, it basically cannot be a pointer to cheer about. At the moment, the Nigerian economy is bleeding profusely, waiting for a probable resuscitation. For productivity to thrive continually, the fiscal and monetary policies must be sharp and effective. That is one area the government has failed woefully. And has been unable to chart a workable course that will usher in green shoots and better productivity indicators.

The roadmap to improved productivity is that which builds synergy among the fiscal, monetary and industrial policies and put manufacturers at the driving seat. The present disconnect cannot birth a resounding productivity in the midst of a tsunamic economic recession. To say the least, any hope of a better productivity ratio will just be mere cosmetic show and window dressing.

And as President of the Coalition of Civil Society Groups (CCSG) recently posited, “we believe that monetary, fiscal and industrial policies should be viewed correctly as macro-economic policies. There is need for genuine synergy and a discard of self-serving tendencies and inept blame games among those that should provide solutions.”
Therefore, the way to get the nation’s productivity right, should also begin with securing the fiscal and monetary policies on the right track as well.