Enhanced Productivity as Recipe for Economic Recovery


In this analysis, James Emejo examines the need to address the variables, which had contributed to the country’s productivity challenges in order to aid a quick recovery from the current recession

No doubt, productivity remains a critical phenomenon in trying to seek solutions to the recovery of the Nigerian economy as it plays a direct role in growth prospects among other parameters.

According to the BusinessDictionary.com, productivity entails “a measure of the efficiency of a person, machine, factory, system, etc., in converting inputs into useful outputs.

“Productivity is computed by dividing average output per period by the total costs incurred or resources (capital, energy, material, personnel) consumed in that period.”

It added that, “Productivity is a critical determinant of cost efficiency.”

Labour productivity refers to the quantity of manpower input required to produce a unit of output. High above productivity can be an important signal of the improvement in the real income (wages of workers), according to the National Bureau of Statistics (NBS).

Essentially, a country’s Gross Domestic Product (GDP) has a direct correlation to the productivity levels in a given period.

However, the country’s labour productivity index had been greatly challenged in recent times as factors which contribute to its growth are equally handicapped.

According to the NBS, labour productivity for Q3 2016 remained low, rising marginally compared to same period in 2015, largely due to several challenges that generally impacted output and labour, and indirectly on labour productivity, which kept it below optimal levels.

After some initial declines, labour productivity for the third quarter of 2016 rose to N713.7 per hour, compared to N636.3 per hour in the second quarter.

It’s important to note that labour productivity is critical to the overall productivity of the economy.

The NBS said: “Investment in the economy was still relatively low, though some government investments were recorded during the quarter; the volume of private investment and foreign direct investments was still considerably low compared to previous years.

“Power was relatively stable throughout the quarter, which partly accounted for the increase in labour productivity. Though there was a contraction in the economy in the third quarter in real terms accompanied by an increasing unemployment rate, the growth in labour productivity implies a gradual increase in labour efficiency employed in the economy.”

The labour productivity index also showed that the agriculture sector recorded a growth of 4.5 per cent, the highest among any major economic activity, as the third quarter was the harvest season in the Nigerian calendar.

President, Time Economics Limited, Dr. Ogho Okiti said exiting the recession would require that the government addressed issues of low productivity.

In his presentation titled, “Economic Downturn: Pathway to Long-term Economic Growth” which was delivered at the recent Economic Outlook conference in Abuja, he said going by available statistics and given that conditions for improvement in productivity levels had not improved, especially the high unemployment rate, it’s unlikely that the country would significantly exit the current recession this year.

According to the renowned economist, “Growth of 1 per cent in 2017 will mean Nigeria is out of recession and technically in recovery. However, this would only mean that the average Nigerian’s income would be at the same level as it was in 2011.”

Okiti noted that, “Therefore, in 2017, there won’t be any meaningful recovery for Nigerians. In order to grow sustainably over a long period of time and have this growth translates into more jobs and higher income for Nigerians, Nigeria needs to tackle the issue of low productivity.”

Nigeria’s long-term problems are symptoms of its low productivity and they will persist unless productivity is increased, he added.

He said majority of the problems associated with productivity levels had not been addressed by annual budgets.

Last year, delays in signing the 2016 budget into law, coupled with fiscal challenges occasioned by oil price fall and politicisation of development initiatives, the lack of coherence between monetary and fiscal policies among other things helped put the country in a recession.

Worse still, the high unemployment rate whereby youths remain idle and not contributing to national output posed a challenge.

According to Okiti, the poorly educated and unskilled labour with poor quality and insufficient infrastructure, low levels of technology adoption, inadequate public service provision and bad governance remain an obstacle to productivity.

Other bottlenecks, according to him, include: poor bureaucracy, low level of financial inclusion, low level of access to health services, low level of urbanisation and a large and fragmented informal sector.

Okiti added: “How to foster sustainable growth over a long period. That is growth that is not dependent on high oil prices. How to make sure this growth translates to broad-based increase in incomes for Nigerians. How to create enough jobs for the millions of Nigerians entering the workforce every year.

“In theory, these are the problems that government budgets and policies should attempt to solve. Despite longest stretch of above 5 per cent growth 2004 – 2014, these problems remain …”