By Alex OTTI
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 or 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.