Three key sectors that should ordinary play big roles in the Nigerian economy have basically lagged behind the growth curve in economic activities as measured by gross domestic product (GDP) in the last five years. Central Bank of Nigeria (CBN) data provide an interesting insight into how the electricity, water and postal services sectors are really not growing at the same pace as other key economic sectors.
Comparing GDP figures measured at 1990 constant prices, these three sectors have seen deterioration in their productivity over the last five years. The postal service’s contribution to the nation’s GDP has remained stagnant at an insignificant 0.07 per cent in the last five years.
Basically, productivity in the sector has not grown with the Nigerian economy. The biggest and obvious laggard in the postal services sector is likely to be government owned Nigerian Postal Services, otherwise referred to as NIPOST. Under government, NIPOST has obviously been unable to adapt fast to the changing business environment it has found itself. With the advent of electronic mailing and increased internet penetration, NIPOST has not seen the need to convert its vast resources to support the new economy. It has remained stuck in the past. The implication to the economy is huge in the number of lost jobs that could have been created if NIPOST has been able to adapt.
The Royal Mail Group in the UK is a good example of what NIPOST could have become if it has learnt to adapt to the dynamics of the new economy. Despite, UK being at the cutting edge of technology with far superior internet and broadband penetration than Nigeria, the British postal services has not lost its relevance, delivering an estimated 84 million parcels everyday as it has converted its vast resources all over the country to support the e-commerce industry. The Royal Mail Group employs 150,000 workers earning about £5.4 billion annually and delivers mails and parcels to more than 29 million UK homes daily, according to information on the Group’s website.
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Another sector that should ordinary be huge in the Nigerian economy but remain stuck in the past is the water supply sector. It is sad that the government does not even seems to realise that this is a sector that can generate jobs and income for millions of employed Nigerians if made to work. The sector’s contribution to GDP has increased insignificantly from 0.14 percent in 2008 to 0.15 percent at the end of 2012. This is less than a quarter of 1 percent. All over the country, less than 10 percent of houses can boast of having access to piped water into their homes. In fact, the best performing Nigerian state in terms of piped water flowing directly into homes is Abuja, where an average of 17.5 percent of the population is served by piped water flowing into their homes. Even highly urbanised Lagos has just 5.5 percent of its residents served by piped water into their homes. Most Nigerians get their water from streams, dug out wells and bore-holes in their compounds.
The essential nature of water and high cost of production mean that only the government can adequately provide it. However, it is a huge employer of labour in all parts of the developed world where water is adequately provided. The Nigerian government’s inability to provide water for its citizens means thousands of lost job opportunities.
The electricity sector has actually deteriorated in the last five year in terms of its contribution to the GDP. The sector’s contribution to GDP has dropped from 3.28 percent in 2008 to 2.88 percent at the end of 2012. The 2012 electricity sector’s contribution to GDP is what the telecommunications sector contribution was five years ago. So, why the contribution of the electricity sector has deteriorated in the last five years, that of telecommunications has increase from 2.85 percent of GDP in 2008 to 5.63 percent of GDP at the end of 2012.
Policy execution could be said to be the key difference in the fates of both the electricity and the telecommunication sectors. While the Electricity Reform Act passed in 2005 just gained traction in about 2009, the telecommunication sector on the other hand has experienced consistent reforms and regulation that has spurred its growth and made it one of the fastest growing sectors in the Nigerian economy today. It is generally agreed that if Nigeria could get its electricity sector right, it could act as the needed catalyst to grow other sectors of the economy.
Unlike other sectors, a modern economy depends very significantly on its electricity sector to perform to its full potential. For example, the World Bank estimates that cost of production is at least 30 percent higher in Nigeria than most comparable economies due to poor electricity supply. Electricity supply actually has critical social and economic implications. For example, students are not able to study as hard as they should if they have no access to electricity or if electricity supply is inconsistent. This basically means students are not being allowed to tap into their full learning potential, which may be a factor in the alleged drop in quality of graduates in the country. Electricity is so critical to the performance of a modern economy that it is surprising that the Nigerian government has not deem it fit to declare a state of emergency on the sector and see that results are achieved within the shortest possible time.
It is our own estimates that if the government can get the three critical sectors of electricity, water, and postal services growing again, it could halve both graduate and non-graduate unemployment in the next five years. There are clear ongoing reforms to reposition the electricity sector, though at a slower rate than most of us would want, but there are not clear attempts to ensure that the public water and postal services sector are reformed. The government needs to move in that direction too.
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Editor, BusinessDay Research Unit
