Rising cost of living dampens Nigerians' weak productivity

The rising cost of living in Nigeria is making a bad situation worse as it is negatively impacting the workers’ productivity in Africa’s most populous nation.

Nigeria, home to the largest youth population globally, has experienced two recessions in the past eight years that have weakened consumers’ purchasing power and thrown millions into poverty.

According to the International Labour Organisation, labour productivity is an important economic indicator that is closely linked to economic growth, competitiveness, and living standards within an economy.

Nigeria’s labour productivity in terms of GDP per hour worked was $7 last year, lower than its African peers such as Gabon ($26), Botswana ($21) South Africa ($21), Egypt ($20) and Algeria ($19).

“Nigerians are resilient people. However, environmental and economic challenges impact our productivity. In the past year, the cost of living and electricity has skyrocketed, affecting overall well-being and ability to work,” Ogugua Belonwu, founder and chief executive officer at MyJobMag, said.

He said Nigerian workers striving to make ends meet are often forced to take on multiple jobs, which affects their ability to deliver on both jobs.

“The resulting economic uncertainties in the country not only disrupt their peace of mind but also significantly reduce their productivity. As people begin to lose faith in the country, we have people working solely to raise money to travel to other countries, which negatively affects their work mindset.”

Femi Egbesola, national president of the Association of Small Business Owners of Nigeria, said, “The productivity of the Nigerians in the business space and Nigerians in their personal space as citizens have dropped considerably. For productivity, you need some indices in place to be well productive which enables productivity.”

He said one of such indices is an enabling environment. “We have myriads of challenges and they are coming back-to-back from removal of petrol subsidy to issue of foreign exchange, high inflation, increase in interest rate electricity tariff and introduction of new taxes.”

Egbesola added that the challenges are reflecting on productivity leading to businesses shutting down from small and medium, to large ones.

Temitope Omosuyi, investment strategy manager at Afrinvest Limited, said Nigerians are typically not very productive as the labour force daily contends with inadequate power supply, suboptimal internet access, insecurity, and macroeconomic instability.

“This consistently impairs their living standard and, in turn, their motivation to deliver the highest productivity in terms of quality and quantity. It reflects Nigeria’s unimpressive GDP growth and an extremely low GDP per hour worked (productivity) of $7.0 compared to a global average of $26 in 2023,” he added.

A recent productivity index by Penn World Table (PWT), a set of national accounts data developed by scholars at the University of California, shows that Nigeria’s population is the fourth least productive country in Africa.

The data showed Nigeria ranked lower compared to South Africa, Egypt, Kenya, Morocco, Algeria, Ethiopia, Ghana, Tanzania among others in the ranking of productive populations in Africa.

The PWT report which utilises the Index of Human Capital per person, a measure of the knowledge, skills, and experience possessed by a country’s workforce, to assess the productivity levels of different countries, showed South Africa had the highest human capital index score of 2.9 percent while Egypt and Mauritius were close behind with scores of 2.67 percent and 2.63 percent respectively.

Ghana, Algeria and Kenya also scored 2.53 percent, 2.38 percent and 2.35 percent respectively, while Nigeria, Morocco, Tanzania and Ethiopia had the least scores with 1.97 percent, 1.94 percent, 1.72 percent, and 1.46 percent respectively.

“Productivity has reduced because of many factors like time and talent. Workers deserve some praise despite the tough business environment, they are not collapsing but still driving economic growth. That reduced level is still a lot that they have played into the economy,” Olamide Adeyeye, a Lagos-based human development researcher, said.

Muda Yusuf, chief operating officer of the Centre for the Promotion of Private Enterprise, said the real income of people has dropped drastically making them poorer.

“When people are in poverty, it will affect productivity, nutrition, health and emotions. All these things have a way of impacting productivity on employees and people in business.”

Inflation rate in Nigeria has accelerated to a record high, largely on the back of federal government reforms, including the removal of petrol subsidy and naira devaluation.

Data from the National Bureau of Statistics shows that the headline inflation quickened for the 15th straight time to 33.20 percent in March, up from 31.70 percent in February

Food inflation, which constitutes more than 50 percent of headline inflation, also increased to 40.01 percent from 37.92 percent.

Rising inflation and sluggish growth in one of Africa’s biggest economies increased the number of poor people to 104 million in 2023 from 89.8 million at the start of the year, according to the World Bank.