• Tuesday, July 23, 2024
businessday logo


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.

Apart from poverty and inflation, Nigeria’s unemployment rate rose for the second time in the third quarter of last year since the National Bureau of Statistics (NBS) adopted a new methodology for the country’s labour force.

The survey said the unemployment rate rose to 5.0 percent from 4.2 percent in Q2. It stood at 4.1 percent in Q1, down from 5.3 percent in Q4 of 2022.

The share of employed persons in informal employment was 92.3 percent in Q3, a reduction of 0.4 percent when compared to 92.7 percent in the previous quarter.

A public Affairs analyst who wants to be known as Akingbohungbe, said in a democratic government like Nigeria, the dividend of democracy needs to be distributed to the people.

“There is less productivity in Nigeria as a nation because the majority of Nigerians are not well-equipped to benefit from the government. Only a select few are being enriched by the government,” he said.

He added that no nation grows beyond the labour (working) capacity of the people and government. “For us to experience growth and development we must invest heavily in training and retraining our labour force.”

Bismarck Rewane, an economist and CEO of Financial Derivatives Ltd, said the government needs to invest in ventures that can help improve labour productivity and unlock the economy.

“Nigeria’s labour productivity is negative, the things the government invests in must have a way of unlocking and accurately de-shackling Nigeria’s constrained economic output,” Rewane said.

In 2023, the economy grew at the slowest pace in three years as its Gross Domestic Product growth fell to 2.74 percent from 3.10 percent in 2022, according to the NBS.

The country’s struggling economy slowed the growth of major job-creating sectors of the economy such as agriculture, manufacturing, trade, construction and transportation.

According to the NBS GDP report, the agric sector slowed to 1.88 percent last year from 2.13 percent in 2022. The manufacturing sector grew by 1.40 percent, down from 2.45 percent; while trade’s growth slowed to 1.66 percent from 5.13 percent.

The growth of the construction sector also slowed to 3.57 percent from 4.54 percent, and transportation and storage contracted to 30.17 percent as against 15.20 percent.

High inflationary pressures shrunk business activity four times far in 2023.

“The job-creating capacity of the informal sector is declining as the demand for their goods is dropping or their businesses is somewhat constrained,” Israel Odubola, a Lagos-based research economist, said.

But Jennifer Oyelade, director of Transquisite Consulting, said Nigerians are becoming more productive to survive.

“They have no choice but to think outside the box in terms of adding additional revenue to be able to survive. They are being more strategic about the work that they do and trying to leverage on the skills whether technical or skills of passion to generate another stream of income,” she added.

Taiwo Oyedele, chairman of the Presidential Committee on Fiscal Policy and Tax Reforms in a recent event, said 81 percent of Nigerians are not contributing to any productive sector of the economy.

“About 81 percent of people in employment in Nigeria are engaged in a non-productive sector of the economy. They are doing things that do not add value in the real sense of the world.

Oyedele noted that Nigeria has the same unemployment rate as the United Kingdom. Meanwhile, Nigeria still has over 133 million people living in multidimensional poverty.

The poor macroeconomic conditions have also pushed many young people to seek opportunities to travel abroad, fuelling a massive brain drain that is hurting the labour quality in the country.

According to the British government, the number of Nigerians given sponsored study or student visas rose by 768.7 percent to 59,053 in 2022 from 6,798 in 2019.

The number of new study permits issued by Canada to Nigeria increased by 17.8 percent to 16,195 as of December 31, 2022, the highest on record, from 13,745 in the same period of 2021.

Exit mobile version