Nigerians are known to be hardworking and ambitious people. So, other nationals would be readily forgiven for saying a priori that Nigeria is a rich nation. However, the positive does not align with the normative.
According to the Global Competitiveness Index 4.0 2019 Rankings, Nigeria ranks 116th in the world, out of 140 countries, and 15th among African countries. That brings to the fore Nigeria’s level of productivity.
In the long-term, the Nigeria Competitiveness Index is projected to trend around 48.00 points in 2021 and 50.00 Points in 2022, according to our econometric models.
Productivity is a measure of the efficiency with which a country combines capital and labour to produce more with the same level of factor inputs.
It’s common to focus on labour productivity measured by output per person employed or output per person hour. A better measure of productivity growth is total factor productivity that takes into account changes in the amount of capital to use and also changes in the size of the labour force.
Productivity is an important determinant of living standards. It quantifies how an economy uses the resources it has available, by relating the quantity of inputs to output. As the adage goes, productivity isn’t everything, but in the long run it’s almost everything.
People may work hard and produce little. Hence, lower productivity will ultimately stagnate economic growth, which is arguably an albatross in Nigeria’s lot.
Higher productivity can lead to lower unit costs. These cost savings might be passed onto consumers in lower prices, encouraging higher demand, more output and an increase in employment.
It can also lead to improved competitiveness and trade performance. Productivity growth and lower unit costs are key determinants of the competitiveness of firms in global markets.
Higher productivity also comes with higher profits. Efficiency gains are a source of larger profits for companies, which might be re-invested to support the long-term growth of the business. Businesses can afford higher wages when their workers are more efficient. Also, if an economy can raise the rate of growth of productivity then the trend growth of national output can pick up.
Productivity improvements mean labour can be released from one industry and be made available for another. For example, rising efficiency in farming will increase production yields and provide more food either to export or to supply a growing urban population.
If the size of the economy is bigger, higher wages will boost consumption, generate more tax revenue to pay for public goods and perhaps give freedom for tax cuts on people and businesses.
In most cases national productivity is propelled by deliberate policy by national governments. The effectiveness of national efforts to improve productivity depends largely on the extent to which the most important social forces can be combined and integrated. These forces include: government and its institutional mechanisms, employers and managers represented by their professional associations, workers, normally represented by trade unions and other non-governmental organisations.
All these forces play (or should play) a major role in productivity drives at the national level through: direct intervention and participation in industry and economic processes, coordinating the activities of all the major social groups in productivity promotion, improving the quality of both workers and managers through productivity-oriented professional education and training and raising public awareness and productivity consciousness.
The role of government in productivity growth
Governments play a vital role in national economic growth and productivity. However, it is important to stress that the actual role played by a government often does not correspond to the real needs. There are many examples where it is necessary to increase direct government intervention in the economy. But there are also many cases of more mature economies where direct government intervention is less necessary and such indirect methods as economic and fiscal policy, strategic planning, legislation and education and training are more effective. Nigeria arguably fits in that bracket.
The important role of government is to provide the necessary infrastructure and to create opportunities for growth. Infrastructure covers education and training, health, housing, power, water, transport, communications, research and development, and the availability of technology. For example, without tremendous government investment in research and development, the growth of agriculture, highways, airports, water and railway systems would never have been possible in many countries. These systems provide infrastructure to practically all other industries and, therefore, without their growth, the productivity increases of most industries would have been greatly hampered.