Economic Restructuring and the Power of ProductivityByVictor E. Dike
Nigeria has gone through political and economic trying times. Presently, there are so many news stories in the society that it has become difficult to discern what to write on. The list is daunting: the Ladoja impeachment brouhaha, Governor Dariye and EFCC, the “war” in the Niger Delta, the witches in the Witch House of Assembly and the on-going economic restructuring. After browsing through the list this author concludes that the economic restructuring program deserves an in-depth analysis because of its profound impact on the health of the nation. Nations with higher productivity could overcome to a greater extent whatever barriers (social/political) “have constrained productivity.”1 The present preoccupation with the dictatorial tendencies of Chief Obasanjo has obscured the criminal process of selling off public corporation to a few rich and well-connected gods in the society and the escalation of unemployment, poverty and inflation in the society. The people should cease further debates on the nation’s shame and sham democracy and concentrate on improving the productivity of the economy to rescue the poor and starving citizens from the claws of poverty.
Productivity is ‘an economic indicator that measures’ “the output of goods and services in the economy or in an industry from the effective use of various inputs (such as skilled workers, capital equipment, managerial know-how, technological innovation, and entrepreneurial activity) used to produce those goods and services.”2 It is “used to measure the efficiency of production, and is most often expressed as a ratio of outputs over inputs.”3 thus labor “…productivity is the amount of output produced by a worker with one hour of labor input.”4,5 And because of the decades of institutional decay, obsolete tools, deficient leadership and poor labor-relation (among others) productivity in the society has been awfully low. The process of converting input into goods and services will remain inefficient and expensive without resolving the deficiencies in the system and unemployment, poverty and inflation will persist. Efficient management of the process, as experts say, is the key to survival of any nation or organization.
Nigerians had expected that the present sociopolitical and economic restructuring would improve their living standard, but it has instead created more miseries because many people have lost their livelihood. The reforms have not yet improved productivity and competition and health of the nation because the supply of petroleum products and electricity is still substandard and this spurs inflation.
From 13% in 1999 inflation is presently above 20%, because a 50-kg bag of rice that sold for N1, 200 in 1999 now sells for more than N6, 000” and a liter of fuel that sold for N20 in 1999 is now N65.6,7,8 The rise in inflation is attributed to the weak economy, low productivity (scarcity of goods and services) and excess liquidity, etc. The CBN in its Economic Report (August 2005) notes that aggregate money supply grew by 39.8% during the period, as against the targeted growth of 15% for Jan 2005. If the conditions are not resolved inflation will continue to erode the purchasing power of the citizens, and worsening the poverty profile of the people. A well-focused Open Market Operation (OMO), among other instruments, could mop up the excess liquidity in the society. No nation can fight poverty when the people are unemployed; economic prosperity without employment and poverty reduction is a sham. Grave threats to Nigeria’s peace and stability lies in the people beset by unemployment and absolute poverty. The United Nations Development Program (2004) report indicates that 70% of the population is poor (a figure the government disputes) and the 2005 report shows that standard of living is fast deteriorating. Even at the 57.8% of poverty, which the government has accepted, the level of poverty in Nigeria is beyond pardon, given the resources available in the society.
Although unemployment appears difficult to measure in the society, the United Nations Development Program (2004b) put Nigeria’s unemployment figure at 15%. But some independent observers believe that the nation’s unemployment figure is around 20-30% in 2005. This is partly because Nigeria is yet to move away from the reform programs to rebuilding the economy.9 But how would a nation increase its productivity without the necessary conditions? The economic restructuring exercise has not yet improved the living conditions of the people at the grassroots; it has only increased the wealth of the already rich few with unlimited access to the nation’s wallet.
Despite the huge sum of money it makes from oil Nigeria is still in a dismal economic condition. It was recently reported that Nigeria earned about “N4.7 trillion from the sale of oil” in the ‘first eleven months of 2005.’10 Why is the economy of Nigeria down, if its income is up? Corruption and mismanagement (reckless government expenditure and inefficient use of resources), misplacement of priorities and institutions that have been unable to regulate the actions of the leaders, the government and their agents. As an American economist, Simon Kuznets, notes the “Welfare of a nation” can “scarcely be inferred from a measurement of [its] national income….”11 but how well the income is managed.
The witches in the Witch House are claiming that the Nigerian economy is moving on the right track, yet inflation, unemployment, and poverty are skyrocketing. This not a gross (mis) measurement of prosperity! The politicians are out of touch with reality and the public should not entrust the health of the economy in their hands. They spend most of their time plotting to eliminate their political opponents (or their family members) and looting the treasury instead of planning on how to grow the economy. And their love for “hard currency” and foreign real estate has put the economy on a “death row.” Chief Obasanjo cannot any longer pretend that the economy is doing marvelously well. The level of poverty in the society is beginning to baffle him, as he wonders “what business has a nation [Nigeria] that had not fought a war in recent time or suffered a major disaster with such abysmal level of poverty?”12 The welfare of the citizens (and not plotting for a third-term and complaining about Nigeria’s economic problems) should be a primary concern of the present civilian government.
Statistics show that the on going “banking consolidation” will cost many jobs. Economic hardship could worsen if the depositors whose monies are stuck in the banks that could not scale through the exercise are not refunded their deposits soon. It must be noted here that the Governor of Central Bank, Charles Soludo, who has done a superb job in strengthening the financial sector. But this is a small bright spot in the entire mess. He should work closely with the NDIC to ensure that depositors get their money back when the banks are finally liquidated. As Charles Soludo has demonstrated it takes a courageous and committed leadership to undertake a propitious socioeconomic re-engineering for sustainable economic growth and development.
However, economic restructuring alone may not resolve Nigeria’s socioeconomic woes. This writer is not discounting the importance of the exercise, but a holistic approach should be adopted to purify the entire system. Many Nigerians want to be rich and own fleet of expensive cars and luxury homes but majority of them lacks wealth-creation mentality or innovative ideas.13 How did the “rich Nigerians” become “very, very rich” without creating wealth? But most of the rich individuals in many organized societies have innovative ideas and their businesses are known to create employment. Thus many Nigerians need some form of attitude or psychological restructuring (mentality adjustment) because many of them do not seem to understand that nations populated by individuals with innovative ideas (or whose system rewards innovative ideas) are higher productivity nations that create employment for its citizens. For Nigeria to retain the gains made from the reforms, the exercise should encompass restructuring the entire system for better value system and management, imbibe “a culture of basic truth” and integrity, hard work and honesty in the society.14 And the workers should be properly motivated for higher productivity. Employee motivation, which “is the art of stimulating someone to action by creating a safe environment….”15 How would the employers of labor improve the workers’ productivity with an unappreciated population? There should also be transparency and accountability in governance (both in public and private sector) - good governance requires people of probity.
Thus a well-managed and properly regulated reform (with broad citizen participation) could mean a brighter future for the society. Selling off public corporations to create a few super-rich that could create private monopoly and stifle competition would not resolve Nigeria’s socioeconomic predicaments. Sadly, the witches in Witch House have been missing and inaction in the exercise. It is though not too late for them to put in place good policies to grow the economy and improve the “economic welfare” of the citizens. This is possible through higher productivity (raise efficiency), strengthening the social institutions, promoting equity and fairness, and maintaining peace and stability in the polity. Experts agree that “to improve the economic welfare of individuals, countries must increase their productivity, primarily by encouraging economic competition.”16
The establishments of social security system and unemployment benefits are appropriate motivational employment packages that could boost workers morale and productivity. A Nigerian worker could work all his or her adult life without coming close to achieving their life goals. The situation is worse today where an average worker cannot meet the basic needs of the family (food, clothing, water, decent shelter and health care). Yet the society expects them to be honest, productive and law-abiding. The lack of basic needs impact negatively on workers morale and productivity; and a healthy worker, ceteris paribus, is a more productive worker. This is a way to successfully alleviate poverty.
The level of poverty and ignorance in Nigeria seems to have increased the demand for used (Tokumbo) goods and services in the society. This includes recycling the old and incompetent rouges as political leadership, cars, clothing, computers, and airplanes. The poverty situation is also responsible for the high rate of armed robbery, fraud, chaos and human trafficking (particularly girls) for prostitution. Is this not disgusting?
As part of the prescribed holistic approach to socioeconomic restructuring, skills training, which has been neglected in the process, should be an integral part of the restructuring program. The displaced workers need to acquire new and employable skills for career change, without which the exercise will create more unemployment, poverty and social crisis. Thus without utilizing “the power of productivity”17 no nation can satisfy the needs of its citizens. Better payment system, information technological (access to information), real competition among business organizations and provision of social amenities are among the important areas that deserve serious attention. Competition plays an important role in productivity because real competition leads to the adoption of higher productivity practices (stimulates innovation). With genuine competition higher productive business enterprises will replace the less productive ones (and the displaced workers will retrain for other job openings). But distortion in competition allows unproductive enterprises to clog the wheel and unemployment and poverty persists. Thus “to reduce barriers to competition, policymakers must stand up to … special interests and focus more on the welfare of consumers”18 by instituting appropriate policies and enforceable laws.
The workers who keep the industrial wheels spinning (produce the goods and services the society needs) should be trained and treated fairly. Increased funding for education (human development and research and development) and investment in health services is necessary to complement to economic reform programs. This would enhance efficiency and productivity of the workers and enable the society compete effectively in the global market. It has been noted that “the only enduring competitive advantage [in the global economy] is a high-quality, well-motivated workforce willing to work together as a team to increase productivity.”19
Corporate employee training is thus important because one of the most efficient and effective methods of improving workers productivity in simply to train them in the skills they need to perform their job duties. Productivity in any organization could improve if the workers have confidence that the management would always do the right thing because this could boost employees’ morale and with resultant productivity increase. But poor labor relations and reward system in the society, among others, have negatively impacted workers morale, productivity and the economic health of the nation. The glaring deficiencies in the system retard economic growth, capacity utilization and thus productivity.
In advanced economies, highly skilled workers are the main tools for economic growth and social progress and their demands are serious considered avoiding the destructive and unnecessary labor strike actions. The economic restructuring process will not be deemed successful without creating a system whereby market forces regulate the prices of goods and services in the society (prices of goods and services should vary according to the economic conditions of a locality).
The non-oil sector of the economy should be improved and expanded with efficient and effective transportation system (good network of roads, waterways (ship, etc), railways, air transportation and electronic commerce facilities – the Internet, etc). This would reduce the costs of distribution of goods and services and effectively connect the society to the global market. Thus attention should be re-directed to the neglected agricultural sector to grow enough food and create employment for the ever-growing population. The importance of food security cannot be overemphasized. And local and small-scale farmers should be encouraged with the necessary agricultural inputs (seeds, fertilizers, modern machinery, access to credit facilities, etc). In addition, small scale and medium sized entrepreneurs should be encouraged to set up agricultural produce processing plants and storage facilities with good financial assistance, etc. Small and medium sized enterprises are known to create more employment opportunities in advanced economies and one wonders why Nigeria should be any different. Good quality control system for food safety and standards should be established and properly monitored for compliance.
Policy inconsistency is a bane of Nigeria and to sustain any gains made in the on -going reforms the government should adopt policy consistency because “frequent policy changes hinder growth” and tarnishes the credibility of any government. The security situation and legal environment in the society should be improved to attract investment from local and foreign businesses and individuals. Petty party politics should be removed from the process; sadly, politics still determines the airworthiness of the flying coffins (airplane) in the society.
In advanced democracies bad economy (rising unemployment and inflation) is a worry for serious politicians who depend on the people for votes. But the witches in the Witch House do not care about the welfare of the people because votes do not seem count. There is nothing to differentiate the plethora of political parties from one another (they are corrupt and do not operate on any ideological compass). Sadly, the party that kills more of its opponents and steals more votes wins (and becomes the most powerful) and could remain in power forever (power intoxicates, and absolute power intoxicates absolutely) because political opposition is virtually dead. Consequently, nothing is done constitutionally in Nigerian politics. The PDP got into power through fraud and intimidation and has since been leading by deception. The party has been courting disaster because its members are lawless (stooping to unethical political practices) and overheating the polity. And Nigeria is perched on the threshold of political crisis with all the political brouhaha and corruption in the society.
Finally, for the sociopolitical and economic restructuring to be adjudged successful by this writer the present defective political system that corrupts should be replaced with a new system that is tailored toward strengthening the social institutions (rule of law and security). The reforms should improve the skills and knowledge of the citizens for development of modern technology and products, build ‘the culture of basic truth,’ honesty and hard work for economic growth and prosperity. And the new system should empower the people to hold the political witches accountable for their actions. Thus, creating an environment that would permit proper utilization of “the power of productivity” the society will produce more goods and services and create employment and successfully alleviate poverty and Nigeria’s past glory could be restored.
Notes and References
1. William W. Lewis: The Power of Productivity: Wealth, Poverty, and the Threat to Global Stability (University of Chicago Press, April 2004). 2. Productivity: see http://mvp.cfee.org/en/glossary.html 3. Productivity: see http://www.populareconomics.org/globalization/html%20/Glossary.html Cobb, 4. Victor E. Dike: “Reward system and labour productivity;” Daily Independent, May 15, 2003 5. ------------------ “Toward labour productivity;” Daily Independent, May 22, 2003 6. The Punch: “Oil windfall and quality of life” January 19, 2006. 7. Vanguard: “Food stuffs price climbs higher,” January 19, 2006 8. Victor E. Dike: “Taming Inflation in Nigeria” Daily Champion (Sunday), Jan 8, 2006 9. ------------------ Democracy and Political Life in Nigeria (Second Edition, forthcoming). 10. The Punch (Ibid.) 11. Ted Halstead Clifford and Jonathan Rowe: “If the GDP is Up, Why is America down?” (This article cites Simon Kuznets), Atlantic Monthly, October 1995 12. Nigerian-Tribune (Opinion): (Article on Nigeria’s economy and welfare of the people), Jan 17, 2006 13. Uju Onyechere: “Wealth without a wealth mentality” Financial Standard: accessed Jan 22, 2006 14. Victor E. Dike: “Building a Culture of Basic Truth;” www.nigeriavillagesquare.com, January 2006 15 (17). Patrick J. Donadio: "Capturing the Principles of Motivation." Business Credit, March 1992, p.40 16. William W. Lewis (Ibid.) 17. (Ibid.) 18. William W. Lewis (Ibid.) 19. Robert J. Greene: "A '90 Model for Performance Management." HR Magazine, April 1991, pp.62-63.
Victor E. DikeCEO, Center for Social Justice and Human Development (CSJHD) Sacramento, California, is the author of Democracy and Political Life in Nigeria (Second Edition, Forthcoming). |