Chancellor Philip
Hammond of the Bank of England in a speech few months back in the British House
of Commons, said that the productivity question in relation to national economy
is the one challenge that the G7 countries are still grappling with, but with
no silver lining on the horizon. This is a rare admission by a ranking official
of a G7 country; and it pretty much reflects our consistently expressed view
that since the second half of the twentieth century, productivity measurement
has become increasingly much more complex than can be effectively captured by
conventional out/input financial ratios. Industrial production in a highly
competitive global market that is not necessarily guaranteed by military might
has compelled a new manufacturing thinking, wherein high quality products are
cheaply churned out. The concept is called manufacturing productivity.
Manufacturing productivity is an overarching concept,
starting from the choice of raw materials, to products’ design specifications,
production personnel, production plant locations, through to the selection of
manufacturing technologies. The concept was pioneered by the East; which is one
of the plausible reasons its intricacies as yet seemingly elude the industrial
West. African economic planners, who are wont to looking to Europe and North
America for solutions to their myriad of problems would, therefore, serve their
national interests best by looking within their respective countries for
solutions to productivity challenges. The following subsections provide brief
explanations for our recommendation.
STRUCTURAL ADJUSTMENTS
PROGRAMMES – SAP
It was not a mere coincidence that the International Monetary
Fund (IMF) and the World Bank (WB) looked to Structural Adjustment Programmes
as standard prescriptions for developing Third World countries, in the last
quarter of the Twentieth century. Those prescriptions were the imperative of a
new global reality imposed by the emerging Eastern countries: the reality that
Western countries’ Outposts needed fundamental structural adjustments to enable
the mother-countries to meet the challenges of a new world order. And as though
advertising the point that the would-be restructuring countries are not the
primary beneficiaries of such prescriptions, life-threatening pills like
massive personnel retrenchments (sans safety nets), and massive national
currency devaluations were high on the prescription lists. It is therefore
small wonder that not a single country in the world has attained full economic
health following the Breton Woods Institutions’ infamous Structural Adjustment Programmes.
NIGERIA’S STRUCTURAL
ADJUSTMENT
Details of Nigeria’s 1986 cataclysmic experiment with
IMF Structural Adjustment Programme cannot bear recounting in this brief piece,
but it suffices to state that Nigeria’s essentially import-dependent economy
has now been significantly undermined by massive devaluations of her national
currency, thus reversing the country’s industrial and socio-economic
infrastructural trajectory. Today, 2019, Nigeria is far more dependent (imports
over 80% of her energy needs!) on outsourced inputs for her fledgling manufacturing
sector than in her pre-1986 years. Consequently, Nigeria is now presented with
a double jeopardy whereby both her import volume and unit cost of import
literally increases in leaps and bounds, in a regime of crippling debt.
The above scenario is clearly not sustainable. At the
time of writing this piece the USD exchanged for an average of 360Naira. And
the Manufacturers Association of Nigeria (MAN) has expectedly made something of
a sing-song of the fact that the prevailing USD/Naira exchange rate and
interest rates regime cannot stabilize, much-less grow the local economy.
DEEPER
IMPLICATIONS OF MASSIVE NAIRA DEVALUATIONS
It is no longer news to state that
massive looting of Nigeria’s accruable revenues has been going on for a better
part of forty years; the looted foreign revenues, in the light of massive Naira
devaluations, have multiple hemorrhaging effects on Nigeria’s financial
fortunes as such looters become richer in inverse proportions while competing
with corporate Nigeria in a common international financial market!!! This irony
provides a hint as to why Nigeria’s financial services sector could declare
run-away profits at a time her manufacturing (real) sector is scaling down
production due to dwindling capacity utilization. It will certainly be of great
interest to see how Nigeria’s ongoing Economic
Recovery and Growth Plan would eventually address this challenge,
particularly as Nigeria now desperately needs her looted funds to finance a
trillion-USD infrastructural deficit.
RECOVERING
LOOTED FUNDS
Having regard to the complex nature of
uncovering and recovering looted foreign funds, we are persuaded that moral
persuasion would yield quicker and higher returns than legal coercion. This is
all the more so because a larger junk of these funds are widely suspected to be
held by some of the biggest names in Nigeria. Therefore, we should like to
further recommend that the federal government appeals directly to the patriotic
conscience of these top Nigerians, possibly with the subtle threat that a steep
upward review of the Naira value is imminent. (part of the attraction for
holding huge foreign currencies lay in their capacity to earn surplus Naira in
the parallel market – see an earlier article: Naira cannot appreciate under market forces)
PRODUCTIVITY DESK
For the avoidance of ambiguity, it needs
to be emphasized that neither currency manipulation nor fiddling with bank
interest rates can solve Nigeria’s productivity challenges; therefore, in
keeping with current best practice elsewhere, the federal government should
promptly establish a world-class productivity desk in the presidency, pursuant
of productivity excellence.
Afam
Nkemdiche is an engineering
consultant; June, 2019
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