Random thoughts on productivity

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