Low investments, fuel crisis, decline in power output pull down labour productivity

Poor investments on the part of Federal government, unabated petroleum crisis and sharp drop in electricity generation are major reasons Nigeria has witnessed low labour productivity in recent times, according to recent report from the National Bureau of Statistics (NBS).

In its latest report, Nigeria’s labour productivity suffered 8 percent decline to N706.95 in the fourth quarter of 2015 as against N768.42 in the previous quarter, somewhat justifying the significant drop in GDP in Q4.

The low labour productivity shows another major decline in Nigeria’s economic indices as seen in recent numbers released by the statistics office.

Nigerian economy slowed 0.73 percent points to 2.11 percent in the last quarter of 2015 from levels recorded in the preceding quarter as all sectors (oil and non-oil) which contribute to the nation’s GDP slowed apart from ‘Other Services’.

Specifically, labour productivity refers to the quantity of labour input required to produce a unit of output.

In Nigeria, although economic growth has been high and stable in recent years, constraints on productivity of labour and other factor inputs continues to put a drag on overall economic growth, according to the NBS.

“Coupled with high unemployment rate, the Nigerian economy faces a considerable threat to realising its full growth potential due to productivity challenges,” the NBS stated.

NBS noted in the report that while labour productivity rose from about N471.94 in 2011 to N718.14 in 2015, which represents a 52.5% increase in labour productivity over the 5-year period and a 12.2% over the last year, that is between 2014 and 2015, “In 2015, labour productivity has decreased to N706.95 in Q4 2015 from N768.42 in Q3 2015, N730.83 in Q2 2015 and N669.57 in Q1 2015. This represents a 5.8% rise between Q1 2015 and Q4 2015, and an 8.0% drop between Q3 2015 and Q4 2015.

“The decline in labour productivity in Q4 could be attributed to several factors, such as the prevalent petrol scarcity, low investment and government spending, and the decline in power generation during the quarter. A combination of these factors contributed to the lower utilisation of available labour capacity recorded during the quarter.

The report also indicated that the number of working hours increased over the quarter by 15.9% and 6.6% increase in nominal GDP, compared to a 1.2% increase in working hours between Q2 and Q3 2015 and a similar level increase in nominal GDP of 6.4% between Q2 and Q3 2015.

“While there was a quarterly decline in labour productivity, it is worth noting that year on year, there was a 12.3% increase, which is the second highest year on year increase in labour productivity over the last 5 years”.