Poor Infrastructure blamed as Nigeria ranks 14th in Africa Competitiveness Index report

Key highlight

• Nigeria ranked 114th in the world and 14th among African countries in the Global Competitiveness Index Rankings update of 2022, revealing the country’s low level of productivity.
• Low productivity leads to economic stagnation, while higher productivity leads to lower unit costs, improved competitiveness, trade performance, and higher profits.
• Governments play a vital role in national economic growth and productivity, particularly in providing necessary infrastructure, education and training, and technology.
• Nigeria’s poor infrastructure, including inadequate electricity, a lack of good roads and rail systems, and limited broadband and ICT penetration, is a major albatross to higher productivity levels, according to experts.

Nigeria, known for its hardworking and ambitious people, has been ranked 114th in the world, out of 140 countries, and 14th among African countries in the Global Competitiveness Index Rankings update of 2022.

This ranking sheds light on Nigeria’s level of productivity, which is measured by the efficiency with which the country combines capital and labour to produce more with the same level of factor inputs.

Nigeria’s productivity is lower compared to South Africa, Morocco, Seychelles, Tunisia, Algeria, Botswana, Namibia, Kenya, Rwanda, Ghana, Senegal, and Uganda, which top Nigeria in the 2022 Competitive Index.

Productivity is an essential determinant of living standards, and low productivity ultimately leads to economic stagnation, which is Nigeria’s current state. Conversely, higher productivity leads to lower unit costs, which can encourage higher demand, more output, and an increase in employment.

Additionally, productivity growth and lower unit costs are crucial determinants of the competitiveness of firms in global markets, leading to higher profits and business growth.

Benefits of high productivity

Productivity is an important determinant of living standards. It quantifies how an economy uses the resources it has available, by relating the number 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 at 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 labor can be released from one industry and be made available for another.

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, and workers, normally represented by trade unions and other non-governmental organisations.

That is in line with what Dr Mathew Enabulele, a social affairs analyst told Nairametrics. He said the level of productivity of a nation is steered by the policies and programs of the government. He added that includes educational programs and the right environment to thrive.

“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 product promotion, improving the quality of both workers and managers through productivity-oriented professional education and training and raising public awareness and productivity consciousness,” he said.

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 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.

Experts’ take

Highlighting the role of government, Dr Nelson Nkwor, a financial economist at Ebonyi State University stressed that the important role of government is to provide the necessary infrastructure and to create opportunities for growth.

He said infrastructure covers education and training, health, housing, power, water, transport, communications, research and development, and the availability of technology. He added that 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.

Affirming the role of government in a higher level of productivity in Nigeria, the chief executive of the Center for the Promotion of Private Enterprise, Dr Muda Yusuf said a major albatross to a higher level of productivity in Nigeria is poor infrastructure.

He said good roads, a functioning rail system, adequate electricity and strong broadband and ICT penetration are all sine qua non to higher productivity levels.

Also, Dr Yusuf noted that improved skills in Nigeria’s workforce would also make Nigeria more competitive. He stated that Nigeria’s level of education and human capital development compared to many countries in Africa, Nigeria is not doing very well.

He noted that Nigeria has the highest number of out-of-school children in the world, adding that in a few years, the out-of-school children will become adults and become a nuisance to society.

He stressed that the quality of human capital affects productivity in an economy. He also noted that the government needs to invest in technology to foster e-governance, instead of pushing files about the ministries, which slows processes down.