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It’s All About Buying And Selling

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By ALEX OTTI

It would not be difficult to understand why as an Igbo man, I am writing about buying and selling. That is the vocation of majority of my people. Some people deride the trader by making uncomplimentary comments about buying and selling. Well, today, I am going to demonstrate that everything in life is actually about buying and selling. The inspiration to write this piece came from a discussion I had recently with a driver known as Eddy. He was assigned to me by my host in the US to pick up me from the airport and handle all my movements. Somehow, on Day Two of my trip, we had a conversation about his experience when he visited his home in Imo State during the last yuletide.
He had led a group of young people, several years ago before he travelled out to Russia from where he made his way into the US. He has been ‘abroad’ now for over 10 years and was very excited to come home for the first time in December 2016. He was glad to attend the end of year get together of the group he had led, while in Nigeria. Many of the members he left behind were present at the event and of course there were also many new members. Eddy had a message to share with them. He needed to discourage those who would give anything up to travel abroad like he did, to perish the thought. He explained that with his first degree obtained from one of the federal universities in Nigeria, the best job he could find in the US was driving. He was honest enough to volunteer this information as he believed it would help to stop people from towing the migration path. How wrong he was! He was shocked to hear people attack him and one of them retorting “If America was that bad, why are you still there?” At the point when one of them was complaining about the absence of white collar jobs, he calmly advised that they should buy and sell something. Another one exploded “If I wanted to be a trader, then I didn’t have to go to school”. After so much argument, Eddy held his position that everything in life was about buying and selling and I cannot agree more.

Buying and selling is one of the earliest engagements of man. History records that buying and selling started over 150,000 years ago from the South West Asia during the stone ages. The mode of payment then was by barter in which two people exchanged physical goods using the principle of ‘double coincidence of wants’. This occurred when someone who needed a particular commodity met someone else who also needed what the other person had. Settlement mode has since then transformed from that crude method all the way to modern day currency and the bitcoin phenomenon is indication that payment (and therefore trading) is still evolving. The need for buying and selling is supported because of what is referred to in economics as “division of labour” and “specialisation”. Division of labour refers to the separation of a work process into a number of tasks, with each task performed by a separate person or group of persons. It is most often applied to systems of mass production and it is one of the basic organising principles of the assembly line.
According to Investopedia, “Specialisation is a method of production where a business, an area or an economy focuses on the production of a limited scope of products or services to gain greater degrees of productive efficiency within an overall system. Many countries, for example, specialise in producing the goods and services that are native to their part of the world, and they trade for other goods and services. This specialisation is therefore the basis of global trade”.

These basic principles of economics are fundamental to buying and selling. Because no one can possibly make everything he needs nor need everything he makes, he must buy some of the things he needs and sell some of the things he does not need. It is in selling the things that he does not need that he gets empowered to buy the things he needs. So, all production ends in the hands of consumers. In fact, production is said to be incomplete until the goods and services get to the hand of the consumer.

If you look at the oil exploration and production companies, you will find that all what they do is to produce oil and oil related products for use in houses, vehicles, power plants etc. If those products are not sold to consumers through different chains that will include exporters and importers, refineries and petrochemical plants, wholesalers and retailers, the oil companies would go out of business. The oil companies must also execute the buying function in order to produce. They must buy machinery and equipment, they must somehow acquire the land that bears the hydrocarbon. They also require skilled and unskilled labour in addition to capital to pay for all that needs to be bought. So, in reality, this very high profile engagement eventually gets distilled to buying and selling. Think of any other endeavour and you will discover that if it does not buy, it will not produce and without production, there would be nothing to sell and therefore, money will not be made. Government sells service to its people and in return, levies, tolls and taxes are paid to it to function. Doctors sell healthcare services to those that need them and in return get paid for them. The electricity company sells energy for which consumers pay bills. If this is understood, it becomes easy for people to find somewhere in the buying and selling universe to locate themselves.

Unemployment has become a recurrent decimal especially amongst the youth in Nigeria. This, unfortunately, is happening at a period when the youth population is increasing at an alarming proportion. There is still a big on-going debate about the veracity of the statistics officially acknowledged as it relates to unemployment. Prior to the National Bureau of Statistics (NBS) redefinition of unemployment in Nigeria in 2011, the recognised rate was in the region of 54% for Nigerians between the ages of 15 and 34 and 26% for the population as a whole. Indeed, since the harmonisation of the unemployment calculations with best global practices, half a decade ago, Nigeria’s official unemployment rate has risen from 7% in 2012 to about 14% by mid-2016.

But what is unemployment? Why has it been such a major concern for Nigerians and why have successive governments chosen to be casual about both its level and growth? Unemployment rate as defined by the NBS is ‘the total population divided into labour force (currently active) and non‐labour force (not currently active)’. The labour force component of the population covers all persons aged 15 to 64 years who are willing and able to work regardless of whether they have a job or not. The definition of unemployment therefore covers persons (aged 15–64) who during the reference period were currently available for work, actively seeking for work but were without work. What this means is that unemployment is that population of Nigerian citizens between the ages of 15 and 64 willing and able to work but cannot find jobs.

During Nigeria’s most recent spell of rising or fairly high international oil prices which occurred between 1999 and 2013; the issue of unemployment had always been subsumed under the easier and more convenient economic issues of gross domestic product (GDP), inflation and interest rates. These issues could be addressed without a sense of ‘personalisation’, as they were, somehow, seen as ‘technical’ and only obliquely referred to actual human beings and their families and livelihoods. In other words, discussion of ‘broad’ or what is usually called ‘macro’, economic issues without considering the politically-sensitive issue of job creation and its sustenance allowed various governments escape the socioeconomic subject of providing means of livelihood for citizens and their families.
Politicians simply dreaded discussing the unemployment issue as they have consistently been afraid of whipping up a major social backlash from Nigerians who, for the better part of two decades (1999-2016), have witnessed growth with little or no development of social and economic infrastructure. This, in actual fact, is what would see to it that citizens actively seeking employment could get one. The consequences may be as devastating as the carnage is pitiful. For example, Nigeria graduates about 3 million students from tertiary institutions annually but creates less than 120,000 new jobs over the same period. In fact, in the last year or so the economy lost a reported 4.6 million direct jobs (based on figures supplied by the NBS), if we assume that every person employed creates some level of secondary employment of at least one other person, the impact of the job loss between the years 2015 and 2016 is closer to 10 million or one in every ten employable adults.
The employment challenge is the unfortunate result of a combination of poor public policy responses to changing population demographics, the institutionalisation of a mono product economy, criminal neglect of failed and failing infrastructure (leading to the de-industrialisation of the economy) and narrow private sector engagement. The Nigerian economy is heavily tilted towards a single commodity – Oil and Gas, which accounts for over 70% of federal incomes and 95% of foreign exchange earnings. The skew has meant that once the oil sector sneezes the whole economy catches a cold. This explains why, when oil prices tumbled from $114 per barrel mid-June 2014 to $46 per barrel, by June 2016, the economy was primed for its first recession in twenty years. With this drop, jobs begun to disappear from all kinds of sectors ranging from Oil & Gas, Telecommunications, Banking & Finance and Manufacturing. Of particular concern has been the disappearance of employment in the Small and Medium Scale Enterprises sector (SMEs) where several jobs have been wiped out as the tougher macroeconomic environment has made it impossible for them to survive.

Even at that, some relatively resilient industries have been reeling from the pains of the business environment. We seem to have endorsed and accepted a man-made difficult environment that does not encourage business. Our approach had hitherto been to install road blocks and bottlenecks on otherwise smooth and easy processes. Registering businesses is a nightmare. Getting permits and licenses is a big deal. Clearing goods from our ports is a herculean task. Even paying money to government by way of taxes, tariffs and levies is like making a trip to hell. We must thank God for the Ease of Doing Business committee, set up by the Federal Government, which is now looking at how to dismantle these roadblocks and move the country from its present dismal ranking of No.169 out of 190 economies in the World Bank’s ease of doing business Index for 2016.
Again, lower real disposable income (the income consumers are left with after adjustment for inflation which is currently around 18% per annum) has translated in the shrinking of effective demand for goods and services by consumers thereby resulting in lower retail sales and worsening gross earnings for companies in a variety of businesses. Even the retail end of the ‘white’ petroleum products businesses in the country has seen sales volume collapse, as oil marketing firms admit that fuel pump sales of Premium Motor Spirit (PMS) or Petrol has fallen by as much as 30%. This situation is a reflection of both the rise in pump price and a sharp reduction in the use of the product by consumers. This is very interesting from an economic perspective, since it is known that demand for petrol is relatively ‘inelastic’ meaning that there are no near substitutes and that consumers cannot simply switch from the product to some lower-priced alternatives. This also means that even though price rises, the percentage fall in demand should be much lower than the percentage rise in price. All said and done, the economy is in no mood to create jobs in the short to medium term. This is because our challenges are structural in nature and solving them will require a lot of will and time. In the face of all these, population, especially the youth component, is not heading south; the universities are not churning out fewer graduates and they really shouldn’t; and jobs are still being lost.

It is, therefore, the responsibility of all of us to put on our thinking caps if we must reduce the size of the “reserve army of the unemployed”. The sad reality is that this challenge rests more on the unemployed themselves. No matter the rhetoric, the truth is that I have seen nothing in place, neither in the budget nor in government policies, that would eliminate unemployment or reduce it to the kind of level that countries with larger populations than us have today. India with its 1.34b people has an unemployment rate of 4.9% while China with about 1.4b people has an unemployment rate of 3.9%. Sometimes, these percentages seem to disguise the actual numbers. Our arguable 14% unemployment rate (a lot of people, including yours truly, believe it is understated) for a population of about 183m people means that close to 12m people are unemployed. In terms of youth unemployment which is put at 25%, it means that one out of every person aged between 15 and 34 has no job. Now if you add this to the underemployed population, you would be dealing with very serious numbers.
The raison d’être of this intervention is to sensitise us to the reality that as currently constituted, this system is not wired to produce the much required jobs in the near future. It is therefore time for the young ones to seriously think of providing jobs for themselves. A lot of them are very talented with so much energy. Roaming the streets looking for non-existent jobs will only weaken them and reduce their confidence. This may be the time to think of what you can do to add value to the society and therefore yourself. It does not have to be something very big. I met two sisters in Abuja recently and all they do is make fresh fruit juices and supply to workers in offices. Today, they no longer have enough fruit juices for offices as supermarkets now buy up everything that they produce. They have improved the product packaging and have succeeded in creating employment directly and indirectly. They have expanded the range of the juices they produce to include vegetable and other smoothies. This is just an example of hitherto unemployed people that started small. It is about buying and selling.
I therefore charge the young unemployed person not to wait for that non-existent dream job as that job may remain a pipe dream. Just look around you, sell something. But be sure that what you are selling either belongs to you or you bought it.

Otti is the former managing director and CEO of Diamond Bank.

 



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