Wednesday, March 28, 2018 12:21 PM / Temitope Babalola, Proshare Research
Prelude: Holiday - Cutting Both Sides
It is important to debunk the myth around holidays, productivity and governance.
As the Q1 2018 comes to a close, Nigeria has already experienced four public holidays. Lagos State, the nation’s economic capital added to this with the declaration of a public holiday today Thursday 29th of March 2018, to mark the visit of the President.
This comes a day before the Easter holidays (Friday March 30 and Monday April 2) which technically delivers a three-day holiday stretching through the weekend.
For a State that is described as the business and commerce zone of the nation, the decision to add a state public holiday before two national holidays has attracted comments from stakeholders ranging from its effective impact on the states’ desire to grow its internally generated revenue (IGR) to the question of the ‘suddenness’ in the announcement – all tied to the productivity debate that existed before now.
Some economists consider public holidays as a depressing factor to productivity, eventually slowing the gross domestic product of any economy. The trickling down effect to revenue is that it slows down government indirect taxes. A good example is the lunar year celebration in China, which is always a drag to the nation’s 1st quarter growth.
Others believe that public holidays, well planned, offers a contributory effect to overall productivity with evidence cited from other climes where such has led to better life expectancy years, lower cost of social interventions in security, health services and education. Indeed, the argument has been made about the positive effects of holidays on overall productivity via the increase in consumption and capacity utilisation.
By and large, public holidays do cut both sides. How?
In festive periods like Easter, Salah and Christmas; there is a recorded increase in aggregate spending by households which favour the trade and manufacturing sector as demand is blistered.
Public holidays which are seasonal in nature tend to favour a service driven economy as a whole. It however requires planning and a bit of creative thinking to recognise seasonal volume spikes which holidays create by the manufacturers, commercial entities and the service industry.
It stands to reason therefore that the nature of an economy and the kind of public holiday it deploys; goes a long way to determine its effect on the sovereign GDP.
What, in this case, and based on the analysis above will be the cost of the public holiday on the Lagos Economy?
Lagos Economy: What is The Cost?
The Lagos economy is valued at N33.526 trillion with the service sector making up N31.87 trillion of the economy.
The state’s internally generated revenue (IGR) stands at N333.97 billion for 2017. Although the limited scope of a tiny chunk of the Lagos state civil service to the Lagos labour force going off-work, makes it hard to access its effect on GDP.
However, the sudden nature of the holiday and the linkages between the public and private sector will most definitely shock productivity regarding mobility of labour across the state.
Expectedly, sections of the informal sector especially trade will experience a seizure in act; and from estimates available to us, the public holiday will cost N1.28 billion of Lagos state revenue .
The nature of this particular public holiday (and the way it was administered) tends to undermine household aggregate expenditure, rather than drive household aggregate expenditure.
While it is hard to ignore the truth in Madonna’s popular lyric: That a nation or a state cannot hope to grow faster by increasing the number of holidays; it is well to recognise that nations, especially Scandinavian countries; have achieved productivity by reducing non-productive stress through holidays in addition to improving the infrastructural support that enables same.
Such countries have indirectly reduced the need for additional public holidays and concurrently increased the life expectancy of their citizens, eventually improving output.
Naturally, the inefficiencies responsible for stress and desperation for public holidays just gradually give way, due to less friction to productive activity. We intend to write more on this nexus and take same beyond a single factor analysis for proper context and comprehension.
For now, enjoy the holidays and manage the stress from the logistics and mobility nightmare that may occur today.