LCA Policy Briefs

October 2022 Version
lca policy brief Oct 2022

UNEMPLOYMENT IN NIGERIA:

Keeping All Hands On Deck

Executive Summary

The most recent unemployment figures published by the Nigerian Bureau of Statistics show that 33% of the Nigerian Labour force is unemployed. For context, 33% of Nigeria’s Labour force is 23.2 million, a number that is about the population of Taiwan and larger than many other countries. For a country with the seventh-largest population in the world, the unemployment record is distressing. The International Labour Organisation (ILO) defines an unemployed person as one who is ready, able, and willing to work but cannot find work. These rates are 6 times above the 4%-5% rates that economists consider as the ideal rate of unemployment for a healthy economy.

So why is Nigeria’s unemployment rate so high? In this policy brief, we will analyse the national burden of unemployment, what the effects are and how can the country’s decision-makers solve this problem.

Faring poorly with comparators

Nigeria’s 2021 GDP was 407 billion USD, a ~6% reduction from its 2020 GDP of 432 billion USD in 2020. However, it still has the largest GDP on the African continent alongside the largest population. Despite this, Nigeria has the second highest unemployment rate in Africa, after South Africa (ironically Africa’s most industrialised economy), and just ahead of Namibia. Together, the three countries are regarded as having the highest unemployment rate in the world in 2021. Although in terms of the actual number, because of its larger population, Nigeria has more unemployed people than its other counterparts. Brazil and Pakistan, two countries with similar population figures as Nigeria have much lower unemployment figures: 14% in Brazil and 4.35% in Pakistan. With over 23 million Nigerians looking for work or working less than the globally accepted 8-hour workday, Nigeria is not in good shape.

A problem with national implications

It is easy to connect stubbornly high crime rates with unemployment in a country with a bulging youth population. The seemingly intractable security situation in the north-eastern part of the country which has now metastasized to the north-west, the south-west, and the south-east, can partly be blamed on unaddressed rural unemployment, which is also another reason for the continuous rural-urban drift.

Fresh graduates struggle to find white-collar work, even holders of primary and secondary school diplomas who would normally drift to blue-collar jobs cannot find textile or vehicle manufacturing and assembly plants to work in. The harsh investment environment does not help the entrepreneurs who find it difficult to get high-interest credit and when they do, they suffer extortions in the hands of multiple state and local government agencies who are often out for ‘blood’ in the name of revenue generation. An ‘agbero’ – a local union tout used for collecting drivers union dues – may have an easier workday than the regular co-founder of a bike delivery start-up whose riders go through hell in the hands of the ruffians from one local government to another. This frustrates individuals from trying to create jobs and sends many to foreign lands in search of greener pastures.

When jobs are not created, more people cannot get out of poverty and find sustenance in criminal activities. Ultimately an economy that could generate at least a trillion dollars per year is currently punching well below its weight. Nigeria’s population is projected to reach 400 million by 2050; every passing day is an opportunity to prepare for that future if the country is not to become the world’s source of poverty.

We need all hands on deck

Nigeria is an oil-producing nation and most of its revenue and foreign exchange earnings come from the oil sector. However, the agriculture sector is widely acclaimed and proven to be the biggest employer of labour in the country, keeping more than 36% of the workforce busy, unlike the petroleum industry which employs only about 20, 000 Nigerians or 0.03% of the labor force! The oil and gas industry is well-regulated and gets the full attention of policymakers. The Petroleum Industry Law, a new governance structure, was recently added to the statute book and while the President is the minister of petroleum – he is not the first president to moonlight as petroleum minister.

petroleum vs agriculture

Agriculture, however, does not get this special treatment. Many jobs and businesses in the Nigerian agriculture sector are subsistent and seasonal. There are a few major industrialized companies in the sector but farming is often either subsistence farming (for immediate family) use or logistics-related. Many of these jobs pay less than the minimum wage (30, 000 naira; 72 dollars) and are therefore not encouraging for the increasingly sophisticated youth who make up to 70% of the population.

There has been a recent rise in entrants into the sector led by tech-oriented youngsters who want to drive the process with apps and codes. However, there is still a need for mechanisation and other large-scale investments for any of these initiatives to make a dent in the wealth prospects of stakeholders in the industry. Additionally, supporting infrastructures like water (for irrigation), roads, rails, electricity, and security which are squarely under the purview of governments are not getting the attention they need especially at municipal levels.

As of 2020, Nigeria ranks in the lower half of countries in the World Bank Ease of Doing Business metric at 131 out of 190. The report, which measures parameters like ease of starting a business, connecting to electricity, dealing with construction permits, and registering property among other factors does not portray Nigeria as an easy place to do business. The country’s economic counterpart, South Africa, fares better at 84, and Ghana, a West African country is at 118. Although this ranking is an improvement on former years, it underscores the volume of work that still needs to be done by stakeholders, especially with electricity. It is a known fact that it is impossible to set up a business in Nigeria without making plans for generators.

workers on site

Nigeria’s annual budget (17.12 trillion naira in 2022) is predicated primarily on its oil earnings though income is also generated from other sectors like agriculture, telecommunications, manufacturing, excise, and federal taxes. This focus on oil income is unhealthy and has to change. There are many other viable sectors like entertainment, media, sports, health, and education that hold immense promise not only for income generation but also for employment. For instance, in 2017, PwC predicted the value of the entertainment industry to hit 6.4 billion dollars by 2021 with the possibility of employing up to 1 million people. These are promising predictions that governments should be keen to help achieve.

Today, the 36 state governments are the largest employers of labour in their states and the Federal Government is the largest employer in the country. The federal government employs about 90, 000 Nigerians, while states like Lagos employ about 100, 000 citizens. These figures are a drop in the ocean when compared to the bulging population of unemployed citizens. Every year students graduate from secondary and post-secondary institutions swelling the ranks of job-seekers. Unemployment can only fall when policymakers move faster and install factors that encourage investments and promote business creation and operations everywhere in the country.

Areas for consideration

Are the answers to unemployment far-fetched? We think not. Hard work must be done by understudying efficient economies in Europe, Asia, and America that have managed to keep unemployment in check despite the COVID-19 pandemic in 2020. After the initial upset from COVID, the US has continued to lower its unemployment rate keeping it below 4%. South Korea with a population of 51 million people has kept unemployment under 3%. We need to examine what these countries are doing and adapt them to local realities. Ultimately though, the political will to solve problems for most Nigerians and not just to score shallow quick wins will be the decider on whether we tame unemployment, or it ravages us to no end.

  • The Presidential Enabling Business Environment Council (PEBEC) has to work with states and Local Government Area (LGAs) to actually cascade the efforts of the council to the ‘home base’ where results can actually show and be felt. Its current setup includes only two states and no local government representation.
  • A business-minded approach must be brought to governance. This means revenue-generating agencies like the Federal Inland Revenue Service (FIRS), Customs, Abuja Municipal Area Council (AMAC), NAFDAC, NDLEA, and so on are not inordinately driven to meet revenue quotas without consideration for business owners. It is an open secret that food companies like bottled water companies, bakeries, and fast-food outlets are regularly harassed by ‘regulatory agencies and local government officials. They exact multiple payments from proprietors of these businesses. This stifles enterprise and leads to unemployment. The main aim of government and its agencies should be to first create the ambience that stimulates entrepreneurship. Profit-taking must come only after adequate investment.
  • The public sector must look beyond oil. Nigeria’s annual budgets are predicated on monthly crude oil sales in United States Dollars (USD). This is a never-ending convention, and it is the easy way out. States report to the capital at the end of each month to share the proceeds of crude based on the federal allocation formula. When oil prices plummet, Nigeria’s earnings crash as well, and government cannot fund its budget – a vicious cycle ensues.

Before 2015, the country earned about 98 billion USD from oil. In 2021, the figure was around 92 million USD! Income is shrinking, investment is shrinking, and employment is vanishing in Nigeria’s bellwether industry. Every part of the economy will definitely take a hit. The technology space is vast (and can absorb many Nigerian professionals). Sports, entertainment, and tourism are some of the sectors that can comfortably and collectively replace oil in an era where fossil fuels are being de-emphasized.

chart of petroleum income from 2015 - 2021

Conclusion

Unemployment is a national problem but cannot be solved without having all levels of government and key stakeholders involved. Focusing attention on solving this problem would be in the interest of every segment of society and failure to do so would also have grave implications for all.

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Author

Jubril Adisa

Edited By

Seun Akinyode

References

https://www.nigerianstat.gov.ng/

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Current World Population. (2022). https://www.worldometers.info/world-population/

Kolawole, S. (2022, July 30). Why does anybody want to be the next president? The Cable.ng https://www.thecable.ng/why-does-anybody-want-to-be-the-next-president

Naidoo, P. (2021, August 24). South Africa’s unemployment rate is now highest in the world. Al Jazeera. https://www.aljazeera.com/economy/2021/8/24/south-africas-unemployment-rate-is-now-the-worlds-highest

Okafor, C. (2020). NEITI: Oil sector employed 0.03% of Nigeria’s workers in 2018. ThisDay Newspaper. https://www.thisdaylive.com/index.php/2020/04/07/neiti-oil-sector-employed-0-03-of-nigerias-workers-in-2018/

Olawoyin, O. (2022, August 4). EXCLUSIVE: Nigeria’s Economic Crisis: Governors advise FG to pay off civil servants above 50 years.

Olubi, F. (2017, October). The Business of Entertainment: Harnessing growth opportunities in entertainment, media, arts, and lifestyle. Pwc (PDF)
https://www.pwc.com/ng/en/assets/pdf/the-business-of-entertainment-final.pdf

Oluwole, V (2021, August 25). South Africa, Namibia, Nigeria, have the highest unemployment rates in the world – report. Business Insider Africa. https://africa.businessinsider.com/local/markets/south-africa-namibia-nigeria-have-the-highest-unemployment-rates-in-the-world-report/6zh1b63

Oyaniran, T (2020, September). Current state of Nigeria agriculture and agribusiness sector. AfCFTA workshop. (PDF) https://www.pwc.com/ng/en/assets/pdf/afcfta-agribusiness-current- state-nigeria-agriculture-sector.pdf

Presidential Enabling Business Environment Council. https://statehouse.gov.ng/policy/councilscommittees/presidential-enabling-business-environment-council/

World Bank. (2021). Ease of Doing Business Report 2020; Comparing Business Regulation in 190
Economies. https://openknowledge.worldbank.org/bitstream/handle/10986/32436/9781464814402.pdf

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