Nigeria’s unemployment figure seen dropping on NBS’ new methodology

The updated methodology for Nigeria’s labour force survey by the National Bureau of Statistics (NBS) could reduce the country’s unemployment figure for the fourth quarter of 2022, analysts have said.

Last week, the NBS said it was changing the way it measured unemployment and employment and would release new unemployment and employment data for Africa’s biggest economy by May 2023, after a two-year lull.

“A number of refinements have been introduced to the operational definition of unemployment and related measurement guidelines based on accumulated Nigeria practice,” it said in a report titled ‘Nigeria Labour Force Framework Re-design 2023’.

A breakdown of the report shows that the previous methodology, which was based on the 13th International Conference of Labour Statisticians (ICLS) standards, covers people aged 15-64 years working for 40 hours or more for pay or profit while the new one, which is based on the 19th ICLS standards, covers people aged 15 and above working for pay or profit, regardless of their working hours.

For the unemployed, the old version defines them as people aged 15-64 who did not work or worked less than 20 hours, while the new one covers people aged 15 and above who are not employed, seeking employment and available for work.

For underemployment, the old method covers individuals who are employed but working between 20-39 hours while the new version covers individuals who work 1-39 hours and are available for more work.

“The updated version could artificially bring down the unemployment rate because they are increasing the coverage for employed by relaxing the cut-offs for hours worked which looks very impracticable and unrepresentative of the desired measure,” Temitope Omosuyi, investment strategy manager at Afrinvest Limited, said.

He said the employed will increase but the structure of the labour force participation rate is still the same, thus unemployment will drop. “The hours worked must be clearly stated for both unemployed and employed to ensure an exhausted survey or analysis.”

Damilola Adewale, a Lagos-based economic analyst, said even though there might be a marginal drop in the country’s unemployment rate, it is not as a result of the Federal Government interventions.

“When the employment rate drops, the government may now be thinking that their programmes and interventions are working, not knowing the NBS is now reaching more active people in the labour market,” he said.

According to Ogugua Belonwu, founder and chief executive officer at MyJobMag, the revised standard will reduce the unemployment rate because the employment rate now captures a percentage of the previous underemployment and unemployment bracket.

“This reduction does not reflect what is happening on the streets as it is not driven by any economic factor. And due to this methodology change, it is difficult to assess the government’s performance by comparing it to the previous years’ unemployment figures,” he said.

A country’s unemployment data is a major macroeconomic indicator that measures the performance of the economy.

Africa’s most populous nation last released labour force statistics for the fourth quarter of 2020 in March 2021, with the unemployment rate rising to 33.3 percent, the highest on record.

“Q4 report will cover data collected between October 19, 2022 and January 22, 2023. The report for the reference quarter is almost concluded and will be published before the end of May 2023,” the NBS said.

It said despite the challenges faced in gathering data for the report, it was learning from other countries to improve Nigeria’s labour market statistics. “Even though collecting high-quality labour market data is among the most difficult tasks that statistical offices around the world face, the NBS has risen to the challenge.”

The 19th ICLS standard, which was adopted in 2013, is an updated version of the 13th ICLS in 1982. Unlike the previous standards, the updated one provides broader measures of labour underutilisation, recognises all work, paid and unpaid, addresses gender bias in work statistics, facilitates integration of labour statistics with other topics and responds to emerging social and economic information needs.

The aim of this re-evaluation is to ensure that the design and methodology is in line with international best practice and locally relevant, according to the NBS.

According to the agency, some other African countries that have implemented the 19th ICLS are Guinea Bissau, Liberia, Madagascar, Mali, Namibia, Niger, Rwanda, Senegal, Sierra Leone, South Africa, Tanzania, Tunisia, Zambia, Zimbabwe, Benin, Burkina Faso, Botswana, Cabo Verde, Cameroon, Chad, Comoros, Congo, Côte d’Ivoire, Gambia, Guinea and Uganda.

“The new methodology is a step in the right direction as it would capture the economic realities, thereby increasing revenue generation,” Tochukwu Okafor, an Abuja-based senior economic analyst, said.

“When you capture a larger population, overtime you start expanding and expanding, gradually you will be able to get a figure that is close to the economic realities because right now, the 33.3 percent is not the economic reality,” he said.

He added that some of those that are categorised as unemployed may have more than one job, and are not even taxed. “And because of that, the Federal Internal Revenue Service is not able to capture them.”

According to Ikemesit Effiong, head of research at SBM Intelligence, the NBS is watering down the unemployment data by including part-time gigs, contract staff, online vendors, social media influencers and other people running their businesses.

He said: “This is not good because accurately defining what full employment is and knowing what cohort of your economy fulfills that indicator is a prerequisite for sensible revenue planning and generation, resource allocation and service provision.

“Many of the economic activities the NBS proposes to capture are stop-gap in nature. Many participants in those areas take part in those activities in lieu of stable wage paying jobs and wouldn’t consider themselves fully employed. It’s a mystery why economic planners would.”

Before the updated version was announced, some analysts had predicted that the slow growth in the performance of major job-creating sectors of the economy such as agriculture, manufacturing and trade may further increase Nigeria’s unemployment rate.

Data from the 2022 Gross Domestic Product report show that economic activities in the agric sector slowed to 1.88 percent in 2022 from 2.13 percent in 2021, manufacturing declined to 2.45 percent from 3.35 percent, and trade plunged to 5.08 percent from 8.62 percent.

Read also: NBS to release unemployment data May

“This likely portends a situation whereby the employment capacity of most of these sectors may have shrunk within these periods,” Ayorinde Akinloye, an investor relations analyst at Seplat Energy Plc, said.

He said most of these key sectors contribute to employment in the country and that when activities in those sectors either slows or contracts, “we are most likely going to see a situation whereby companies operating in that space may have sort of cut down their labour particularly with the recent surge in inflation.”

KPMG, a professional services firm, said the unemployment rate would increase to 40.6 percent in 2023 from 37.7 percent in 2022.

“The figure of job seekers would rise in 2023 due to decreased economic growth and the inability of the country’s economy to absorb the four to five million yearly graduates into the Nigerian job market,” it said.

Olamide Adeyeye, partnerships manager at The African Talent Company, believes that the new version is not sufficient enough because it does not address the old problem of the methodology.

“Numeric factors should not be a major unemployment indicator because it is not enough to provide for social economic index,” he said.

He recommended that the economic value of work engagement should be captured in the employment and unemployment matrix. “Unemployment information is supposed to be a premise for interventions that improve human capital or for economic planning.”