Towards reducing unemployment in Nigeria: A case for job creation hubs
Unemployment continues to be one of the most burning macroeconomic challenges facing Nigeria today. As population growth continues to outpace output expansion, the number of people seeking jobs keep rising. The World Bank noted, the rise in unemployment has been particularly acute since the 2015-2016 economic recession. It has further worsened as COVID-19 health cum economic crisis led to the worst recession in four decades in 2020, coupled with the rising inflationary pressures, supply-chain bottlenecks, and now global tensions concerning the Russia/Ukraine war.
Over the past century, mankind has pondered on where its talent for innovation and creativity might lead. The German philosopher and economist Karl Marx, in the 19th century, worried that ,“Machinery does not just act as a superior competitor to the worker, almost to the point of making him superfluous. It is the most powerful weapon for suppressing strikes.” John Maynard Keynes in 1930 warned of widespread unemployment arising from technology. Yet, innovation has transformed living standards. Life expectancy has increased, basic health care and education are widespread, and most people have seen their incomes rise. Despite this, concerns about the future employment trends remain. Advanced economies, middle and low-income countries manufacturing jobs are being lost to automation. Fears of robot-induced unemployment have dominated discussions about the future of work. Workers undertaking routine tasks that are ‘codifiable’ are the most vulnerable to replacement amid the technological innovation, and competition. Yet, technology provides opportunities to explore different alternatives in production, job creation, and increased productivity.
The Federal Government of Nigeria implemented the Medium-term National Plan (2021-2025) that sets out a blueprint for the future of Nigeria to reduce its over-dependency on crude oil, diversify the economy and increase private sector participation. The economic plan aims to achieve long-term goals such as increasing the number of job opportunities, especially in the private sector, securing meaningful employment for Nigerian citizens, and reducing the unemployment rate in Nigeria.
According to a World Bank report on the unemployment rate in Nigeria, between 2010 and 2020, the unemployment rate in Nigeria rose five-fold, from 6.4 percent in 2010 to 33.3 percent in 2020. Unemployment is one of the predicaments Nigeria is facing ranging from the different types of unemployment which includes structural unemployment, frictional unemployment, seasonal unemployment and cyclical unemployment.
The alarming rate of unemployment in Nigeria has brought about the rapid increase in rural-urban migration, a decline in the national output, high rate of poverty and an increased crime rate in the country.
The Federal Government has enacted various job creation policies that support existing businesses, encourage start-ups, and build an efficient workforce towards lessening the unemployment rate in Nigeria. Such policies include the National Economic Empowerment Development Strategy (NEEDS I and II, 2003 and 2007, respectively), Subsidy Re-Investment and Empowerment Program (SURE-P); the establishment of the National Directorate of Employment, National Youth Service Corps Scheme; Vocation and Technical Education programs, Small and Medium Enterprises Development Agency of Nigeria, National Open Apprenticeship Scheme, Youth Enterprise with Innovation in Nigeria (YouWIN), N-power Scheme, Presidential Youth Empowerment Scheme (P-YES) and the National Social Investment Programme (NSIP) embedded in the National Economic Recovery and Growth Plan (ERGP) 2017-2020. To be sure, these laudable initiatives have all had mixed outcomes because the problem still lingers.
Perhaps the most heartbreaking data around unemployment in Nigeria is the rate of youth unemployment (42.5%) which has economic, social, and political implications for the attainment of the Medium-term National Development Plan (MTNDP 2021-2025) and the United Nations Sustainable Development Goals (SDGs) 2030. Thus, the ripple effect of increasing unemployment in Nigeria has a far-reaching implication on the economy. Therefore, the rest of this paper aims to examine the unemployment rate in Nigeria by proffering policies such as JOB CREATION through HUBS to alleviate unemployment in Nigeria.
Job creation through hubs or “job creation hubs” is a structure through which businesses that offer similar services can utilise a common infrastructure to provide services to different clients. This measure helps ameliorate start-up costs, cost of doing business, ease the challenges around launching a new business and provide networking opportunities. However, in Nigeria, the job creation through hubs suffers from a lack of a sustainable environment for business, inappropriate regulatory policies, multiple taxation and high-interest rates.
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Furthermore, human capital is essential for innovation, growth and sustainability. Investment in human capital ameliorates unemployment rate. According to the World Bank Human Capital Index ranking in 2018, Nigeria ranked 152nd out of 157th countries with an index of 34%.
The United Nations Development Programme (UNDP) in 2018 ranked Nigeria 157th out of the 189 countries sampled, grouping Nigeria under countries with a low human development index.
Again, the World Bank noted that around 4 in 10 Nigerians live in poverty, and millions more are vulnerable to falling below the poverty line as growth remains slow and not inclusive.
According, to the most recent official survey data of the National Bureau of Statistics (NBS), 39.1 per cent of Nigerians lived below the international poverty line of $1.90 and $3.20 per person per day.
Unemployment in Nigeria has always been a growing concern that stems from the country’s systemic issues. The unemployment rate in Nigeria as of Q4 2020 stood at 33.3%, which is 6 percentage points higher than the 27.1% reported in Q2 2020 (NBS, 2020). The underemployment rate declined from 28.6% in Q2 2020 to 22.8%.
In Nigeria, every year, tertiary, vocational and technical institutions produce thousands of graduates, which is a measure to reduce the illiteracy level, but the core challenges that undermine this effort is unemployment as there are few industries at the private and public level. These and many more pose great challenges to the efforts to alleviate unemployment in Nigeria, and towards attainment of the SDGs goal 2030. However, there is need to take strategic action on unemployment by adopting the policy of investment in job creation hubs.
Setting up successful job creation hubs requires investment and funding. Thus, investments in job creation hubs are vital instruments to reduce unemployment. From the side of human capital, there are some determinants of human capital such as education (vocational training, skill development and work experience), and health. Education is a crucial factor in promoting the masses’ efficiency and capabilities. The strategic line of action in achieving mass employment of labour in an economy include core skills, access to education, availability of training opportunities, and recognition of acquired skills.
These are essential for enabling workers to attain decent work and manage change such as technological innovation amid structural unemployment and, for enabling enterprises to adopt new technologies and enter new markets. There is a need to promote skills development in economic sectors with high job creation potential for young people and expand educational opportunities at all levels by ensuring that graduates are equipped with skills and competencies sought after by the labour market.
Health also has a significant impact on employment level. A healthy worker is more efficient and more productive. Unemployment increases due to less efficient labour force because unhealthy workers are likely to produce less, so they remain unemployed, which negatively affects the whole economy.
There is a need to develop and launch an innovative digital skills curriculum comprising computer science, information technology and digital literacy to promote digital skills development. Quality internships and apprenticeships should be promoted, and work-based learning and core work/soft skills integrated into existing training programmes.
The government can provide incentives to partners such as information technology and telecoms firms, for example, to provide operational services for broadband and e-commerce platforms targeted at Micro, Small and Medium Enterprises (MSMEs) to stimulate productivity, improve inclusion for underserved businesses and encourage informal sector service growth along different value chains. Additionally, enterprise development or training institutions that provide coaching and educational support to aspiring and existing entrepreneurs are paramount. Using hubs, the government’s role and support are channeled towards startup’s economic needs, such as low-interest rates on loans to participants, tax breaks, and an enabling environment for business.
Measures/Steps to ameliorate Unemployment in Nigeria.
The diagram above illustrates steps and measures to ease unemployment in Nigeria through investment in job creation hubs. From figure 1.2 above, investment instruments to ameliorate unemployment are human capital investment, foreign direct investment and government expenditure. There is employment generation in the economy when there is effective human capital investment, government expenditure, and foreign direct investment inflow (US$) to finance job creation in an economy.
When the government at the national, state and local levels, explore the initiative of investing in the development of job creation hubs, illiteracy levels will reduce. There will be additional skilled human resources with the skill set for employment. The MSMEs will be equipped with the capacity to start up business and this will enhance employment generation and increase output. The increase in output in the economy will spur economic growth, lower unemployment, increase the income of the masses and improve the overall standard of living.
Policy and institutional framework to curb unemployment
The job creation hub rapidly transforms job profiles and corresponding skill requirements across sectors through the digital economy. It presents opportunities for job creation, economic growth and productivity.
Governments have new ways to reach the poor and others who lack access to quality services or tools to manage risks using technology. Many work informally in low-productivity jobs without access to protections, making it difficult to escape or remain out of poverty. ICT, along with services and creative industries, is a sector dominated by youths who are the most unemployed in the economy. There is a need for job creation HUB, a digital-led growth strategy, internet penetration promotion, ICT clusters and skills development, among other initiatives.
In addition, the changing nature of work implies adjustment costs for workers. Government, and private companies need to engage their staff in capacity building to boost their efficiency amid technological innovation. Technology has varying impacts on skills and their demand in the labour market. Depending on the technology, some skills (and the workers who possess them), are becoming more relevant than others. Advanced skills – such as complex problem-solving and critical thinking are becoming more valued in the labour market. People with these skills can work more effectively with new technologies. Socio-behavioral skills such as empathy, teamwork and conflict resolution are also becoming more valuable in labour markets because machines cannot easily replicate them.
However, challenges to the technological innovation of HUB in Nigeria relate to (digital) infrastructure and devices, power supply, institutional frameworks, educational practices and digital literacy and skills. Efforts to salvage Nigeria can be achieved when there is an adequate investment in human capital and job creation hub.
The Nigerian government has initiated several strategies and investment measures to ameliorate unemployment in Nigeria. While there is no quick fix for generating employment opportunities, the government along with development finance institutions can get on the right path through targeted policies and investments, such as investing in job creation hubs, building multi-sector partnerships, and leveraging ICT to create and sustain jobs for the present and future.
Professor Nnanna is chief economist, Development Bank of Nigeria PLC.