GDP growth fails to lift job-creating sectors

The Nigerian economy recorded 3.4 percent growth in 2021, the highest since 2014. But growth has been sluggish in sectors that have the capacity to create jobs and lift many people out of poverty.

Manufacturing, agriculture and construction have the capacity to absorb Nigeria’s growing unemployed population but have been unable to reach their 2014 growth levels.

According to a full-year 2021 report from the National Bureau of Statistics (NBS), agriculture, manufacturing, construction, which recorded growth of 4.3 percent, 14.7 percent and 13.03 percent, respectively, in 2014, plummeted to 2.13 percent, 3.35 percent and 3 percent in 2021.

While sectors like metal ores, electricity, gas, steam and conditioning supply and coal mining reported some of the highest growth in 2021 with an expansion of 34 percent, 27 percent and 20 percent, respectively. These sectors do not need as much labour as manufacturing, agriculture or construction.

However, sectors like trade and transport have seen their growth rate rise from 5.88 percent and 7.5 percent in 2014 to 8.6 percent and 16.26 percent, respectively, in 2021.

In terms of value, the performance of these sectors has also been underwhelming without significant growth compared with 2014.

The manufacturing sector, which grew by N6.7 trillion in 2014, plunged to N6.5 trillion in 2021. Trade grew marginally to N11.4 trillion in 2021 compared with N11 trillion in 2014, while the agriculture sector expanded to N18.7 trillion in 2021 compared with N15.4 trillion in 2014.

This means there is no relief in sight for unemployed Nigerians.

“Challenges such as high inflation, unemployment, and underemployment have persisted in Nigeria as a result of a skewed growth performance, with growth concentrated in a few sectors which do not have the capacity to create jobs with decent incomes,” a 2022 outlook report by Nigerian Economic Summit Group (NESG) states.

Similarly, Damilola Adewale, a Lagos-based economic analyst, tells BusinessDay that the job-creating sectors are still not out of the woods even with the purported recovery, noting, “A lot still needs to be done by policymakers to help these sectors unleash their growth potentials.”

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Nigeria’s unemployment rate surged to 33.3 percent in the fourth quarter of 2020 compared with 6.4 percent as at 2014. The rate was projected to hit 40 percent at the end of 2021, according to the Presidential Economic Advisory Committee (PEAC).

Since oil-dependent Nigeria recovered from the 2016 recession, the growth of the sectors has been stifled by various challenges.

The agricultural sector, a major employer of labour, has been plagued by low productivity and rising insecurity ranging from terrorism, banditry to herdsmen attacks that put farmers and their investments in peril.

Inflation rate was 15.60 percent in January 2022, still far from the ideal single-digit inflation rate. The country’s surging inflation rate has also increased the number of poor people to 90.1 million and that number is expected to increase by 11 million by 2022, the World Bank states.

The manufacturing sector has also continuously faced several structural challenges leading to low productivity, which has caused manufacturing shutting down, limiting growth and investment inflow into the sector.

“The effect of the COVID-19 pandemic and some of the policies taken by the Federal Government are still affecting businesses. A lot of manufacturing companies are leaving the country for Ghana and other neighbouring African countries to survive,” Abidemi Ajai, HR manager at Nosak Farm Produce Limited, says.

Ajai adds, “The survival rate for manufacturing in Nigeria is something else and that also will have an effect on the rate manufacturing helps the unemployment situation in the country.”

Likewise, sectors with the capacity to drive growth through human development, health and education have also not seen any significant growth.

The education sector contracted 0.75 percent in 2021 compared with a growth of 8.8 percent in 2014 while the health sector also grew 4.93 percent in 2021 compared with 10.5 percent in 2014.

The Nigerian education sector has received poor budgetary allocations to run the system. For instance, in the 2022 budget, the education sector got an allocation of N1.29 trillion (7.9%) out of N16.39 trillion, in the 2021 budget it got N 771.5 billion (5.68%) out of N13.58 trillion.

“The last few years were characterised by worsening poverty, high inflationary pressures, and massive erosion of purchasing power, high energy prices, escalating production cost, sharp currency depreciation and many more,” Muda Yusuf, CEO at Centre for the Promotion of Private Enterprise, says.

“Therefore, going forward, policymakers should prioritise these key development indicators. Citizen’s welfare and investment productivity in the economy matter even more than the GDP numbers,” he states.