BusinessDay

Manufacturers warn of higher unemployment, poverty as economy slows

Manufacturers in Africa’s biggest economy have warned that the country’s slow growth in the third quarter of this year, the lowest in 15 months, may result in higher unemployment rate, throwing more Nigerians into the poverty net.

Segun Ajayi-Kadir, director general of Manufacturers Association of Nigeria (MAN), said higher unemployment, coupled with high inflation rate, would likely see the economy face a higher misery index that worsens the poverty level.

“In an economy with an average population growth rate of 2.6 percent, the recent real Gross Domestic Product (GDP) growth of 2.25 percent implies that real GDP per capita growth has depreciated by 0.35 percent,” he said in a statement on Wednesday.

He said this will also result in the country being downgraded from a middle-income economy to a low-income one. Other implications, according to him, are sub-optimal revenue generating capacity, low diversification drive, further decline in growth and slow development.

In 2020, Africa’s most populous nation recorded an all-time high unemployment rate of 33.3 percent, an indication that 23.2 million Nigerians were without jobs.

Although new numbers for last year are yet to be released, analysts have projected that the poverty rate could be well above the 40 percent mark.
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The continuous downturn of the economy has further validated the urgent need to release an updated unemployment rate that corresponds with the current economic situation, said Ajayi-Kadir.

Last week, the National Bureau of Statistics (NBS) reported that the country’s GDP grew by 2.25 percent (year-on-year) in real terms in Q3 2022, down from 3.54 percent in Q2 and 4.03 percent in the same period last year.

“The reduction in growth is attributable to the base effects of the recession and the challenging economic conditions that have impeded productive activities,” the NBS said.

Muda Yusuf, founder of the Centre for the Promotion of Private Enterprise, said the growth decline reflects the diverse headwinds that have been bedevilling the economy.

Some of the headwinds mentioned by Yusuf include heightening inflationary pressures, currency depreciation, foreign exchange illiquidity, surging energy cost, weakening purchasing power, legacy structural constraints, lingering insecurity and crippling trade facilitation issues.

Some of the headwinds also affected growth in the manufacturing sector, which dragged the overall GDP growth. The sector contracted by 1.91 percent in Q3 2022 for the first time since Q4 2020, according to the NBS.

The food, beverage and tobacco subsector of the manufacturing sector, also contracted by 4.05 percent, the first time since Q2 2020.

Nigeria’s path to economic growth, industrialisation and sustainable development has been compromised by inadequate attention to the numerous pressing challenges of the manufacturers who are meant to be the propellers of its long-term economic agenda, MAN said.

In order to restore the sector to an enviable position, manufacturers hope that the government will committedly deploy means to reduce unemployment and boost productivity of the manufacturing by encouraging local sourcing of raw materials, improving infrastructural developments and resolve all credit and forex-related challenges.

The association said: “Synergistically align monetary and fiscal policies while also curbing fiscal deficits by the gradual removal of fuel subsidy backed with appropriate palliatives for the poor.

“Tackle flood disaster adopting erosion control mechanisms, early warning and emergency services as well as flood risk assessment and ecological funds.”

It said the government should ensure the implementation of the Executive Order 003 and impose cost-reflective electricity tariff and energy prices.