The labour data released last week by the National Bureau of Statistics (NBS) depicts Nigeria as a ‘hustle economy’ as the informal sector accounts for an outsized share of employment in the country.
According to the NBS, the percentage of people who were engaged in some type of jobs for at least one hour in a week, for pay or profit (employed), rose to 76.7 percent in the first quarter of 2023 from 73.6 percent in the previous quarter.
“Majority of Nigerians are self-employed while a much smaller proportion holds wage jobs. In Q4 and Q1, 73.1 percent and 75.4 percent of employed Nigerians respectively worked in their own business or farming activity for their primary job,” it said.
It said the percentage of employed Nigerians engaged as employees (being wage-employed) in their primary jobs dropped to 11.8 percent from 13.4 percent.
The statistical agency, which defined a rise in unemployment as generally meaning the number of people searching for jobs, said the unemployment rate fell to 4.1 percent from 5.3 percent.
It said unemployment was highest for young Nigerians compared to other age groups and higher in urban areas compared to rural areas. It was also higher among those with higher educational attainment, and highest for those with post-secondary education.
“Those with higher levels of education are more likely to seek formal, wage-employment jobs, which could require longer periods of search,” the NBS said.
Analysts say the rise in employment and a decline in unemployment show how Nigeria’s harsh operating environment is forcing the younger population to be creative towards job creation.
This is negative for the economy as most of the quality or productivity of jobs in the informal sector are low as they are done for survival purposes or to meet people’s daily needs, thereby not contributing to economic growth.
“The informal sector gained traction after the COVID-19 pandemic because inflation began creeping in and eating into people’s income,” Tochukwu Okafor, an Abuja-based senior economic analyst, said.
He said the migration and the attractive nature of certain informal businesses that weren’t taxed also caused the deviation towards that sector.
Ogugua Belonwu, founder and chief executive officer at MyJobMag, said the economic landscape led to a decline in the number of corporate employers.
“The rising cost of living has made it difficult for people to survive on their previous salaries, forcing them to start their own businesses, especially on social media just to make ends meet,” he said.
A 2021 survey by the NBS and World Bank highlighted the impact of the COVID-19 pandemic on the labour market.
“When asked what their dream job is, the most commonly reported was trader or businessperson (22 percent). It is the most common even among the different subgroups of youth, such as by sex or consumption quintile,” it said.
The nature of jobs is changing very rapidly as many young people are losing interest in paid employment because it is becoming less attractive, Muda Yusuf, chief executive officer of the Centre for Promotion of Private Enterprises, said.
He added that there is a limit to the number of people that the regular paid employment can absolve, especially given the challenges that many of the Small Medium Enterprise (SMEs) are facing.
“The nature of work, which is changing, means that people are now trying to be more creative, which is not a bad idea. The economy is very big and there is a lot of demand that needs to be met and a lot of value to be created to meet those demands which presents a lot of opportunities,” he said.
Over the past seven years, Nigeria’s economy has slumped into two recessions owing to the collapse of oil prices, disruptions caused by the pandemic and an inability of the government to reform the economy.
The contractions have weakened consumers’ purchasing power, throwing millions into poverty. Data from the NBS shows that headline inflation, which serves as a measure of consumer prices, rose to a near 18-year high of 24.03 percent in July 2023.
Last year, the NBS put the number of Nigerians living in multidimensional poverty at 133 million, compared to 82.9 million considered poor in 2019 by national standards.
A recent World Bank report noted that the worsening poverty in Africa’s biggest economy was making more people quit school for menial jobs.
“Youth responded to both the 2016 oil recession and COVID-19 crises by leaving school earlier to enter the labor market, thus increasing overall labor supply. Rising labour supply amid chronic job shortages have further widened precarity and informality in Nigeria’s labor market,” it said.
The multilateral lender projected that by 2030, over 40 million young Nigerians under 29 years could abandon furthering their higher education to join the informal sector.
Adejare Ademola, an Ogun-based taxi driver and a father of three, told BusinessDay that he currently makes more than twice what he got when he was in the banking sector.
“I was doing my cab business as a side hustle while working as a banker on a salary of N150,000 monthly. But when I discovered that I was making N350,000 from my cab business, I had to resign,” he said.
Daniel Ekurume, a 20-year-old domestic worker, said he had no plans to attend a university immediately after graduating from secondary school three years ago.
“Being the first child of my family, I have a lot of responsibilities at home. My father abandoned us when we were young; so as the man of the house, I just have to do my part to support my family,” he said.
This mirrors the reality of the economy because the people who are doing some sort of micro businesses are doing them for survival purposes not out of passion, according to Femi Egbesola, national president of the Association of Small Business Owners of Nigeria.
“And this does not really reflect much in the economy because the purpose of entrepreneurship is to be able to start and upscale. But those kinds of businesses may not be able to upscale because they are not done with the right mind set,” he said.
He added that one of the reasons for employment is to be able to secure one’s livelihood. “Those that are self-employed, whether it is for one hour or for side business, are looking for every opportunity to leave the country, which means to them they are not really gainfully engaged but just passing time.”
Nigeria’s struggling economy slowed the growth of major job-creating sectors of the economy such as agriculture, manufacturing and trade.
Data from the NBS shows that 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.
The economic uncertainties are making many jobless Nigerians seek opportunities to travel abroad, fuelling a massive brain drain that is hurting the labour quality of Africa’s most populous economy.
Data from the British government showed a total of 40,875 Nigerian students as well as health and care professionals were granted visas by the United Kingdom in one year.
In the first half of 2023, the number of Nigerians moving to Canada rose to 10,180 from 10,105 in the same period of 2022, according to Immigration, Refugees and Citizenship Canada.
Israel Odubola, a Lagos-based research economist, said the NBS labour report shows the role of entrepreneurship in driving employment in Nigeria and the need for the government to support micro, and small business owners to ensure that they contribute substantially to employment promotion in the country.
“The Micro, Small and Medium Enterprises (MSMEs) sector is the most important segment in any economy but their job creating capacity has not been fully tapped in Nigeria,” he said. “So I feel creating an environment that supports their growth and development, creating a conducive regulatory space and creating policies that will also drive their job creation capacity will go a long way in promoting employment opportunities in the country.”
In Nigeria, the sector currently contributes 50 percent of the GDP and has provided over 48 percent of all employment opportunities in the country, according to the United Nations Industrial Development Organisation.
But small business operators in Nigeria have been grappling with a combination of issues, including poor power supply, rising borrowing costs, soaring inflation, restrictive economic policies, foreign exchange volatility, and tax multiplicity.
According to the Small and Medium Scale Enterprises Development Agency of Nigeria in Nigeria, 80 percent of SMEs fail before their fifth anniversary due to harsh economic environments, lack of access to capital, and poor business practices, which have stunted the growth and transition of micro-businesses.
“There is a lot of work that the government needs to do because when those one man businesses are able to grow and make revenue and profit, they will begin to hire more people,” Belonwu of MyJobMag, said.