• Friday, March 29, 2024
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BusinessDay

Parents’ retirement plan in jeopardy as youth unemployment worsens

Retirement plan

Four in every 10 Nigerian parents depend on their children to meet their needs when they are old and cannot work. The problem with that is that their retirement plan may be in jeopardy as unemployment in Africa’s most populous nation rose to its highest in at least 13 years and the world’s second-highest in 2020.

Out of the 24 million Nigerian adults who told EFInA during its 2020 survey on Access to Financial Services that they did not have pension accounts but were saving for retirement, 11 million or 45 percent said their children were their pension plan.

According to Gallup World Poll, 26 percent of Nigerians say they have no friends, family or anyone to count on to help them if they have any trouble.

Nigeria’s sluggish economic growth, which undermines the country’s capacity to create enough jobs to meet the growing number of labour market entrants, puts the retirement plan of many Nigerian parents at risk. Parents’ dependence on their children to carter for them in their old age is a long-existing perception that has remained unchanged in not just Nigeria but the Africa continent.

Since 2017, when oil-dependent Nigeria emerged from economic recession, not only has the country’s economic growth been sluggish but only a few sectors triggered the expansion, further undermining Nigeria’s ability to provide job for its youthful population.

Nigeria’s unemployment rate has more than quadrupled since 2016, when the economy slipped into a recession. A second recession occurred in 2020.

Nigeria’s unemployment rate rose to 33.3 percent in the fourth quarter of 2020, translating to some 23.2 million unemployed people. The figure jumped from 27.1 percent recorded in the second quarter amid Nigeria’s lingering economic crisis made worse by the coronavirus pandemic.

A high unemployment rate in a country like Nigeria whose economy is described as one that is stagflated (blend of high inflation rate and slow economic growth) means poor Nigerians will become poorer in real terms, and the middle class will get thinned out.

With Nigeria’s joblessness rate at 33.3 percent and April 2021 inflation of 18.12 percent, Nigeria’s misery index stands at 51.42 percent. The misery index is an indicator that is used to determine how economically well off the citizens of a country are. Nigeria’s misery index was 14.75 percent in 2015.

“Climbing misery index implies declining economic activity and reduced consumption,” Charles Akinbobola, an analyst at Sofidam Capital, says

Until Nigeria’s economic growth outpaces the population growth rate or at least labour-intensive sectors grow at a faster pace, there is no relief in sight for unemployment in Africa’s most populous nation, analysts say.

Nigeria produces people at an average of 2.6 percent annually. This leaves the country’s 0.51 percent GDP growth in the first quarter of 2021, anything but undesirable. The Q1 2021 growth rate was slower than the 1.87 percent growth rate recorded in Q1 2020 but higher than 0.11 percent recorded in Q4 2020, indicative of a slow but continuous recovery.

“Nigeria’s population is expected to grow by as much as 35 million in the next decade, and unless the pace of growth and job creation accelerates, the country will account for a quarter of all people living in extreme poverty worldwide,” Marco Hernandez, World Bank lead economist for Nigeria, states.

Before COVID-19 about 80million of Nigeria’s 200million people lived on less than the equivalent of $1.90 a day. The pandemic and population growth could see that figure rise to almost a 100million by 2023, according to the World Bank.

While the impact of COVID-19 is easily blamed for the recent economic woes in Nigeria, an evaluation of the country’s macro-economic indicators before the pandemic exposes how the pandemic only made what was already a bad situation worse.

Long before the pandemic started spreading across the globe late last year, Nigeria’s economy had been gasping for breath for five years.

Economic growth in Africa’s most populous nation averaged 1.2 percent between 2015 and 2020. The problem with that is the population grew two times faster at an average of 2.6 percent per year.

Those five years were a painful squeeze for Nigerians who grew progressively poorer, as economic growth was too slow to create sufficient opportunities for a rapidly rising population.

In 2015, President Buhari promised to lift 100 million Nigerians out of poverty in 10 years. He also pledged to create three million jobs yearly for the nation’s unemployed youths if voted to power. But most analysts say this is an illusion going by current realities in the economy.

“The public sector lacks the capacity to create sufficient jobs. Their role is to create an enabling and supportive macroeconomic and policy environment that facilitates private sector development,” Damilola Adewale, a Lagos-based economic analyst, notes.

On how Nigeria can capitalise on its youth and keep the additional population from falling into extreme poverty, the World Bank says Africa’s top crude producer needs to increase productivity to support robust growth and job creation.

Priority areas highlighted by the Washington-based lender include increased policy transparency and improved access to finance.

“Nigeria could enable millions of citizens to escape poverty over the next decade through enacting bold reforms designed to boost economic productivity, according to the latest economic analysis,” it states.

Tackling insecurity, improving the ease of doing business and creating an enabling environment are areas the President’s economic advisers recommend the government to pay urgent attention to boost economic growth and lift the vulnerable out of poverty.

“There’s only one way forward really: the government has to remove the handcuffs from the private sector so they can create jobs as fast as they can. Government should focus only on the provision of an enabling environment. Every other thing should be left to private operators ,” says Cheta Nwanze, partner, SBM Intelligence.

Muda Yusuf, director-general, Lagos Chamber of Commerce and Industry, buttresses this, saying the solution is to support private sector players (especially MSMEs) that should be creating jobs as those being created by the government are not sustainable.