Struggling job-creating sectors show unemployment woes may persist

Nigeria may be out of recession for the second time within five years, but sectors of the economy collectively responsible for the bulk of job creation are delivering less growth than previous years. This indicates more jobs cannot be created, at least for now.

Yet, unemployment and even underemployment remain a major source of concern for millions of people in a struggling economy.

Performance of major job-creating sectors of the economy such as agriculture, manufacturing, trade and construction remains very weak, as seen in the recent 2020 GDP report by the National Bureau of Statistics (NBS). Without growth in these sectors, unemployment will persist, worsening the already poor living conditions of many Nigerians.

While agriculture improved on a quarterly basis by 3.42 percent in Q4 2020, from 1.39 percent in Q3, it however recorded a year-on-year decline, growing 2.17 percent in 2020 from 2.36 percent in 2019. Manufacturing remains in the negative territory (recession) as it recorded -2.75 percent from 0.77 percent the previous year.

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At -8.4 percent, trade remains in recession from -0.58 percent the previous year. The construction sector posted a huge contraction of -7.7 percent from a positive growth of 1.81 percent the previous year.

“When the largest sectors of the economy – agriculture and trade, are performing this badly, it means that the unemployment situation is not about to improve, and that is what needs to be done to open the economy up quickly,” said Cheta Nwanze, lead partner at SBM Intelligence.

According to the NBS, out of 100 percent, agricultural employment accounts for 48.2 percent, followed by industry with 7.1 percent and services with 44.8 percent (this includes construction, trade, real estate, banking and finance, ICT, education, health, etc).

Damilola Adewale, a Lagos-based economic analyst, noted that these sectors critical to job creation are still struggling with growth and their capacity to create employment opportunities may not be fixed in the short term. “Until these sectors come out of contraction and sustain the positive growth momentum, we will not see employment prospects,” he said.
For instance, Tolu, a 27-year-old graduate of accounting, has not been able to get a job despite finishing university with good grades. In order for her to survive, she has engaged in menial jobs.

“After my mandatory youth service in 2018, I was unable to get a job. Now, I do menial jobs to at least take care of myself, even if I can’t take care of my parents yet,” she said.
Tolu’s experience currently depicts the plight of Nigerian youths, which constitute over 65 percent of a population of over 200 million, currently face Africa’s biggest economy. Nigeria’s unemployment rate at 27.1 percent is the highest in five years.

Apart from the NBS data, the Central Bank of Nigeria‘s Manufacturing and non-Manufacturing Purchasing Managers’ Index (PMI) for employment level index has been below 50 points since March 2020, indicating contraction in employment levels.

“The measures that were taken to limit the spread of the COVID-19 pandemic in 2020, such as lockdowns of the economy, had a huge negative impact on the job-creating sectors. And this worsened the already bad state of unemployment in the country,” Moses Ojo, chief economist/head, investment research, PanAfrican Capital Holdings Limited, told BusinessDay.

Ayodele Akinwunmi of FSDH Merchant Bank said the government could not continue to fund these important sectors of the economy by hoping to drive growth through its annual budgets.

“Yes, we already established a one trillion-naira infrastructure fund, but it is not enough. The best model is to develop our infrastructure by shifting some of these assets to the private sector so that these different companies can compete for revenue generation. With this industrialisation will spring up investment in agric and other sectors, thereby creating employment for more people,” Akinwunmi suggested.

Apart from rising joblessness, the economy is also confronted with other critical issues such as rising consumer prices that further stress consumer wallets, especially those of unemployed people. According to the NBS, as of January 2021, Nigeria’s inflation stood at 16.47 percent, the highest in 34 months.

The economic uncertainties are making many jobless Nigerians seek opportunities travelling abroad, fuelling a massive brain drain that is hurting the labour quality of Africa’s largest economy.

According to a recent report by the NBS, in four states (Lagos, Abuja, Kano and Rivers), at least two-thirds of households had spent their savings to cover their living expenses. For those where the breadwinners are unemployed, the future remains bleak until they can get jobs.

When the exit from recession was announced, it was met with understandable excitement from some quarters. However, for unemployed Nigerians hoping the reflated economy will be an opportunity to become gainfully employed, that reality may not materialise anytime soon.