Unemployment is a significant economic indicator since it shows workers’ ability (or inability) to find gainful employment and contribute to the economy’s productive output.
Unemployment is caused by a variety of factors on both the demand (or employer) and supply (or worker) sides. High-interest rates, global recession, and financial crisis may all contribute to the reduction in employment from the demand side, while frictional unemployment and structural employment are important on the supply side.
Of the several types of unemployment, the major one currently affecting Nigeria’s economy is cyclical unemployment.
Cyclical unemployment is the fluctuation in the number of unemployed workers over time as a result of economic ups and downs caused by some factors such as the pandemic, and changes in oil prices, among others. Unemployment also rises during recessions and falls during times of economic expansion.
It perpetuates a vicious cycle that is difficult to break without some form of intervention
In 2020, during the COVID-19 pandemic, for instance, most sectors including banks found it difficult to retain their staff as a result of the lockdown experienced in the economy. This led to a good number of companies rationalising a large number of their staff, with many of the casualties being young and new entrants into the industry. These unfortunate individuals suddenly found themselves joining the country’s ever-growing army of the unemployed.
During this period, casual employees, contract workers, and those who provide various industry support services were also among the affected.
The banking sector’s persistent human capital crisis grew even worse as statistics show that almost 8,000 jobs were lost in the sector within the first nine months of 2020. This was despite the pleas by the Federal Government and Central Bank of Nigeria (CBN) that the organisation should not lay off personnel on the basis of reasons relating to the COVID-19 pandemic.
Meanwhile, Nigeria’s economy is yet to recover from the pandemic shock when the effects of oil price fluctuations began to have its toll on the economy.
Over the years, Nigeria’s unemployment rate has been on the increase as a result of several factors including dependency on oil prices, and indeed, any fluctuation in oil prices has a ripple effect on the economy.
The rise in oil price has generally increased the cost of production in all sectors and compelled several companies/employers to respond in ways that they deemed fit.
In a recent Editorial on “Nigeria’s unemployment rate faces an upward trend as firms’ cost of production rises”, we highlighted some of the leading factors attributable to the high cost of production experienced by firms in recent times and how firms have responded to it. The response revolved around features like: cutting working hours, firing employees or even a combination of the immediate, foregoing.
Recently for instance, Access Bank plc sacked several employees. This was clearly in violation of the directives from the CBN.
This was done by using electronic means of communication (e-mail) in sending notifications to the affected staff, making it difficult to ascertain the number of employees affected because the bank ensured that the sack notifications were not sent out at the same time.
However, the majority of those affected were contract employees who had worked for the company for several years, and the majority of whom were staff of the defunct Diamond Bank.
Meanwhile, analysts have predicted that bank initiatives to disengage workers will exacerbate Nigeria’s alarming unemployment rate.
In a report released in the first quarter of 2021, the National Bureau of Statistics (NBS) indicated that Nigeria’s unemployment rate had increased. Unemployment was 33.3 percent and the youth unemployment rate was 42.5 percent.
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Also, the under-employment rate was 22.8 percent while the youth underemployment rate was 21 percent.
With the rising economic instability and the deploring state of the economic situation within the country, Nigeria’s unemployment rate will likely increase and aggravate suffering and poverty among the people.
Furthermore, unemployment generates financial difficulty for people, which has an impact on their families, relationships, communities, and the country at large. When this happens, consumer spending, which is one of an economy’s most important drivers of growth, falls, potentially leading to a recession or even depression if not handled promptly.
In addition, unemployment reduces demand, consumption, and purchasing power, resulting in decreased profitability for enterprises and budget cuts and personnel reductions. It perpetuates a vicious cycle that is difficult to break without some form of intervention.
Consequently, the negative effects of poverty, unemployment, insecurity, low standard of living, low pay, high taxation, etc., may force people to migrate thereby leading to a brain drain in the economy.
Therefore, and in the light of the foregoing, the various levels of government should put in place vision-driven policies which will ensure that unemployment in the polity is reduced to the barest minimum.
