For Nigeria to keep its unemployment rate stable at record-high 23 percent, assuming this was desirable, the country would need to create at least 3.3 million jobs every year. Keeping the unemployment rate stable would help the country avoid exacerbating joblessness and absorb new labour market entrants. But Nigeria struggled to create only a fifth of this number of jobs in the last four years.
What is desirable, though, is for Nigeria to drastically reduce its current rate of unemployment, which climbed to 23.1 percent in the third quarter of 2018, from 8.2 percent in 2015.
Creating 3.3 million jobs annually means Africa’s largest economy would need to revert to the private sector by attracting more foreign direct investments (FDI), the Nigerian Economic Summit Group (NESG) stated in its latest report.
“At the moment, Nigeria’s private sector does not have the capacity to absorb the rapidly increasing unemployed population in the short term,” the NESG said.
Nigeria’s jobless rate embarked on an upward spiral in 2015 after a decline to 6.4 percent a year earlier, a development which followed a 36 percent dip in FDI inflows to $1.45 billion in 2015 from $2.28 billion. In the last four years, Nigeria was able to attract an average FDI of about $1.17 billion each year.
Since 2017 when oil-dependent Nigeria emerged from its economic recession, not only has the growth been sluggish but also only a few sectors triggered the expansion, further undermining the country’s capacity to create enough jobs to meet the growing number of labour market entrants.
Out of about 4.8 million Nigerians who entered the country’s labour market between 2015 and 2018, about 635,000 jobs were created within the period, indicating only a job was available for every 8 people who joined Nigeria’s economically active workforce.
While there seems to be no end in sight for the country’s soaring jobless rate, the challenge could be resolved through private sector expansion and industrial growth, according to the research arm of NESG.
For instance, in 2018, 13 out of the 19 major sectors contributed positively to GDP growth. Out of these 13 sectors, only 6 sectors accounted for 90 percent of GDP growth during the period.
Meanwhile, comparable data from Indonesia show that the top 6 sectors contributed 72 percent to the country’s GDP growth in half-year 2018, leaving room for the remaining 11 sectors.
“The GDP data for Nigeria show that there are many sub-sectors such as metal, iron and steel, and electrical and electronics, that contribute almost nothing to GDP growth, yet these sectors have the capacity to create jobs and meet the needs of consumers both in the local and export markets,” it stated.
To achieve these, the government would need to embark on urgent reforms capable of opening up key sectors that are strategic to job creation and have significant potential for growth such as manufacturing, construction, professional services, education, health and trade. This is expected to deliver about 12 million jobs over the next five years.
“The sectors were selected based on their larger weight in share of employment, share of GDP, strong backward and forward linkages and strong growth potential,” NESG stated.
These sectors “can meet the demand of consumers both at the local and export market and have the capacity to absorb a significant number of the country’s labour force”, it said.
OLUWASEGUN OLAKOYENIKAN
