Jobless rate rises on multinationals’ exit, factory closures

Nigeria’s unemployment rate rose to 5.3 percent in the first quarter (Q1) of 2024 from 4.1 percent reported in the corresponding period of 2023, the National Bureau of Statistics (NBS) said on Tuesday.

Analysts attribute the increase in unemployment numbers to exits of multinationals and factory closures which led to job cuts across various industries.

“We are beginning to see the impact of company shutdowns and exit of multinationals from Nigeria over the last one year,” said Ike Ibeabuchi, an emerging markets analyst.

“When companies shut down or exit a market, they go with their jobs and the economy suffers.”

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Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise, said that the unemployment rate might be worse than reported, citing economic pressures on small and medium enterprises (SMEs).

“Many companies are shutting down or leaving Nigeria as consumer spending habits shift,” Yusuf said.

About 767 manufacturing firms shut down in 2023 while 335 experienced distress, according to the Manufacturers Association of Nigeria (MAN).

More than 10 major companies exited part or whole of their local operations in 2023, including GlaxoSmithKline Consumer Nigeria Ltd, Sanofi-Aventis Nigeria Ltd, Equinox Nigeria and Bolt Food & Jumia Food Nigeria.

In the first six months of 2024, Kimberly-Clerk Nigeria and Diageo Plc moved their operations away from Nigeria. The ripple effects of the situation are job and revenue losses.

“Energy cost and foreign exchange losses by businesses and companies led to the implementation of cost cutting measures, which involved downsizing and layoffs of staff to manage the challenging business environment,” said Tobi Ehinmosan, a fixed income and macroeconomic analyst at Lagos-based FBNQuest Capital.

Samson Simon, chief economist ARKK Economics & Data Limited, said the unemployment rate increase is a result of poor economic performance which impacted businesses negatively.

“High interest rates have made it difficult for businesses to borrow for expansion. Previous borrowings are also difficult to pay off. There is high inflation and some businesses have exited the country,” he stated.

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According to the NBS’s Labour Force Survey report, the labour force participation rate among the working-age population declined to 77.3 percent in Q1 2024, from 79.5 percent in Q3 2023.

The NBS said exchange rate has not been friendly because manufacturers import machinery for production, leading to the labour force participation rate among the working-age population declining to 77.3 percent in Q1 2024, from 79.5 percent in the third quarter (Q3) of 2023.

Naira was adjudged one of the 10 worst performing currencies in the world by Bloomberg on September 20.

According to data from FMDQ Securities Exchange Limited, the naira declined from N776.60 on September 19, 2023, to N1,658 on September 24, 2024 in the Nigerian Autonomous Foreign Exchange Market (NAFEM), previously known as the Investors and Exporters (I&E) forex window.

In the parallel market, often referred to as the black market, the naira stood at N1,675.

According to Afreximbank Research, “Ongoing currency risks and uncertainties around Nigeria’s economic recovery could keep long-term investors cautious, reflecting bearish sentiment towards the naira.”

The National Pension Commission (PenCom) approved the disbursement of N14.2 billion to 8,651 Nigerians who experienced temporary job loss in the first quarter of 2024.

The total sum disbursed reflects the considerable financial support provided to these individuals under the age of 50 years, averaging around N1.64 million per person.

Tunde Abidoye, an equity research analyst at FBNQuest, said Nigeria’s rising unemployment rate, especially alongside modest economic growth, highlights serious challenges in the labour market that require urgent attention.

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“One worrying statistic is the youth unemployment rate, which has hit 8.4 percent, potentially signalling future problems that may crop up with the workforce, such as a lack of skills among young people. It may also result in an increased risk of civil unrest,” he said.

He added, “If the unemployment rate continues to rise, we are likely to see people tightening their belts and cutting back on spending. This shift could slow down economic activity and make it harder for growth to pick up.”