Nigeria’s unemployment unexpectedly fell in the second quarter of 2024, fuelled by the steady rise in self-employment, otherwise known as ‘hustle jobs’ as loss in paid employment puts citizens’ entrepreneurial skills to test.
The National Bureau of Statistics (NBS), which defined a rise in unemployment as generally meaning the number of people searching for jobs, said the unemployment rate dropped to 4.3 percent in the three months to June from 5.3 percent in the first quarter of the year.
The data further revealed that jobless growth has been waning for the past three straight quarters despite the tough business climate that resulted in exodus of multinationals and downsizing of workers in some companies to stay afloat.
Read also: Nigeria’s unemployment rate slows to 4.3% in Q2 2024
“Decline in paid employment dropped the unemployment rate as people created jobs for themselves,” said Bunmi Bailey, head of research at Africa-focused research firm, SBM Intelligence.
She noted that despite the rising inflationary levels, jobs were created, explaining that a person is employed if paid at least one hour in seven days.
According to the NBS, the percentage of people who were engaged in some type of jobs for at least one hour in a week for pay or profit (self-employed), rose to 85.6 percent in Q2 from 84 percent in the previous quarter.
“Survey findings reveal a decrease in the share of employed persons primarily engaged as employees between Q2 2024 (14.4%) and Q1 2023(16.0%),” the Abuja-based statistical agency said.
The report further revealed that informal employment in Nigeria remained high in Q2 2024 compared to previous quarters, increasing marginally from 92.7 percent in Q1 2024 to 93.0 percent during the reference period.
Analysts say the rise in employment and a decline in unemployment show how Nigeria’s harsh operating environment is forcing the younger population to be creative and innovative towards job creation
Adeola Adenikinju, president of the Nigerian Economic Society, raised concerns, stating that with multiple shocks in the economy, “it will be difficult to expect that unemployment will fall at this time.”
“The informal sector will be the sector growing, which led to the fall in unemployment rate, but jobs in the informal sector are not decent high-paying jobs but rather low-wage employment,” Adenikinju said. “We need growth in the formal sector because growth in the formal sector is more crucial.”
He said Nigerians are very enterprising, stating that instead of sitting at home, they rather take jobs to survive, including ones which are not necessarily decent or high-paying but are needed to meet daily needs.
Over the past eight years, Nigeria’s economy has slumped into two recessions due to the collapse of oil prices, disruptions caused by the pandemic and an inability of the government to reform the economy.
The contractions have weakened consumers’ purchasing power, throwing millions into poverty. Data from the NBS shows that headline inflation, which serves as a measure of consumer prices, rose to a near three decade high of 33.88 percent in October 2024.
Read also: Naira to extend gains as US eyes unemployment data
Rising consumer spending means shrinking disposable income and elevated poverty which the World Bank now puts at 129 million, significantly higher than 104 million it stood last December.
The multilateral lender in another report projected that by 2030, over 40 million young Nigerians under 29 years could abandon furthering their higher education to join the informal sector.
Adejare Ademola, an Ogun-based taxi driver and a father of three, told BusinessDay that he currently makes more than twice what he got when he was in the banking sector.
“I was doing my cab business as a side hustle while working as a banker on a salary of N150,000 monthly. But when I discovered that I was making N350,000 from my cab business, I had to resign,” he said.
Daniel Ekurume, a 20-year-old domestic worker, said he had no plans to attend a university immediately after graduating from secondary school three years ago.
“Being the first child of my family, I have a lot of responsibilities at home. My father abandoned us when we were young. So, as the man of the house, I just have to do my part to support my family,” he said.
Formal job-creating sectors bleeding; informal rising
Nigeria’s struggling economy slowed the growth of major job-creating sectors of the economy such as agriculture, manufacturing and trade.
Data from the NBS on Nigeria’s GDP showed that the manufacturing sector, which is one of the largest employers of labour, saw its growth decline by 90.11 percent as nominal GDP in Q3 stood at just 3.62 percent year-on-year.
This is a massive decline from 36.59 percent in the reference period last year. The GDP report indicated that the real sector only contributed a measly 8.21 percent to the economy.
The agricultural sector, which employs some 25 million individuals in the workforce, also saw a dip.
The sector contributed 28.65 percent to overall GDP in real terms in Q3 2024, lower than the contribution in the third quarter of 2023 and higher than the second quarter of 2024 which stood at 29.31 percent and 22.61 percent respectively, according to the NBS.
These sectors have been fraught with multi-layered headwinds which is limiting their growth, and by extension, inhibiting them from employing more labour.
Read also: NACCIMA criticizes NBS report on GDP growth, unemployment
Manufacturing sector is contending with a high inflationary environment, volatile exchange exchange rate and continuous rise in interest rates.
The agricultural sector, on the other hand, is suffering from persistent insecurity and some climate shocks, resulting in flooding and unfavorable weather conditions for plant growth.
Muda Yusuf, the CEO of Centre for the Promotion of Private Enterprises (CPPE), welcomes the rise in self-employment but cautioned that a lot more needs to be done to support these sets of individuals.
“I am aware of the federal government’s support for these small businesses. But it’s more than just funding. They need to support them with facilities, equipment and location where they can operate from,” Yusuf said.
He added that since the young people are now predisposed to owning their businesses, leading to the rise in the informal sector, the government needs to provide some incentives to make them formal.
According to the Small and Medium Scale Enterprises Development Agency of Nigeria in Nigeria, 80 percent of SMEs fail before their fifth anniversary due to harsh economic environments, lack of access to capital, and poor business practices, which have stunted the growth and transition of micro-businesses.
Femi Egbesola, the national president of Association of Small Business Owners (ASBON), said the rise in self-employment was as a result of the government’s efforts through the Bank of Industry to roll out funding for those that have gone into trading, farming and other enterprises.
“This downward trend in unemployment rate does not always capture the economic well-being of the country. Because we are having a reduction in employment does not mean that everything is well with the economy,” Egbesola said.
Read also: Lagos moves to tackle unemployment with entrepreneurship drive
“For us to have a good economy, it means that we must have a comprehensive picture that includes metrics like income distribution, poverty level and people’s participation. Without this, we cannot say the economy is fine. We cannot, on our own, judge the vibrancy of the economy by the recent unemployment rate,” he added.
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