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Achieving decent employment in Nigeria through fiscal and monetary policies

Nigeria is a country with an abundance of natural resources and a land area of 923,768km. Tin, iron ore, coal, natural gas, limestone, lead, zinc, and fertile land are among the country’s wealth of natural resources.

However, Africa’s most populous country has been labelled as one of the world’s poorest and one of the countries in Sub-Saharan Africa with the worst unemployment rates.

According to the National Bureau of Statistics, Nigeria’s unemployment rate increased to 14.2 percent (11.55 million) in the fourth quarter of 2016, up from 13.9 percent in the third quarter and 13.3 percent in the second quarter. The unemployment rate kept increasing, and by the fourth quarter of 2017, it was 20.42 percent, jumped to 23.13 by the third quarter of 2018.

The COVID-19, which started in the country in early 2020, also increased the number of unemployed as many companies laid off their workers during the pandemic. By the second quarter of 2020, the unemployment rate was 27.1 percent and rose to 33.3 percent by the first quarter of 2021. Thus, more than one-third of the labour force willing and able to work are unemployed. This implies that despite the availability of natural resources, more people are still unemployed and underemployed amid abundance. The constantly rising unemployment rate in Nigeria is a problem because naturally, rate should not exceed 5 percent.

Aside from the problem of poverty that accompanies unemployment, the unemployment rate in the country has increased crime rate, decreased overall economic production and consumption, deteriorated skill, fuelled depression, and mental health issues, among others.

The International Labour Organization coined the term decent employment in 1999 to mean a job contributing to workers’ social and economic stability. Decent employment entails abundant work opportunities that pay a fair wage, workplace security and social protection for families, improved prospects for personal development, and social integration. It involves the freedom of people to express their concerns, organize, and participate in decisions that affect their lives and equal opportunity and treatment for all women and men.

The Sustainable Development Goal (SDG) 8 of decent work and economic growth may be unachievable if a drastic effort is not put in place to address the escalating macroeconomic problem of unemployment in the country.

How then can fiscal policy be used to generate employment?

Fiscal policy is the use of government expenditure and tax policies to influence macroeconomic conditions.

To promote suitable employment in Nigeria, the government must manage its spending, such that it directly and indirectly aids the creation of jobs for the people.

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The government can directly create jobs through its many agencies and parastatals, which would help lower the country’s unemployment rate. Also, the government can indirectly partner with some local and foreign organizations to employ its population through Public-Private Partnerships (PPPs). Such fiscal efforts that create respectable jobs for citizens would result in better income, consumption, and living standards, eventually translating into inclusive growth and development.

Furthermore, increasing government spending, which drives economic development, is another indirect approach to providing decent jobs for Nigerians. For example, government spending on public works and public projects (such as the construction of roads, rails, and hospitals) will result in labour employment.

Can monetary policy help?

The Nigerian Monetary Authority’s mandate is to achieve full employment and price stability while also managing the country’s monetary policy. Monetary policy as we know is the set of actions that the central bank can undertake to control the overall money supply and achieve sustainable economic development. The monetary policy entails using variables and tools like the money supply and interest rate to influence economic activity and achieve their objectives. This can either be expansionary or contractionary.

Over the years, the significance of monetary policy in influencing macroeconomic variables has changed. For example, Classical economists viewed money as a “veil” that had no actual influence on the economy, i.e., it was neutral, and they believed that if the money supply increased while production remained constant, nominal prices would rise. Still, the actual value of the product would remain the same. As a result, in a classical world, money is irrelevant. Other economists, such as the Keynesians and the monetarists, have refuted this school of thought’s claims that money is neutral in the economy over time. They discovered that, contrary to popular belief, money impacts economic variables. Their argument was based on the assumption that prices are not flexible but rather sticky. Money, they believe, is not neutral in the face of disequilibrium and unemployment and has real-world consequences. However, many economists have agreed that the variations in the money supply affect the economy and rejected money’s neutrality.

In conclusion, to address Nigeria’s rising unemployment rate, which raises the possibility of not meeting the SDG goal 8 of decent work and economic growth, economists have shown that monetary and fiscal policy can influence economic variables such as unemployment.

Busayo Aderounmu is an economics lecturer at Covenant University, Ota, Ogun State.