During the labour protest recently, varying figures were given by government agencies as amount the economy lost. The protest, analysts believed were hugely successful because lots of Nigerians were not employed and so were ready tools at the hands of labour and other interest groups.
So there is a potentially dangerous phenomenon, which recent official statistics confirmed. Nigeria’s unemployment rate is on the rise. According to the National Bureau of Statistics (NBS), unemployment in the country increased to 23.9 per cent in 2011, and it seems it would continue in 2012 and 2013.
“This is because the economy seems to lack the absorptive capacity to engage those currently unemployed and those expected to be disengaged next year. The official figure is quite alarming but we suspect this figure could be higher. Without speculating, the unemployment figure does not reflect Nigeria’s present situation, in fact, conditions in the labour market may be slightly worse,” said Bismarck Rewane, chief executive officer of? Financial Derivatives Company (FDC) Limited in his Monthly Economic publication.
The increase in the number of unemployed coupled, with the relatively high inflation level of 10.5 per cent, pushes Nigeria’s misery index upward to 34.4 per cent. Nigeria’s misery index climbed to 32.9 per cent in 2010, and with the higher redundancy rate, this could increase to 40 per cent. A country’s misery index is the sum of the unemployment rate in a country and the consumer price level.
In certain countries, this index is tracked on a monthly basis to highlight the expected level of economic hardship.
Why is the Unemployment Rate Increasing?
According to Rewane, the most obvious reason for the high rate of unemployment is structural in nature. The absorptive capacity of the entire economy is low. Official data indicates that the telecommunications sector which employs the largest professional services recorded a 37.33 per cent growth in Gross Domestic Product (GDP) in 2010. The other sectors didn’t fare so well, with building and construction recording a 8.70 per cent and retail and trade employing 10.51 per cent.
Data from the NBS suggests that 2.1 million graduates joined the labour market in 2010. However, this does not take into account the number of students who study abroad and return home every year seeking employment.
Meanwhile the largest sector of the economy in terms of contribution to GDP – agriculture – grew by 5.64 per cent in 2010.
This indicates a labour market disconnect and an inevitable imbalance.
Also, the prevailing economic conditions in Europe and America have forced many to return home, swelling the labour force and also the national unemployment rate.
“It is clear that if the trend continues the potential for a social breakdown could increase,” said the report.
The second factor is the lack of skilled personnel which many recruiters and employers have cited as a barrier to employment. Some analysts believed this argument now forms the basis of many employers’ refusal to hire local graduates.
Underemployment: Potentially More Dangerous
The number of individuals that are currently employed in positions which have no correlation to their level of education, in the light of prevailing market conditions are swelling.
Economists have queried how the economy continued to expand at an annual average of 7.25 per cent, but the situation in the labour market tells a different story.
“It is assumed that every economy has a natural rate of unemployment or a non-accelerating inflation rate of unemployment, at which point it is assumed demand for labour equals supply. It is obvious Nigeria’s labour market is out of balance. The cause of this disequilibrium is multi-factoral,”he said.
The most dangerous yet potential impact of an increasing unemployed mass is the likelihood of a breakout in social unrest.
The root cause of the Arab Spring could be traced to the increasing dissatisfaction with the social and economic conditions in countries such as Tunisia, Egypt and Libya. Average unemployment in Sub-Saharan Africa (SSA) in 2009 is estimated at 8.2 per cent. Nigeria’s unemployment rate is above that of the sub-region’s average and is projected to hit 25 per cent in 2012. This uncomfortable phenomenon is fast crystallising and more disturbing, is the lack of short-term or medium term solutions.
Outlook
The 2012? to 2015 medium-term fiscal framework is established on creating jobs with agriculture as the pivotal sector. The agricultural sector has potential for growth and the capacity to absorb a large percentage of the unemployed.
The challenge however is a combination of an unclear value-chain and the lack of an efficient payment and settlement system.
However, government’s? intervention into the supply side of agricultural inputs such as fertiliser, machinery, new seedlings, and other inputs should be addressed to prevent potential drains.
Nigeria has to be able to generate strong demand for its products both domestically and from international markets. There is no denying that the country has the potential to be the hub of productive activities in Africa with an estimated population of 167 million.
A combination of polices that attract foreign direct investment (FDI) and focused spending on infrastructure to reduce the cost of production for domestic producers, could reverse the undesirable trend in the labour market.