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>Big Story >Nigeria’s unemployment crisis amidst the Covid-10 pandemic

Nigeria’s unemployment crisis amidst the Covid-10 pandemic

Abstract

Massive and unemployment and underemployment are among the most serious obstacles to Nigeria’s economic growth and development. Over the years, the efforts of successive governments to address the unemployment crisis have yielded very little result. The COVID-19 Pandemic has further exacerbated the unemployment crisis.  The increasing level of unemployment in the country is attributable to lack of a proper economic plan to put the country on the path of inclusive growth. Against this backdrop, this paper assesses the dimensions and magnitude of unemployment and its implicationsfor the Nigerian economy, using extensive desk review. Findings from the review showed that the high levels of unemployment and underemployment in the country have implications for increased poverty, heightened insecurity and social vices. This paper argues that government needs to urgently address the unemployment crisis in a bid to tackle the massive poverty and security challenges in the country. The paper therefore recommends few policy measures the government could explore to address the unemployment crisis.

Introduction

Unemployment is a global phenomenon across many developed and developing countries. However, the magnitude of this challenge is more in developing and emerging economies where majority of young people experience severe unemployment and underemployment in both the formal andinformal sectors. The trend is not different in Nigeria where massive unemployment appears to be one of the biggest challenges bedeviling the growth and development of the economy.

There is no doubt that the rising trend of debilitating youth unemployment and underemployment have implications for widespread poverty, heightened insecurity, youth restiveness and high rate of criminality being experienced in the country. In the wake of recovery from a recession in 2016, Nigeria’s economic growth averaged 2.5% from 2017 to 2019 with growth driven mainly by the service sector. Worthy of note is the fact that the relative economic growth witnessed has neither abated the massive unemployment rate nor reduced poverty. Also, the relative growth in GDP remained lower than the rate of population growth, meaning that Nigerians, on average, are getting poorer. The recent survey (September, 2020) conducted by Africa Polling Institute (API)[1], on the relationship between the citizens and the Nigerian state, revealed five key policy areas that Nigerians want the government to improve: employment (30%), security (21%), good governance(18%),empowerment (15%) and education (12%).The COVID-19 pandemic and the recent plunge in the price of oil have further aggravated the unemployment crisis.

Over the years, successive governments have attempted to address the worrisome unemployment figures in the country through different policy interventions and programmes aimed at boosting job creation. Some of these programmes include: the National Poverty Eradication Programme (NAPEP) in 2001, the National Economic Empowerment and Development Strategy (NEEDS) in 2003, the Small and Medium Enterprises Development Agencies (SMEDAN) also in 2003, the adoption of Vision 20:20:20 in 2009, the Subsidy Reinvestment and Empowerment Programme, known as (SURE-P), the Youth Enterprise With Innovation in Nigeria (You-WIN) in 2012, the recent N-Power Programme which is an off-shoot of the National Social Investment Programme in 2017, amongst others. Despite these efforts by successive administrations, the unemployment scourge has continued to pose serious challenges to the economy. To address this situation, this study therefore firstly, assesses the dimensions and magnitude of unemployment and its implicationson the Nigerian economy.

Overview of Unemployment in Nigeria

According to the International Labour Organisation (ILO)[2], a person is termed unemployed if he/she is willing to work and is within the active working age but could not find a job. This includes people who have lost their jobs. In Nigeria however, the unemployment rate has been widespread despite having the biggest economy in Africa with an estimated GDP of US$397 billion ((WEF, 2019)[3]. With a population of over 200 million people, Nigeria prides itself as the most populous country in Africa and the sixth largest in the world. Roughly seven (7) in every (10) Nigerians are under 35 years old[4], making the future of the country dependent on how well the potentials of the teeming youth population are harnessed for the country’s development. Unfortunately, the unemployment rate is even more severe among the youth population.  The recent unemployment data (released by NBS in the second quarter of 2020) indicates that the unemployment rate has increased by 4% rising from 23.1% in 2018 to 27.1% in the second quarter of 2020[5]. As illustrated in figure 1, even among the OPEC countries, Nigeria’s unemployment rate was highest in 2019 after Angola, while Kuwait and United Arab Emirates had the lowest unemployment rate strongly suggesting that the oil wealth in Nigeria and Angola, has not been adequately channeled into job creation.

Figure 1: Unemployment Rate in OPEC Countries (2019)


Source: (World Bank, 2020)

In the same vein, the underemployment rate in Nigeria increased by 8%, rising from 20.1% in the third quarter of 2018 to 28.6% in the second quarter of 2020 and implying that a total of 55.7% (constituting more than a half of the country’s population) are either unemployed or underemployed. The dysfunctional economic performance is attributable to several failed development plans, lack of good governance and committed leadership.

The data further revealed that the unemployment rate centered on the bourgeoning youth population aged between 15 and 24 years who supply the highest unemployment rate (40%). They are followed by those from 25 to 34 years (30.7%). This is very disturbing given that three-quartersof the country’s population are under 35 years, suggesting that much of the active labour force in the country remain unemployed; an indication ofa massive waste of the country’s productive youthful manpower resources. In line with this, Olajide and Adeleke (2019)[6] observes that the productive energies of the youths which ought to be important assets to the country, are being wrongly channeled to counter-productive activities since they do not have better things to occupy them.

The data also shows that unemployment rate among rural dwellers increased from 23.9% in the third quarter of 2018 to 28% in the second quarter of 2020 while the unemployment rate among urban dwellers also rose from 21.2% to 25.4% in the reference periods. The spike in the unemployment rate among rural dwellers is due to several years of neglect by the government in the provision of infrastructure that could support local business and agricultural activities. Over the years, most government development activities have been concentrated in the urban centres with very little or no attention to the rural areas, thereby leading to rural-urban migrations and congestion of the cities.

The federal government anticipated that the full implementation of the Economic Recovery and Growth Plan (ERGP) after the  economic recession in 2016, would  cause unemployment to significantly drop  from 16.2% in 2017 to 11.2% in 2020 and also increase net job creation from 1.5 million in 2017 to 5.1 million in 2020 (Ministry of Budget and National Planning 2017)[7]. However, a review of the ERGP shows that the employment target has not only not been achieved, but had rather, worsened since 2017 (Augusto et al., 2019)[8]

As depicted on figure 2, Nigeria’s unemployment rate was almost five times higher than the global rate of 5.4 per cent in 2019. Despite this frightening scenario, the government has not shown serious commitment to tackling the unemployment scourge which has been trendingupward since 2014. Also, contrary to what obtains in most developed climes, there is in Nigeria, no provision for social security to cushion the effect of economic hardship on the unemployed as citizens are allowed to fend for themselves.

Figure 2: Nigeria’s Unemployment Rate Versus World Average Unemployment Rate

Source: (NBS, 2020)

More disturbing is the non-diversification of the economy away from crude oil. The Nigerian economy is still highly dependent on crude oil as the major source of government revenue, a situation which has not helped the development of other critical sectors. With the non-diversification of the economy, the fiscal linkage between the oil sector and the Nigerian economy remains very tightly fused as the volatility in international crude oil prices continues to bring great effect on the GDP growth and unemployment rate.

As shown in figure 3, the unemployment rate has been counter cyclical with the volatility in the oil price. Notably, when oil price crashed from $96.3/b in 2014 to $49.5/b in 2015, unemployment increased from 6.4% in 2014 to 10.4% in 2015. Similarly, when the oil price dropped from $64.2/b in 2019 to $40.8/b in the second quarter of 2020 due to the spillover effect of the COVID 19 pandemic, unemployment again rose from 23.1% to 27.1% in the reference period. In this trend, when the oil price rises, the unemployment rate reduces and increases when the oil price falls. This implies that the unemployment rate in Nigeria is strongly influenced by the volatility in crude oil prices. More so, the huge revenue derived from the oil sector over the years has not been transformed into improving the living conditions of the citizens, as the country continues to witness high poverty rates, high inflation rates, high lending rates, low life expectancy and low human development indices amidst unemployment.

Figure 3: Oil Price and Nigeria’s Unemployment Rate

Source: (NBS and OPEC Bulletin, 2020)

Implication of COVID-19 Pandemic on the Unemployment Rate

Many countries across the world are currently facing economic challenges due to the COVID-19 pandemic.  Several measures aimed at reducing the spread of the virus have adversely affected the global employment rate. The Nigerian economy is not insulated from this global shock as there have been significant negative effects of the pandemic on government fiscal space and unemployment, especially during the lockdown. The lockdown directives and movement restrictions led to the shutdown of several businesses, with many employees either outrightly sacked or losing work hours. However, as the pandemic intensified, most businesses in the private sector relied on staff downsizing to reduce overhead costs in order to remain operational.

It is worth noting that before the COVID 19 pandemic, the unemployment rate was already high at 23.1%. Also, about 4 in 10 Nigerians were already living below the national poverty line while millions were slightly above it, making them susceptible to poverty at the outbreak of the pandemic[9].  This validates the projection of the Nigerian Economic Sustainability Committee (ESC)[10] that due to the effect of the COVID-19 Pandemic, unemployment rate in Nigeria could rise to 33.6% with 39.4 million Nigerians being out of job by December 2020.

As the outbreak increased, Nigeria’s GDP declined by 6.1% in the second quarter of 2020 according to the National Bureau of Statistics (NBS)[11], putting an end to the 3-year positive growth recorded since the economic recession in 2016. The decline was driven by lower levels of economic activity in both the formal and informal sectors as a result of the nationwide lockdown efforts of government in a bid to contain the pandemic. According to the report, the mining & quarrying sector, as well as the non-oil sector, dropped by 16.02% and 6.05% respectively in Q2 of 2020. The agricultural sector and the manufacturing sector also recorded a contraction of 2.57% and 0.14% accordingly. The construction sector, service sector and the financial sector equally experienced a contraction. The decline in economic activities of these sectors resulted in widespread job losses across the country, as the unemployment rate skyrocketed to 27.1% in the second quarter of 2020.

As posited by Ozili (2020)[12], the rise in unemployment was a combination of the declining oil price and effect of the COVID-19 outbreak.Economic activities were disrupted when lockdown and social distancing policies were introduced. Adeyinka et al, (2020)[13] stresses that the COVID-19 pandemic affected all components of aggregate demand, leading to loss of wealth, reduced household spending and firms’ investment due to uncertainty about the duration of the pandemic. They emphasize that the pandemic also caused a decline in stock prices which eroded investors’ wealth, thereby dampening the potentials for job creation.

In the same vein, the COVID-19 impact survey by the National Bureau of Statistics (NBS)[14]found that of the 1950 households surveyed, 42% stopped working. The report further stated that households from the poorest quintile were the highest proportion of Nigerians who stopped working (49%) relative to the wealthiest (39%), while 79% of the entire households surveyed reported decrease in income. More so, while the COVID-19 pandemic affected almost all the sectors, the service, commerce and agricultural sectors were found to have the highest number of workers who stopped working. The implication of this finding is that more Nigerians have been pushed below the poverty line due to the pandemic.

Significant job losses have also been witnessed across the Small and Medium-Sized Enterprises (SMEs). In Nigeria, SMEs contribute 48% to GDP, account for 96% of businesses and 84% of employment[15]. The Covid-19 pandemic and resulting inflationary pressure contributed to the increasing job losses with negative implication on poverty. However, while the youths constitute the highest unemployed population, women bear the greatest negative impact of unemployment and poverty, particularly in the rural areas, where they have serious obligation of children upkeep and generally catering for the family.

Economic and Social Consequences of High Unemployment

One of the reasons for the continuous rise in Nigeria’s unemployment rate is the non-diversification of the economy away from its over 40 years dependence on oil revenue. The country’s economic growth and development have been held back by policy failures and absence of purposeful governance. Over the years, the government has deliberately ignored the need for job creation and also to transform the economy into shock-resilient productive sectors. The negative consequences of these governance failures are quite glaring. As pointed out by Akintunde (2017)[16], the consequence of bad governance  in Nigeria has given rise to mass poverty, high unemployment, widespread corruption, economic stagnation, insurgency and terrorism, kidnapping, social unrest and conflict.

Markedly, unemployment and poverty and recently, heightened insecurity have remained the major bane of Nigeria’s economic development. Some scholars have studied the link between unemployment and poverty and found that unemployment is one of the factors that induce poverty in Nigeria (Adelowokan and Adesola (2019)[17].Indeed, widespread poverty and increasing unemployment rate constitute direct cause of economic and social instability as currently being experienced in the country. This is evident in the separatist agenda, ethno-religious conflicts, the Boko Haram insurgency ravaging the Northeast region, the farmer-herder clashes especially in the Northcentral region, the militancy in the Niger-Delta, and the issue of banditry in the Northwest region. The current crises and killings in the Southern part of Kaduna State do not help matters either.

The growing insecurity impedes business activities, discourages local and foreign investors, and also threatens the corporate unity of the country; a situation which leaves Nigeria among the top fragile countries in 2020.

Out of 178 countries, Nigeria ranks 14th most fragile country in the world and 9th in Africa[18]. The Fragile State Index measures a country’s vulnerability in pre-conflict, active conflict and post-conflict situations. However, several scholars have ascribed the increasing challenges to security in the country to the failure of leadership in terms of reducing unemployment and poverty (Nwagboso, 2018[19]; Yahaya et al. 2018[20]).

Besides heightened insecurity and social disorder, very striking is the strong link between the massive unemployment rate in the country and social vices and crime. According to Okeke and Ngonadi, (2017)[21], the high rate of unemployment is responsible for the prevalence of social vices and crime perpetuated by some graduates in Nigeria. Also, strongly correlated with high unemployment is the increasing level of prostitution, oil bunkering, drug addiction, trafficking, rape, kidnapping among other ills. Furthermore, financial and cybercrimes have become increasingly patronised by most unemployed youths in Nigeria. Some of these crimes include internet fraud, identity fraud, ATM skimmers, hacking, phishing and piracy. In addition, many of these youths have taken the risk of travelling to Europe by road in search of better life opportunities. The unfortunate fact is that some of them have died in the Sahara Desert while embarking on the journey (Adegbami, 2019)[22]. Buttressing the rationale for the massive youth emigration, Adepoju (2017)[23] opines that the sustained pressure on youth emigration in Nigeria is occasioned by the absence of job opportunities to meet up with rapid population growth amid widespread poverty and high level of unemployment. All these fraudulent activities do not only put Nigerians in bad light on the global space but also constitutea colossal waste of the country’s manpower resources.

Conclusion and Recommendation

This paper has demonstrated that the widespread unemployment in the country constitutes a recipe for youth restiveness and social disorder. The combined unemployment and underemployment rate of 55.7% in the second quarter of 2020, depicts a great danger for the country’s unity and socio-economic development, considering that three-quartersof the country’s population are under 35 years. This no doubt, has implications for increasing poverty and heightened insecurity, which is currently ravaging the country. Therefore, addressing the unemployment challenges will have a positive effect on reducing poverty and insecurity in the country. In this vein, there is the urgent need for government to formulate effective policy and programmes for aggressive job creation. 

While the private sector has the potential for bridging the unemployment gap, the government must embark on key macroeconomic and monetary policy reforms to provide the enabling environment, strategic for job creation, especially in the area of accessing single-digit loans which can boost the productive capacities of the private sector. Also, the need to diversify the economy away from the oil-dependent to a more resilient and job-creating one cannot be over-emphasized.

Again, entrepreneurship is considered an important means for job creation;so, to reduce the unemployment rate, government should focus on  massive investment  in youth intensive sectors such as; entertainment and music, ICT, coding, artificial intelligence,  comedy and skit amongst others, while providing potential and existing youth entrepreneurs with the opportunity to access funds for business development and expansion, moreso in a situation where some youthsdo not possess the skills needed for productive employment. To address this challenge, there should be increased investment in educational infrastructure and curriculum development to ensure the alignment of graduate’s skills with the industry’s needs. We commend some of the initiatives by the Central Bank of Nigeria (CBN), particularly the NIRSAL SMEs COVID-19 Support Fund, Survival Fund, Youth Entrepreneurship Development Programme and the proposed Nigeria Youth Investment Fund, which are as a result of a collaboration between CBN and Federal Ministry of Youth and Sports Development. We urge that these schemes be closely monitored to ensure effective implementation and penetration to the youth population in both urban and rural areas.

Finally, agriculture has been identified as an important sector in unlocking the doors of employment in the country. However, the attention of the teeming unemployed youthsis not directed towards harnessing the job opportunities in the sector due to lack of incentives. Therefore, government needs to provide adequate incentives to enablea youth uptake across agricultural value chains.

About the Institute

Africa Polling Institute (API) is an independent, non-profit and non-partisan opinion research think-tank, which conducts opinion polls, surveys, social research and evaluation studies at the intersection of democracy, governance, economic conditions, markets and public life in order to support better public policy, practice and advocacy in Africa.

About the Authors

Dr. Festus Osaguis a Research Fellow at the Africa Polling Institute (API) in charge of Economy and Markets. He holds a PhD in Economics from the University of Ibadan and was previously a research fellow at the Centre for Petroleum Energy Economics and Law (CPEEL), University of Ibadan, under the Directorship of Professor Adeola Adenikinju.

Ekene Anthony Okonkwo is a Senior Research Associate with the Africa Polling Institute (API). He holds first and second degrees in Economics from Delta State University and the University of Ilorin respectively. He has been team leader on a number of studies and survey projects focusing on the economy for the Institute.


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New Release: The African Economic Congress 2020 Report.