Nigeria’s economic growth and employment contingencies
The All Progressives Congress administration of President Muhammadu Buhari has superintended massive job losses in Nigeria. According to the National Bureau of Statistics, over 9.8 million people became unemployed between the second quarter of 2015 and Q3 2017. The ruling party, which scores a perfect 10 in rhetoric, has so far been ineffective in tackling the growing job market crisis.
The government's Economic Recovery and Growth Plan (ERGP) ambitiously targets the creation of 3.7 million jobs per annum over a four-year period, culminating in 15 million jobs by 2020. However, 4.3 million people became jobless from January to September of 2017 alone, taking the total number of unemployed people to 15.9 million. The administration is set to further flounder on its job creation target in 2018 given the tepid economic growth outlook for this year.
The International Monetary Fund's GDP growth projection for Nigeria in 2018 is 2.1%, compared to the forecasted 0.8% GDP growth rate for 2017. Such meagre growth would hardly make a dent on the jobless rate. In a statement following its review of the Nigerian economy last December, the IMF said the economy remains vulnerable even though it is exiting recession. The Washington DC-based institution, therefore, advocated for new policies to achieve a stronger recovery and prevent lingering risks from crystalizing.
Economic growth needs to accelerate and be sustained to curb the rising unemployment rate. The high jobless rate itself can be a drag on economic growth. But rather than champion policies that would improve growth, the APC propaganda machine has been working at full tilt, touting the economic growth recorded last year as Nigeria exited the recession. Last month, National Chairman of the APC, John Oyegun, said: "We took over a totally collapsed country. The hope is that things have started to solidify...the economy has started to grow." Unfortunately, Chief Oyegun's sophistry does not even attempt to explain the facts and figures on the underperformance of the jobs market under Buhari as reported by the nation's statistics agency.
The negative correlation between recent GDP growth and unemployment rates is reminiscent of the jobless growth paradox that Nigeria – and other sub-Saharan African oil exporters – became well associated with during the commodities bo om that ended in 2014. While Nigeria's real GDP growth averaged 6% during the boom, the growth was not redistributed from the oil boom to high-productivity, labour-intensive sectors such as manufacturing to reduce unemployment and poverty.
The Buhari administration did promise to end the country' s commodity dependence, but its economic policies have failed to break from past regimes, which fostered jobless growth.
While the economy is technically out of recession, some of the labour-intensive sectors of the economy still recorded negative GDP growth in the third quarter of last year. For example, real growth rate of the construction sector was -0.46% in Q3 2017. This happened in spite of the massive capital spending in 2016 and 2017, aimed at building infrastructure and creating employment opportunities. Meanwhile, the manufacturing sector's GDP contracted by 2.85%. Indeed, since 2016, the real contribution of industries – which include manufacturing, mining and construction – to GDP has been on the decline, effectively surpassed by the agriculture sector, whose performance has been fairly impressive.
The sub-optimal recovery from the recession must make it necessary for the government to review its policies. Ramping up capital spending alone, while increasing the public debt stock, has hardly unlocked the vast potential of the Nigerian economy. The goal of new policies has to be to drive productivity growth in the agriculture, manufacturing and services sectors.
Investment in human capital must be a policy priority for the federal and state governments. This can be an elixir that increases the supply of skilled workers for the country's growth industries, thereby entrenching sustained economic growth that is inclusive. Human capital is the engine that drives innovation. It is also a productive input for economic progress. Without advancement in the stock of skills possessed by the labour force, Nigeria's true potential as the giant of Africa would remain elusive.
The government should also support investment in high-technology industries, which will employ high-skilled workers and produce high-end goods for both the domestic and export markets. This should be in addition to supporting innovation in low-technology consumer goods manufacturing. Plugging the productivity gap in the agriculture sector will enhance value chain development and boost the growth momentum in the sector.
The strong enterprise culture among Nigerians can also address the challenge of job creation. However, this is contingent on a favourable macroeconomic environment. SME empowerment programmes can be successful to the extent that there is access to finance and the supply of other backbone infrastructure like power and transportation. Here also, there is a nexus between the global competitiveness of those SMEs and the quality of education and skills acquired by the workforce.
It would amount to a huge demographic dividend and high labour productivity if there is improvement in the education and training of the labour force, which continues to increase due to Nigeria's high population growth rate. As a factor in the production process, labour productivity increases economic output, while also improving income levels and living standards of workers.
In the meantime, a significant portion of the workforce is unemployed and unproductive. The NBS expects the jobless rate to expand in Q4 2017, from the 18.6% recorded in the preceding quarter. At 15.9 million, the latest figure is more than the population of Rwanda and Namibia combined.