More shocks as unemployment data exposes misery status of Nigerians

After two year delay, the National Bureau of Statistics (NBS) published Nigeria’s second (Q2):2020 labour statistics on Friday. CHIMA NWOKOJI, in this analysis interprets what the data says about the economy and the Nigerian population demography.

BEFORE now, economic and finance experts found it difficult to assess the healthy nature of the labour market and how to measure the impact of government policies targeted at creating jobs because of lack of real time labour data. But on Friday, August 14, 2020, the concerns were only slightly eased as the National Bureau of Statistics (NBS) published second quarter (Q2):2020 labour statistics, the first report since Q3:2018.

This means that labour data between fourth quarter (Q4) 2018 and Q1:2020 remain outstanding despite the recent update. By this, “we cannot conduct a trend analysis to better understand and explain what happened in the labour market between Q3:2018 and Q2:2020,” Ike Chioke, Managing Director at a Lagos based investment banking and Research firm, Afrinvest (West) Africa Limited said recently. It could also lead to a significant bias in policy decision, making this, will have a distortionary impact on the trend analysis of unemployment as the Q2, 2020 numbers will only be compared to Q3, 2018.

Yet, even with the available data, the NBS has revealed a lot of shocks in the Nigerian economy.

When President Mohammadu Buhari-led All Progressive Congress (APC) in February 2015 promised that it will create three million jobs every year, the leadership of the Nigerian Labour Congress also promised that it would hold the president accountable. But the two parties seem to be engrossed with salary negotiations and strikes to the detriment of other pragmatic labour intensive initiatives.

The president again modified his promise in his Democracy Day address in Abuja on June 2019.  President Buhari promised to move 100 million Nigerians out of poverty in 10 years.

In his words “This task is by no means unattainable. China has done it. India has done it. Indonesia has done it. Nigeria can do it. These are all countries characterised by huge burdens of population.”

Most analysts expected the executive to initiate a bill on job creation based on this promise. But the government proudly took the easy way of Tradermoni and N-Power rather than reviving Moribund industries as it earlier envisaged.

This made most Nigerians conclude that expecting the president to lift 100 million Nigerians out of poverty in 10 years is like saying Buhari will transform Nigeria into a country of law and order, justice and peace, progress and prosperity.

The result is what Taiwo Oyedele, West Africa Tax leader at PriceWaterhouse Coopers (PWC) describe as living in extraordinary times. Breaking it down, he says over 15 million people previously in full time employment are now either unemployed or underemployed. The NBS says out of 80 million labour force population (people qualified and willing to work), about 22 million are unemployed while 23 million are underemployed (working and earning below their potential).

Although the Central Bank of Nigeria (CBN) has been intervening in almost all the sectors of the Nigerian economy to save jobs, the situation is getting out of hands because there is a popular saying that a tree cannot make a forest. The apex bank has thrown money into agriculture, aviation, industries, banking sector, creative industry and health sector and now looking into households through its various financial inclusion programmes. All these simply means that it is not all about the CBN and money alone, because these sectors have ministries and departments that ought to patriotically pursue coherent policy measures to compliment the efforts of the CBN.

 

The shocks from Q2:2020 unemployment statistics

The long-awaited unemployment data was finally released after a two-year delay. The report shows that unemployment rate rose to 27.1 per cent in Q2:2020 from 23.1 per cent in Q3:2018 while underemployment rate increased to 28.6 per cent from 20.1 per cent.

This according to Ike Chioke and his team of researchers at Afrinvest in a note to clients is the worst performance on record since the reporting of quarterly data began in 2010.

“Interestingly, we discovered that underlying numbers suggest that the labour market is in a worse state than the headline unemployment rate would suggest. We are surprised by the reduction in the size of the labour force by 10.2 million to 80.3 million between Q3:2018 and Q2:2020 as this is the only decline on record,” they said.

Further explanation to this is that a large number of people of employment age were not interested in working. The decline was mainly driven by the reduction in the number of male persons available to work by 16.3 per cent to 41.7 million while labour force population in the rural area was down 19.1per cent to 51.8 million.

Furthermore, the report noted the continuous rise in youth (15-34 years old) unemployment rate to 34.9 per cent from 29.7 per cent, while the rate of underemployment rose to 28.2 per cent from 25.7 per cent. The trend in youth unemployment and underemployment is the worst of all age groups despite benefitting from government’s targeted employment programmes. Overall, the Q2:2020 unemployment report shows that the labour market has worsened in the past seven quarters.

Unemployment was highest among the youths, especially those in the age bracket (15-24 and 25-34 years). Within the age bracket (15-24 years) it was 40.8 per cent. These categories of people are new school leavers with little or no experience. They are also unlikely to be negatively impacted by the COVID pandemic due to their high immune system. Nigeria’s median age is 18.3 years the NBS report showed.

While the researchers admit that the reason for the decline is unclear, other unverified sources attribute it to the mentality of quick money and time wasting on the internet by most young adults. According to the later, for the fact that there are no jobs, youths/graduates prefer to spend the whole day predicting games, developing new internet fraud methods.

More worrying is the 0.7 per cent annualised increase in the size of the economically active population to 116.9 million, which is lower than the historical growth of 3.3 per cent yearly.

 

According to the NBS report, there is a steep decline in the number of fully employed people to 35.6 million from 51.3 million in Q3:2018 and the peak level of 55.7 million in Q1:2015. The total number of employed, including underemployed, also fell sharply to 58.5 million from 69.5 million.

“The sharp moderation in the size of people in employment and in full-time employment raises concerns about growth prospects, especially as labour productivity growth is poor. We reiterate that reforms that open sectors to investment and strong economic growth are crucial to creating jobs and slowing the pace of unemployment,” Chioke and his team suggested.

To the renowned economist and Managing Director of Financial Derivatives Company (FDC) Limited, Mr Bismarck Rewane and his think tank team, in the last four years, unemployment rate has more than doubled as the economy struggled to recover from the 2016 recession. This shows growing imbalances in the labour markets across Nigeria.

According to the FDC analysts, the misery index, which is a proxy for the level of citizens welfare and is computed as an addition of unemployment, underemployment and inflation has now spiked from 54.48 per cent to 68.26 per cent. At this level, Nigeria is now ranked the 6th country in the world with highest misery index.

“So, as the COVID paralysis takes its toll, the delayed impact will show up in higher unemployment in future quarters. This means that the Economic Sustainability Plan needs to focus on job creation and shared prosperity especially in the light of the debilitating effect of the ever-growing level of multi-dimensional poverty in Nigeria,” Mr Rewane and his team wrote in the firm’s economic bulletin.

 

Nature of misery and poverty

The misery index, which is unemployment (27.1 per cent) + underemployment (28.6 per cent) + inflation (12.56 per cent ), is now 68.26 per cent, making Nigeria the 6th most miserable country in the world. The simplest explanation to the misery index is poverty. There is a consensus opinion that Nigerians are getting poorer by the day. It is worth mentioning that the unemployment rate is a lagging economic indicator, meaning that the impact is felt after the cycle has changed. Therefore, the unemployment rate could be much higher in subsequent quarters due to the COVID-induced economic paralysis.

The NBS took a poll to assess the impact of COVID-19 on the population. The bureau›s telephone coverage of the same 1,950 households it contacted in 2018/19 within its general household survey between April 20 and May 11 (FGN lockdown) found that 42 per cent of respondents had been working before the outbreak but had since lost their jobs. Interestingly, there were not huge differences per income group, with the ratio 45 per cent for the poorest quartile and 39 per cent for the richest quartile.

It shows that 51 per cent of respondents reduced their consumption of food and 29 per cent drew on savings. The next three mechanisms were cuts in non-food consumption, support from friends, family and additional income-generating activities.

In advanced economies, the mechanisms would include one-off support from the state such as a furlough scheme and regular government benefits to cover unemployment and housing. Common to developing and advanced economies are food banks or their equivalent.

The pandemic disrupted economic activities across virtually all sectors of the economy, making it more difficult for output growth to keep up with the fast-growing population (2.6 per cent) and creating some disequilibrium in the labour market.

Nigeria’s poverty is unique in two aspects. Nigerians suffer from extreme poverty. Extreme poverty is defined by the UN as “a condition characterized by severe deprivation of basic human needs, including food, safe drinking water, sanitation facilities, health, shelter, education, and information. It depends not only on income but also on access to services.” There is no rational for Nigeria’s poverty considering human and material resources the country is blessed with.

Common root causes of poverty include lack of good jobs, lack of job creation, lack of good education, conflicts, social injustice, lack of food and water, lack of infrastructure, lack of good healthcare services, bad governance, lack of safety and security.

On the implications on fiscal policy, FDC suggested that the continued rise in the unemployment numbers and a possible spike in subsequent quarters due to the COVID disruptions further support the need for more aggressive measures to reduce the pandemic effect on growth and unemployment.

The risk to this remains the fear of a second wave in infections. The IMF has projected that the Nigerian economy will contract by 5.4 per cent in 2020 due to the twin shock of the COVID pandemic and oil price crash. This will most likely push the unemployment rate above the 35 per cent threshold in subsequent quarters.

Although, the president has launched a programme to engage 774,000 Nigerians in special public works, FDC analysts note that this will be sub-optimal to make a significant impact on the unemployment numbers.

 

Demographic spread

The breakdown of the unemployment statistics showed that the states with the highest unemployment rate is mostly oil producing. On the other hand, the states with the lowest unemployment rate are predominantly in the North West, which is plagued by insecurity. Lower unemployment rate in this region suggests increased migration. Unfortunately, some of these states had the highest level of poverty and inflation.

Anambra, Kwara, Sokoto, Zamfara and Ebonyi have the lowest unemployment. States with highest poverty rate are: Sokoto, Taraba, Jigawa, Ebonyi and Adamawa while states with highest inflation rate are Bauchi, Sokoto, Ebonyi, Plateau and Taraba.

In a similar development, Economists at Proshare research earlier in the year observed that the banking sector which has always been seen as the one of the highest employers of labour have started to scale back their operating expenses as they begin to right-size their staffing needs to remain competitive and protect business margins. A clear example of the emerging shift in industry strategy occurred in January 2020 when one of Nigeria›s oldest top-tier banks, disengaged hundreds of its staff. Investigations by Proshare indicate that the bank carried out the exercise to lean into more competitive workforce demography and streamline salary compensation along with broad industry standards. Later on, others followed. The once vilified term, Rightsizing, has become a respectable corporate expression.

 

 

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