JOBLESSNESS is becoming a way of life in Nigeria. In its just-released report that covered the third quarter of 2016, the National Bureau of Statistics paints a grim picture: 27.1 million citizens are unemployed. Companies and manufacturing concerns are closing down; others are shedding jobs in an effort to stay afloat. To stem the ugly tide and put people back to work, government needs to implement radically creative measures that will enable businesses to reopen their shut gates.
Really, the new figure from the NBS is not surprising. In Q3 alone, the economy – assailed by recession and three straight quarters of negative growth between January and October 2016 – destroyed 272,499 full-time jobs. Conversely, the NBS noted that 782,886 active people entered the labour force, but the economy generated only 187,226 jobs. This is frightening. Year-on-year, job losses amounted to 60.6 per cent. In reality, Nigeria had been recording what economic experts call a non-job growth during its oil boom period.
Although it experienced high oil revenues earlier this decade, the government did not spend wisely on capital projects, or boost industry, agriculture and savings. It allowed infrastructure to deteriorate. Corruption and dependence on importation caused a severe bleeding of resources when the collapse of global crude prices started in mid-2014.
The NBS says, “With the Nigerian labour force population rising by a five-year average of over 2.6 million annually, the economy needs to generate the same level of jobs annually just to hold the unemployment rate at the current level of 13.9 per cent.” But the 13.9 per cent
does not give the comprehensive picture. This is because of a new method of calculation adopted in the last dispensation. It separates unemployment and under-employment (which currently stands at 19.7 per cent). The pragmatic rate comes when the two are merged: it gives 33.6 per cent. This is a national crisis.
Notably, youths are affected the most. The NBS’s 2016 Q2 report says that there are 17.6 million unemployed/underemployed youths. Socially, this is dangerous. To fight unemployment, the three tiers of government need to roll out new policies that will spur growth. For now, it seems our economic managers are blind to the impact of unemployment and how to exit the recession. For example, in 2017, the Federal Government and 36 state governments have a total budget of N13.5 trillion. Out of this, recurrent expenditure is estimated to gulp N6.51 trillion. This is bad economics. It harms capital expenditure, which can boost job creation.
Government blames the crash in oil prices for this, which has essentially caused the naira to crash to an all-time low against the US dollar. On Monday, it exchanged at N499 to $1 at the parallel market. Also, because of militant activities in the Niger Delta that have restricted oil output, Nigeria cannot meet its daily production quota of 2.2 million barrels. The effect is that government revenue has reduced seriously. Consequently, companies are closing down because they cannot access the forex they need to import raw materials.
Because of low revenue, the public sector is not hiring. State governments are struggling to pay salaries and are not employing. To stop job destruction, it is critical for government to identify the constraints to job creation. Thus, government must free the economy from public control. It is killing it. Fortunately, policies that inhibit the economy can be reformed by adopting free market policies.
The United Nations’ World Development Report 2013 stresses the role of the private sector-led growth in job creation. “Governments play a vital enabling role by creating a business environment that enhances the demand for labour,” says (former) World Bank Senior Economist, Kaushik Basu. This is wise counsel, and is also the key motto of World Bank President, Jim Yong Kim. He said, “It is critical that governments work well with the private sector, which accounts for 90 per cent of all jobs. We need to find the best ways to help small firms and farms grow.”
There is a strong link between power, economic growth and job creation. A growing body of research has shown that energy use is either the cause or the facilitator of economic growth and that inadequate electricity provision is a binding constraint to growth and job creation. But the Buhari’s government efforts to get our power system back on track are stuck in a maze of confusion. There is strong evidence that economic growth is influenced by government’s economic policies. So far, Buhari government’s has not pursued policies that promote growth.
The administration should loosen its control on the commanding heights of the economy, declare a national emergency in the power sector, fix the volatile forex market and work on the ease of doing business. This economy needs private capital to grow. Concentration should be on how to liberalise the sectors that can generate jobs. It should swiftly privatise the public refineries and get the Railway Act 1955 repealed to create room for foreign private investors. The refineries have been losing money for decades because they are not producing products for consumption. It is an anomaly to do business this way.
An efficient railway network, apart from moving goods and people, is capable of generating high impact jobs. According to its Department of Transport, United Kingdom’s liberalised rail system employs more than 190,000 people and enables more than 1.3 billion-passenger journeys yearly. The government should go this route: rail privatisation. The Aliko Dangote Group is showcasing what private investors can do by proposing an investment of $100 million in a truck manufacturing company in Lagos. When operational, the firm will employ 3,000 people and produce 10,000 units per annum.
However, economies that create jobs empower small-scale enterprises. SMEs employ a lot of workers, but Nigeria’s harsh business climate stunts their growth. NBS statistics note that it is the informal sector that creates most jobs in Nigeria. But the main impediments to their sustenance are lack of access to capital and poor electricity supply. Nigeria has an interest rate anchor of 14 per cent. This is a huge hindrance. The Bank of Japan, in comparison, has adopted an interest rate range of 0 per cent to -0.1 per cent. For an economy with a GDP of $481.07 billion, business must have electricity to drive growth. However, Nigeria is still struggling with less than 5,000 megawatts.
Again, Buhari must adopt policies that will reduce Nigeria’s dependence on imported goods, which sustains jobs in other countries, and diversify to agriculture, mining, industry and services as a way of producing staples for domestic consumption and boosting jobs and income.
Source: The Punch Editorial
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