21, 2020 / 09:33 AM / by FBNQuest Research / Header Image
Credit: Red Cheetah
Given its hazy business environment, as well as its macroeconomic challenges, Nigeria has struggled with reducing its unemployment rate. Over the past several years, the rate has steadily trended north. Although lagged, the latest labour force report from the National Bureau of Statistics shows a rise in the national unemployment rate to 23.1% in Q3 2018 from 22.7% recorded in the previous quarter. Labour markets have been adversely affected by economic shutdown due to the Covid-19 outbreak, resulting in higher unemployment rates across the globe.
In India recent data show that the unemployment rate has risen to 27% (compared with 7.2% recorded in January), and in the US the rate is currently 14.7%, compared with 3.5% recorded six months ago.
The federal ministry for labour and productivity had disclosed that Nigeria's unemployment rate is likely to hit 33.5% this year. We assume that the ministry may be considering an upward review of this projection, given the downturn triggered by the ongoing pandemic.
Small business is regarded as an engine of the economy, partly due to its ability to provide jobs. Official data show that the 37+ million micro, small and medium scale enterprises (MSMEs) in Nigeria provide over 59 million jobs, and account for almost 50% of GDP.
SMEs are the hardest hit from the impact of restrictions and lockdowns. For some, downward revisions of salaries have taken place. In worst case scenarios, retrenchment exercises have been conducted.
In Nigeria's private sector, the banking industry is regarded as a top employer of labour. Data compiled by a reputable research agency show that based on companies listed on the NSE, banks make up a significant percentage of the top employers. Some segments of the banking industry had begun laying off workers due to current economic headwinds. However, this was muted following CBN consultations with the Bankers' Committee earlier this month.
The CBN has also rolled out other measures to boost productivity, and by extension limit job losses. These include: an interest rate reduction on eligible CBN intervention facilities from 9% to 5%; the creation of a N50bn targeted credit facility through the NIRSAL microfinance bank for SMEs; and unspecified strengthening of the CBN loans-to-deposit policy, which has helped with boosting credit to the real sector.
An obvious beneficiary of the coronavirus outbreak has been the technology sector. Digitizing operational processes has assisted some companies with maintaining workflow activities, keeping productivity afloat and avoiding layoffs.
The shortage of critically needed skills and competencies is one factor behind joblessness. This is likely to get worse as the future of work, which threatens to render skills of some employees and jobseekers obsolete, comes into play. The FGN should consider revamping curricula across all education levels to properly incorporate technology, since artificial intelligence algorithms will at some point become co-workers to humans.
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