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Unemployment Set to Rise Still Higher

Nigeria Economy	1098 VIEWS
Nigeria Economy
1098 VIEWS

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Thursday, January 16, 2020 /09:20 AM / By FBNQuest Research / Header Image Credit: InfoGuide Nigeria

The impact of the several government initiatives geared towards boosting job creation is being blunted by the massive growth in the labour force. 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.

Chris Ngige, the reappointed federal minister for labour and productivity, disclosed that the country's unemployment rate is likely to hit 33.5% this year. The shortage of critically needed skills and competencies is one factor behind joblessness.

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.

However, over the past few years many businesses have slowed down or, in some cases, halted recruitment. In the country's choppy business terrain, many firms are reluctant to take on additional labour. This is borne out, for example, by our own manufacturing PMI.

It is assumed that the finance bill signed into law this week could provide some respite for small and medium-sized businesses. The bill states that companies with annual turnover of N25m or less will be exempt from companies' income tax (CIT) while companies with turnover of N25m - N100m are to pay a tax rate of 20% for CIT.

Previously, a fixed CIT rate of 30% was applied to all company sizes. With the passage of the bill, small and medium-scale enterprises should be better placed to grow their businesses and perhaps boost staff strength.

Policymakers worldwide list youth entrepreneurship and development as leading solutions to high unemployment. The FGN's N-Power has supported the mass training of Nigerians aged 18 to 35 years.

We understand that plans to restructure this initiative are underway. This was prompted after the authorities discovered that some beneficiaries were breaching their contracts by refusing to exit after the stipulated two-year duration.

To ease pressure on the unemployment rate, state governments should consider identifying their respective competitive advantages and use this information to promote appropriate formal skill acquisition training. By educating the locals as well as equipping them with new skills, this would boost employability.

In its latest economic update on Nigeria, the World Bank estimated that, given the high population growth rate, nearly 30 million new jobs would be needed by 2030 just to keep the current employment rate constant.

According to the World Bank, 80% of new labour market entrants end up unemployed. Additionally, over the past five years, the quality of available jobs in the country has declined significantly.