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Unemployment: Push to reverse jobless growth

Unemployment: Push to reverse jobless growth

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Nigeria’s population is projected to hit 410 million by 2050. This will rank her as the world’s third largest populated country. Experts say there is no better time than now for federal and state governments, in collaboration with the private sector, to prioritise implementation of policies that will drive productivity growth in agriculture, manufacturing and services sectors. According to them, doing so while also investing in human capital development and infrastructure can reverse Nigeria’s paradox of jobless growth. Assistant Editor CHIKODI OKEREOCHA reports.

Nigeria boasts strong economic growth, which averaged 6.5 per cent between 2000 and 2017. Ordinarily, this should translate into a significant improvement in job creation and overall standard of living of Nigerians. Sadly, this hasn’t been the case. Despite the widely reported real Gross Domestic Product (GDP) growth, unemployment figures remain high and poverty literarily walks on four toes.

For instance, the National Bureau of Statistics (NBS) put Nigeria’s unemployment and underemployment rates at all-time high of 18.8 per cent and 21.2 per cent, respectively, for third quarter 2017. The NBS specifically said between January and September 2017 alone, 4.07 million Nigerians were jobless, bringing the number of unemployed people to 15.9 million.

What is responsible for the rising unemployment and underemployment rates, despite recording high growth in recent years. Why have poverty and its associated social disorder and growing insecurity refused to abate? Were policies targeted at job creation and caging the unemployment monster not properly thought through?

More importantly, what are the options available to sub-Saharan Africa’s biggest economy and most populous country to reverse the paradox that exists between her GDP growth rate and rising unemployment?

A report by multinational professional services firm PricewaterhouseCoopers (PwC) attributed the high unemployment rate to slow pace of job creation, noting that, in recent years, job creation and the quality of jobs have been marred by a slowdown in economic growth and the recession.

PwC in the report titled “Structural Transformation and Jobless Growth in Nigeria” stated, for instance, that the pace of job creation in Nigeria has been considerably weaker than labour force growth, pointing out that between 2010 and 2017, average job growth was 1.6 per cent, weaker than labour force growth of 3.9 per cent.

To reduce the unemployment rate, the report, obtained by The Nation, said an estimated employment growth of at least 4 to 5 per cent was required. “This would translate to at least three (3) million new jobs annually,” it added.

PwC’s concern over raising the nation’s employment growth rate stemmed from the projection that the population will rise from an estimated 206 million in 2018 to 410 million by 2050.

With a projection that this will make Nigeria the third largest populated country globally, PwC was emphatic that the implementation of policies that would deliver inclusive growth and engender a productive labour force has never been this imperative.


Informal sector is key to job creation

The Economic Recovery and Growth Plan (ERGP), the Federal Government’s medium-term Economic Plan, which was launched by President Muhammadu Buhari in April 2017, charts a course for the economy over the next four years (2017–2020).

Its vision was to restore economic growth, invest in Nigerians, and build a globally competitive economy. And as part of investing in Nigerians, the ERGP set an ambitious target of creating 3.7 million jobs per annum over the four-year period (2017–2020), culminating in 15 million jobs by 2020.

However, achieving this target and tackling Nigeria’s growing job market crisis is no tea party. For PwC, the informal sector holds promises of creating more high productivity jobs capable of boosting incomes and reducing poverty.

It noted, for instance, that the informal economy, which is usually associated with weak productivity growth, is large in Nigeria and accounted for an estimated 41.4 per cent of GDP and 68.0 per cent of jobs created between 2013 and 2016.

The report said based on trends observed in recent years, the informal sector continues to absorb the largest proportion of Nigeria’s workforce, accounting for 73.7 per cent of jobs created in 2016, up from 54.0 per cent in 2013.

“This sharp increase in new jobs created in the informal sector was associated with a decline in the share of jobs created in the formal and public sectors from 37 .2 per cent and 8.8 per cent in 2013 to 29.9 per cent and 0.0 per cent, respectively, in 2016.

According to the NBS, informal jobs are jobs generated by individuals or businesses employing less than 10 persons or businesses operating with little or no structure.


Structural reforms also

The PwC report, which was authored by Partner & Chief Economist Dr. Andrew S Nevin, Economist Adedayo Akinbiyi, and Junior Economist Dayo Bakare, said reducing unemployment through services-led growth was a critical success factor.

They, however, noted that there is need for structural reforms to lay the foundation for long-term sustainable growth in the broader economy and the services sector.

Such reforms, according to the experts, include business environment reforms, which are necessary to improve the ease of doing business, sustain macroeconomic stability, and attract investments.

They also specifically recommended improving human capital development, providing enabling infrastructure and intellectual property rights, noting that they are necessary ingredients to drive growth and productivity in the services sector.


Human capital

development is imperative

According to experts, the services sector relies on high-skilled workers to drive high productivity sectors which include Information and Communications Technology (ICT), medical services and other professional services.

Similarly, traditional services sectors such as transportation, accommodation and food services, rely on semi-skilled labour such as cooks, technicians, carpenters, plumbers, electricians, amongst others.

“Improving human capital for these categories of workers would require increased spending on vocational centres, apprenticeships and technical colleges to improve skills,” PwC said, noting that in Nigeria, firms cite the low quality human capital as a key constraint to doing business.

The Managing Director/Chief Executive Officer of Asset Management Corporation of Nigeria (AMCON), Mr. Ahmed Kuru, also emphasised the need to invest in human capital, noting that this will raise workers’ productivity due to upgraded skills and better education.

Kuru, who was Guest Speaker at the 2018 Institute of Directors (IoD) Fellows’ Luncheon, which held in Lagos, in a paper titled “Determinants of Growth in Transition Economies…,” also said it will empower workers with capacity for new ideas and innovations.

He said countries that have made sustained progress invested heavily in enhancing the stock of skills of its labour force by prioritizing early childhood quality education, training and provision of health care.

“The concept of human capital is even more important for labour-surplus countries. These countries are naturally endowed with surplus labour due to high birth rate. For example, the surplus labour in China, India, Brazil and Nigeria far outweigh the physical capital such as machinery, plant and equipment.

“This human resource can be transformed into human capital via education, training, and improved health care delivery,” Karu said.

Besides, human capital, he further said, “Provides the resources for the development and deepening of other areas of intellectual assets such as research/development, and training. It is interesting to note how China transformed its raw labour into human capital.

To develop adequate human capital, PwC said there needs to be a ramp up in investment in education, through increased funding for schools, and public research and technological institutes.

It, however, stated that given the poor state of public finances, where spending on education was allotted only 7.0 per cent of the federal budget in 2018, unlocking investment in education would require increased participation from the private sector.

Beyond investing in education, the Director General, Nigeria Employers Consultative Association (NECA), Mr. Segun Oshinowo, said time has come to completely overhaul the programmes and courses being run by Nigerian universities if the country must tackle the unemployment menace head on.

While pointing out that this will help bring the universities up to speed with current realities in the labour market and the economy generally, Oshinowo observed that courses being offered in Nigerian universities were designed over a century ago by the colonial masters and are therefore, obsolete.

The NECA DG, who spoke at a recent event in Lagos, also advocated for a change of mindset by youths from white collar jobs to vocational and skill-oriented jobs relevant to Nigeria of today.


Infrastructure is game changer

According to World Bank, telecommunications infrastructure and reliable power supply are the most crucial for services-led growth, aside quality human capital.

However, Nigeria suffers chronic deficits in these areas. Telecommunications infrastructure is weak. As a result, broadband penetration is low at 21 per cent, lower than 58.6 per cent and 52.6 per cent in South Africa and Egypt, respectively.

Similarly, there is a widening power infrastructure deficit, given that Nigeria’s installed power generating capacity is low at 10 gigawatts (GW), when compared with over 39 GW and 47 GW in Egypt and South Africa, respectively.

“To cover the shortfall in infrastructure, significant private investments in utility infrastructure such as telecommunications, power and transport is required.

“To attract investment, policies have to be consistent, while regulations need to allow market-reflective pricing, which guarantees cost recovery and contract enforcement between the private and public sector. These reforms are necessary to boost competition and promote efficiencies,” the PwC report said.

The consensus of development experts particularly those in the labour market space is that the private sector, in collaboration with the public sector (federal, state and local governments), must prioritize investment in infrastructure and human capital development.

They also recommend plugging the productivity gap in the agric sector to enhance value chain development and boost the growth momentum in the sector.


The post Unemployment: Push to reverse jobless growth appeared first on The Nation Nigeria.

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