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Nigeria’s new unemployment rate: Quality over quantity

Researchers have argued that there is a tendency for the headline of a lower unemployment rate to overshadow some important information contained in the recently…

Researchers have argued that there is a tendency for the headline of a lower unemployment rate to overshadow some important information contained in the recently released Nigeria Labour Force Survey NLFS (2022’Q4 and 2023’Q1) by the National Bureau of Statistics, NBS.  

They argued that if not properly examined, this may lead to incomplete information which can be used for or against the effect of a policymaker’s actions.  

The NBS recently released the new unemployment figures, using a more globally acceptable definition, which now puts Nigeria’s unemployment rate at 5.3 per cent and 4.1 per cent for 2022’Q4 and 2023’Q1, respectively.  

The new statistics have generated a lot of debates on whether it adequately reflects the experience of most Nigerians.  

However, researchers at Ibadan-based Analysts Data Services and Resources in their September’s policy brief, argued that the figures are lower and even comparable to those of advanced countries. The policymake’s dilemma is whether to shift attention to other socio-economic problems with worse statistics or to critically look at the unemployment numbers again and see how to redefine the targets.  

Dr Afolabi Olowookere-led ADSR in the report titled “When Changes in Employment Methodology Achieve What Planning Cannot: A Policymaker’s Dilemma,” noted that job creation is one of the Eight-Point Agenda of the Bola Ahmed Tinubu-led administration.  

“If achieved in a sustainable manner, it can aid the attainment of the other items on the agenda, namely; food security, poverty eradication, economic growth, access to capital, a level-playing field, improving security, rule of law, and fighting corruption,” it argued.  

The objective of creating jobs and reducing unemployment is found in almost all of Nigeria’s plan and strategy documents. For instance, the National Development Plan, NDP (2021-2025), has the goal of reducing the unemployment rate from 33.3 per cent in 2020 to 19.6 per cent in 2025 through the creation of 21 million new full-time jobs. The Nigeria Agenda (NA) 2050 takes this further with the target of reducing the unemployment rate to 9.0 per cent in 2030, 6.5 per cent in 2040, and 6.3 per cent in 2050.  

In most of the discussions and analyses that led to setting these targets, it was widely acknowledged that Nigeria would need to be more committed to implementing relevant policies, particularly in human capital development and industrialisation for such low unemployment figures to be attained.  

However, the new unemployment figures by NBS, using a more globally acceptable definition, has now put Nigeria’s unemployment rate lower than all these targets, hence the need to redefine the targets and consider key metrics in the methodology.  

This is imperative because of the tendency for the headline of a lower unemployment rate to overshadow some important information contained in the Nigeria Labour Force Survey NLFS (2022’Q4 and 2023’Q1) by the NBS. If not properly examined, this may lead to incomplete information which can be used for or against the effect of a policymaker’s actions.  

The policy brief argued that beyond a low unemployment figure of 4.1 per cent in the first quarter of 2023, the NLFS shows some details which can guide policymakers in their decisions and programmes.  

It noted that beyond the report that 76.7 per cent of working-age Nigerians are engaged in some kinds of job for at least one hour a week, for pay or profit; policymakers should be interested in the types of jobs these Nigerians are doing and how well such jobs contribute to meeting their basic needs, especially as the report further revealed that 75.4 per cent of those with jobs operate their own businesses or engage in farming activities.  

It said given that 92.6 per cent of workers are employed in the informal sector, it is important to get more information on the sector, whether it has the capacity to achieve the production, revenue, and export diversification that Nigeria desires, and how fast the sector is transitioning to being formal.  

“It is equally important to determine factors pushing and keeping people in the informal sector,” it added.

It said there is a need to determine the advantage of being in wage employment and the optimal proportion of working-age Nigerians needed in this category as the NLFS showed that only 11.8per cent are in wage employment.  

The report also indicated that 10.6 per cent are engaged in helping (without direct pay or profit) in a household business while 3.6 per cent of working-age Nigerians are subsistence (own-consumed) farmers.  

The report added that policymakers should also be interested in the characteristics of the 20.1 per cent of the working-age population who are out of the labour force and the factors contributing to their being economically inactive.  

It observed that policymakers should be worried that only 2.2 per cent are engaged as apprentices/interns, especially given that apprenticeships and internships provide the opportunity for industry-relevant skill acquisition.  

It noted that beyond revising the targets set by policymakers on job creation and unemployment reduction, economists, by now, will be trying to juxtapose the new unemployment numbers with their understanding of the fundamentals of the economy, especially as they relate to output, prices and the wage level. In achieving these, he said it would be important for policymakers to provide answers to these questions: What is the lowest acceptable unemployment level that the Nigerian economy can sustain without creating inflation? What is Nigeria’s potential GDP and its determinants? What is therefore the relationship between Nigeria’s unemployment and inflation rates? What is the implication of a low unemployment rate for GDP growth? And what is Nigeria’s labour supply and how is it distributed across sectors and other socio-economic groups?  

In conclusion, researchers in the policy brief submitted that for a government that has job creation as an important item on its agenda, this non-comparability and the fact that the majority of working-age Nigerians are already engaged in some types of job suggests that the policymaker needs to pay more attention to the quality, as against the quantity of the jobs to be created.  

“In setting new targets for job creation and unemployment reduction, the policymaker needs to pay due attention to the types of jobs that the working-age Nigerians are doing, as well as the proportions of those in the underemployed, waged employment and informal sector categories.  

“In addition, the unemployment figures cannot be analysed in isolation; thus, a comprehensive analysis of the Nigerian labour market needs to be conducted to establish the relationship with other key macroeconomic objectives, especially the attainment of high and sustainable GDP growth and a low and stable price level.  

“The statistical authority has done its job based on the relevant methodology. It is now left for the policymaker to interpret, interrogate and use the figures in a manner that serves the country’s development agenda,” they said.  

It is believed that this will guide policymakers in focusing on decent jobs. 

 

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