The PricewaterhouseCoopers Nigeria says unemployment is a major socio-economic challenge in the country

By Anayo Ezugwu

WITH unemployment and underemployment on the rise, Nigeria faces tremendous challenges in terms of sustainable job creation and productivity. PricewaterhouseCoopers, PwC Nigeria, said the incidence of high unemployment has become a major socio-economic challenge over the past decade, despite strong economic growth in the country.

PwC in its latest report, titled: “Structural Transformation and Jobless Growth in Nigeria,’ said despite strong economic growth which averaged 6.5 percent between 2000 and 2017, high unemployment remains a critical challenge facing the economy of Nigeria. The report noted that the latest available data puts the unemployment rate at 18.8 percent, and underemployment at 21.2 percent, the highest since the National Bureau of Statistics, NBS, adopted a new methodology for measuring unemployment in 2010.

“The incidence of high unemployment in Nigeria can be attributed to the slow pace of job creation, which has been considerably weaker than labour force growth. Between 2010 and 2017, average job growth was 1.6 percent, weaker than labour force growth of 3.9 percent. To reduce the unemployment rate, we estimate that employment growth of at least 4-5 percent is required.

“This would translate to at least three million new jobs annually. Delivering jobs capable of boosting incomes and reducing poverty requires creating more high productivity jobs within the formal sector. The informal economy which is usually associated with weak productivity growth is large in Nigeria and accounted for an estimated 41.4 percent of GDP and 68.0 percent of jobs created between 2013 and 2016.

“The economic development model which resulted in industrialisation in advanced economies and East Asia followed a three-stage process where the agriculture, industry and services sectors dominated output in that sequence. In contrast, structural change in India has made a positive contribution to growth and employment, driven by the expansion of the high productivity activities within the services sector, largely Information Technology, IT, and Business Process Outsourcing services, BPO,” it stated.

According to the PwC report, Nigeria has evolved in this same pattern as declining shares of output and employment in agriculture have been absorbed by the services sector. It stated that in addition, estimates of employment elasticity’s suggest Nigeria’s services sector has the highest employment potential at 0.5, relative to agriculture’s -0.1 and manufacturing’s 0.3.

The report noted that services sector jobs require a wide range of skills from artisans in traditional services to ICT experts in modern services. Without higher productivity in both segments, the potential of services to drive employment will be unrealised. Hence, enhancing productivity in services requires a significant investment in human capital development. Specifically, investing in tertiary education is required to provide high-skilled workers in modern services, while investing in vocational centres and technical colleges is required to improve the supply of skilled labour in traditional services.

“Similarly, the services sector can be harnessed to diversify exports. This is particularly important because services ares less reliant on physical infrastructure. Despite this, boosting services exports would still require significant improvements to telecommunications and power infrastructure. Turning these around would involve wide-reaching reforms to resolve structural and policy issues that currently restrict investment in these sectors.”

The report stated that the economy expanded rapidly between 2000 and 2014, recording an average annual growth of 7.6 percent year-on-year and over the same period, employment growth was 1.2 percent, markedly below the labour force growth of 2.9 percent. As a result, the unemployment rate, which also reflected underemployment at the time, increased from 13.1 percent in 2000 to 24.3 percent in 2014.

PwC suggested that the responsiveness of employment to economic growth, also known as employment elasticity, has not been large enough to reduce unemployment. “Empirical studies which examine the relationship between growth and employment in Nigeria show that Nigeria experienced a period of jobless growth between 2005 and 2014,” the report stated.

Nigeria’s population is projected to rise to 410 million by 2050. It said with this population, the country will rank as the third largest populated country globally. As such, the report stated that implementing policies that will deliver inclusive growth and engender a productive labour force is imperative.

– Jun. 8, 2018 @ 16:27 GMT |