The fallacy of high unemployment in Nigeria

By Tunde Obadina

It is often said that Nigeria is impaired by a major unemployment problem, especially affecting its youths. But this common belief that the level of joblessness in the country is high by international standards is simply not true. Using internationally comparable method of calculation, unemployment in Africa’s most populous nation is not high. It is low to moderate.

The idea that a large proportion of the Nigerian labour force is without gainful employment stems partly from job data published by the country’s National Bureau of Statistics (NBS) up until mid-2015. Before revising the premises on which it calculated unemployment rates, the bureau told that the world that around a quarter of Nigeria’s workforce was out of work. The problem with this assessment is that it is derived a definition of unemployment that is quite different from that used by most national statistical agencies in the world and the International Labour Organisation (ILO). Nigerian statisticians counted members of the labour force who did not work for at least 40 hours in a week as jobless, while the ILO defines unemployed as those in the workforce who have not worked for at least one hour in a week.

Whereas people who worked only one hour in a week are regarded by the ILO as employed, those who toil for 39 hours were counted as unemployed by the NBS. Given this very different understanding of joblessness it made no sense using official Nigerian data to compare unemployment in the country relative to elsewhere.

In May 2015 the NBS launched a new method of computing unemployment rates. This is a compromise between the old formula and the ILO way. Official unemployment figures now comprise people who have not worked for at least 20 hours in a week. This still exaggerates the extent of joblessness in the country, but to a less degree. Fortunately, the NBS now also publishes alongside the official rates, estimates based on the ILO definition. In its first post-revision dataset the bureau put Nigeria’s official unemployment rate in the last quarter of 2014 at 7.8%, but only 2.1% when calculated according to the ILO formula. Nigeria’s internationally comparable unemployment rate was shown to be significantly below the 5.3% average for developing countries and 7.8% for the world, as reported by the ILO.

Unemployment in Nigeria has since risen, reaching 5% in the fourth quarter of 2015. The upward trend is worrying but the current levels are still below the global average. It is not surprising that joblessness in Nigeria is relatively low. Economic inactivity is not an option available to poor people in countries that lack state welfare safety nets for the out of work. Individuals without savings or benefactors simply cannot survive without engaging in some form economic activity. The prospects of destitution forces men and women to be imaginative in creating work for themselves.

Unemployment statistics indicate the quantity of available work in an economy. The issue in Nigeria and other developing economies is not the quantity of jobs available but their low quality. Widespread poverty does not stem largely from unemployment but prevalence of low-paid and low yielding economic activities. Poor people are not idle – most toil for many hours, but for little gain. Subsistence farmers who produce insufficient value of crops to support themselves and their families are not poor because they are unemployed or underemployed – they have little money because of the low value of their output. What they need is not necessarily new jobs but the wherewithal to boost their productivity, and perhaps access wealthier markets.

The challenge facing governments is to foster an environment in which individuals and firms are unhindered in their ability to grow through attaining higher productivity and expansion into new markets. Those who look to the state and large corporations to generate millions of new jobs to cater for low earning masses are liable to be disappointed. Governments already struggle to maintain their current workforce let fund substantial expansion of the public sector. Also the era of mass job creation in the private sector is probably over in most parts of the world. We are unlikely to replicate the conditions that triggered the mass movement of labour from farming into urban factories as occurred during the industrial revolution in the West and the more recently in parts of East Asia.

Manufacturing, traditionally the big provider of full-time, salaried employment opportunities, is worldwide struggling to retain its existing workforces. The nature of work in the 21st century is evolving into something quite different from what pertained in the past two centuries. Globalisation and advances in technology have made manufacturing less centralised and labour intensive. Furthermore, many labour intensive industries, such as textiles, that have moved from the old industrialised centres to newly industrialising economies have also in the process shifted from the formal to informal sector.

Governments in low-income economies should endeavour to remove restrictions on the ability of citizens to grow their wealth by exploiting their skills and innovating for greater profit. The state should get out of the way of enterprise and concentrate its attention on protecting life and property, rendering other services if they are essential and only it can provide.

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