The latest report from the Central Bank of Nigeria (CBN) shows steep contraction across manufacturing and non-manufacturing sectors of the economy. The disturbing situation points to a looming recession. The apex bank’s report for the month of October reflects experts’ prediction that the current unemployment rate may rise as high as 50 per cent due to the coronavirus pandemic and looting across the country. The computation of an all-time 50 per cent unemployment rate is based on the International Labour Organisation’s (ILO) definition, which describes unemployment as the population of persons aged 15-64 who, during the period under review, were available for work, actively seeking for work, but were unable to find work.
According to the CBN report, the unemployment level index for the non-manufacturing sector stood at 44.2 per cent contraction for the month of October. About 17 subsectors reported a decline in employment level below 50 per cent threshold. The Purchasing Managers Index (PMI), which measures growth in the manufacturing sector, showed that employment in both manufacturing and non-manufacturing sectors declined sharply. This means that there is danger ahead, except the government engages the private sector operators to restore normalcy. It may also lead to capital flight and divestment. All of this will likely worsen the unemployment situation.
Unfortunately, all sectors of the economy have experienced huge employment decline, but strategic areas most affected, according to the report, are agriculture, arts, entertainment and recreation, hospitality industry, food and beverage services and petroleum sectors. Other sectors are finance, insurance, healthcare, transportation, information and communication, warehousing, professional services and utilities. These sectors are still counting financial and job losses incurred during the EndSARS protest. Experts predict that the earliest the country can recover from the present situation and begin to create employment opportunities will be the end of first quarter of 2021. For now, the only source of employment is the public sector, and the number it can absorb is limited. This means that the unemployment rate can get worse before the end of the year.
With the unemployment figure released by the National Bureau of Statistics (NBS) for the Q2 2020, which showed 27.10 per cent rate, the situation is scary. Put together, the CBN and NBS figures should be taken seriously. Unemployment in the country has been widely described as a time bomb, and rightly so especially among the youths who make up about 60 per cent of the population. As statistics show, 50 per cent unemployment rate is the highest in 20 years. This raises serious concerns as recent unrest in the country has shown. According to the World Economic Forum (WEF), this is the first time in some years that Nigeria would reach that frightening 50 per cent mark. This has increased Nigeria’s misery index, which is the combination of unemployment and inflation rates.
The Federal Government must address the rising unemployment rate. It is disturbing that when the present administration came to power in 2015, unemployment rate was a modest 8.2 per cent. It grew progressively worse to 13 per cent in the Q3 2016 to 18.88 per cent in 2017, 23.3 per cent in 2018, and 33.5 per cent in 2019, according to NBS reports. In the same vein, Nigeria has not done well in the human capital development index. In 2016, Nigeria was in 127th position out of 130 countries ranked in the World Economic Forum.
Sadly, the Manufacturers Association of Nigeria (MAN) has complained that the inability of many companies to obtain foreign exchange (fx) to import critical equipment and raw materials has resulted in retrenchment of workers and low capacity utilisation, and in some instances, closure of some companies. With the damning reports on unemployment, the problem should be taken seriously.
We are aware that the federal and some state governments have set up some youth empowerment programmes following the recent protests. We advise that such programmes must be duly implemented. At present, the domestic labour market is fragile because the spending power has continued to weaken as a result of the COVID-19 pandemic and recent disruption of economic activities. Also, the Foreign Direct Investment (FDI) has dropped significantly, as confidence in the economy continues to wane. The situation may deteriorate further until there is a meaningful intervention.
We believe that checking the rising unemployment requires massive job creation initiatives in all sectors. The country needs pragmatic policies that will boost employment opportunities and strengthen purchasing power of consumers. Against the depressing economic outlook, some programmes already put in place to boost employment ought to be retooled. To overcome the effects of the pandemic and the recent protests, local industries need the support of the government.