Wednesday, June 19, 2013

Nigeria’s soaring unemployment and poverty rates

“Poverty rates remain high in Nigeria, particularly in the rural areas.”
—World Bank in its ‘Nigeria Economic Report’ May, 2013
The World Bank on Monday, May 13, 2013, released its economic report on Nigeria. What do we have? A less than complimentary report about my dear country! To my mind, the report largely reinforces what many genuine Nigerian economic analysts have been saying. I have said several times that what Nigeria has been experiencing is growth without development. There is just no way a country experiencing high inflation, unemployment and poverty can be said to be developing even if its economic growth is in double digits.
True, as the World Bank observed in its report, “Nigeria’s annual growth rates that average over seven per cent in official data during the last decade place the nation among the fastest growing economies in the world. This growth has been concentrated particularly on trade and agriculture, which would suggest substantial welfare benefits for many Nigerians. Nevertheless, improvements in social welfare indicators have been much slower than would be expected in the context of this growth. Poverty reduction and job creation have not kept pace with population growth, implying social distress for an increasing number of Nigerians. Progress toward the fulfilment of many of the Millennium Development Goals has been slow, and the country ranked 153 out of 186 countries in the 2013 United Nations Human Development Index.”
The World Bank further notes that “Job creation in Nigeria has been inadequate to keep pace with the expanding working age population. The official unemployment rate had steadily increased from 12 per cent of the working age population in 2006 to 24 per cent in 2011. Preliminary indications are that this upward trend continued in 2012.”
However, if one may ask, do we need the World Bank to tell us this? If anyone will pontificate about Nigeria’s deplorable economic situation, should it be one of the architects of that misfortune? Recall that it is these Bretton Woods Institutions, that is, World Bank and its sister, the International Monetary Fund, that first sold the idea of Structural Adjustment Programme to the then military government of Ibrahim Babangida in 1986. What were the fundamentals of SAP? Devaluation of currency; rightsizing and downsizing of the workforce; privatisation and commercialisation of government enterprises, etc. These are the pills forced down the throats of Nigerians by the military junta under the influence of the World Bank and IMF in order to access loans and grants. Ironically, it is the parlous state these economic policies have led us that the same World Bank is turning around to criticise. Anyway, the message is more important than the messenger.
It is worth reiterating that there have been more job losses under this administration than are created. Here, I do not mean at the federal level alone, even at state and local government levels as well as the private sector. Since 1986, when the words, “rightsizing” and “downsizing” crept into our national lexicon, we have not yet done with it. Many private enterprises have closed shop in Nigeria due to the high cost of doing business in the country. Individual entrepreneurs find it difficult to access soft loans at affordable interest rates. Often times, the interest rate is in double digits ranging from 15 to 20 per cent and above, yet you need to provide collateral, submit business plans and meet a long list of requirements. If you are eventually successful in accessing the loans, renting or leasing an office is very expensive. I live in a satellite town in Abuja where a small shop goes for between N500, 000 and N1m, depending on the location and size. This is the principal sum; you have to pay other service charges such as electricity, water and local government licensing fees. If you hire employees, you have to pay salaries. For you to break even and subsequently make profit in such an enterprise, you will need to fully stock your shop or provide affordable services otherwise your business failure is guaranteed. I have only spoken about a small enterprise, mostly in the informal sector. The challenge increases for medium and big enterprises.
There is the need to interrogate many jobs referred to by the government as employment opportunities. In my opinion, there is actually under-employment. Take for instance the glamourised SURE-P and other youth employment schemes embarked on by some of the state governments where graduates of tertiary institutions are recruited as street sweepers and traffic managers only to be paid N10, 000 a month. This is pure under-employment. There is also increasing casualisation by many public and private companies. Under this inhuman policy, eminently qualified personnel are recruited under conditions similar to slavery with peanuts as salaries and without any other welfare packages such as health, transport, housing allowances, leave bonus etc. This is one phenomenon that is being fought by the workers’ union of the Power Holding Company of Nigeria as government works towards consummating the planned privatisation of the company. A similar practice obtains in the banks, oil companies, telecommunications companies, among others. This is tantamount to under-employment as the workers in question do not get commensurate wages for their services. The glut in the unemployment market has made this to be an attractive option to many government and private corporations.
I couldn’t agree more with the submission of the World Bank that, “In sum, statistics on poverty and unemployment in Nigeria, together with other direct indicators of welfare, suggest a story that is rather different from the national accounts data. The GDP growth has not been sufficient to support levels of poverty reduction and job creation necessary to prevent a growing number of poor and unemployed (underemployed) Nigerians.”
The World Bank is on point in its suggestion that, “It is imperative that Nigeria finds a recipe to unlock rapid growth and job creation in a larger part of the country, as well as to increase standards of education, health, and other social services to enable its citizens to find gainful employment in the emerging growth poles.” There is no two ways about it; gainful employment will drastically reduce poverty. No one is under any illusion that only the government holds the recipe to fight unemployment and poverty. However, government needs to provide the enabling environment that will make the private sector, not necessarily the organised private sector but the informal private sector, the cottage industries, the artisanal service providers to thrive. If there is significant public electricity supply, it will reduce the cost of doing business drastically as many welders, hairdressers, barbers and other artisans will find it easier to ply their trade. Once the government can help bring down the cost of doing business through appropriate policies inclusive of low interest on loans, provision of critical social infrastructure and adequate security of lives and property, the problem of unemployment will abate and likewise poverty as the dependency ratio will also reduce.