Transcript CHALLENGES OF UNEMPLOYMENT AND POVERTY IN NIGERIA

CHALLENGES OF UNEMPLOYMENT
AND POVERTY IN NIGERIA
Professor Olu AJAKAIYE
Executive Chairman
African Centre for Shared Development Capacity Building
Ibadan, Oyo State
Nigeria
A Presentation at the National Assembly Dialogue, Nov 16-17, 2015
 Outline of Presentation

Introduction

Growth, Unemployment and Poverty episode

Drivers of economic growth

Employment generation by drivers of growth

Implications of growth drivers for Unemployment and poverty

Pathways for Addressing the Challenges

Conclusion
 Introduction


Nigeria is a country blessed with abundant human and
material resources with:
 Large youthful population of over 170 millions people.
 Huge renewable and non-renewable natural resource base
However, these resource endowments are either untapped or
inefficiently utilized, and where they are used, the income
generated from them has not been well managed ..
…………..contd

Meanwhile, the country has enjoyed relatively high GDP
growth rate of approximately 6.82% between 2000 and
2013 making it one of the fastest growing African
economies.

Also, the country has not only posted significant rates of
growth, with the rebasing of GDP in 2010 it has become
Africa’s largest economy with GDP of about $510 billion
as at 2010
…………..contd


On the other hand: welfare of Nigerians has not improved
 with over 60 percent of the population living below
poverty line,
 over 23% rate of unemployment,
 human development index (HDI) of 0.504 (UNDP, 2014)
which ranks the country 152 out of 186 countries as at
2013.
Evidently, Nigeria belongs to the club of African economies
facing the paradox of growth with rising unemployment,
worsening poverty and deepening inequality.
…………..contd


Evidently, both Executive and Legislative arms of
Government at all levels are committed to
redressing the situation by taking steps to resolve
this paradox
An ex-ray of this paradox should guide pathways
to addressing the paradox and challenges of
unemployment and poverty in Nigeria
 Growth, Unemployment
Episode in Nigeria,
and
Poverty
 Over
the years, the Nigerian economy has recorded a moderate
but increasing economic growth rates.
 Real GDP grew at average rates of 1.9%, 9.2%, and 6.5%
percent over the periods of 1991-2000, 2001-2010, and 20112014 respectively.
 The
impressive economic growth has not been accompanied by
increased employment generation See Figure 1

.
Figure 1: Growth rate of real GDP and Unemployment
50.0
40.0
30.0
20.0
10.0
0.0
-10.0
1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013
-20.0
GDP Growth
Unemployment
…………..contd

Unemployment rate has assumed an upward trend, rising
from an average of 9.2 percent between 1991 and 2000 to
23.1 percent over the period of 2011-2014 (rebasing
period). Figure 1

Similarly, people’s welfare has worsened over time in spite
of the persistent economic growth. Head count poverty
index, HCPI rose from 46.01 percent in 1985 to 63.5 in
1996 and further to 65.3 in 2013
 Drivers of Economic Growth

Economic theory suggests that sustained economic growth should lead
to development and improved welfare overtime. However, the picture
painted by Nigerian situation runs contrary to this postulate.

Hence, in this section we ex-ray the Nigerian economic growth by
examining the sectoral contributions to GDP & GDP growth.
The Table indicates that agricultural and wholesale and retail trade
sectors remain significant contributors to GDP
 Contributions of Agric declined slightly while those of services
increased significantly and that of manuf remained low – a missing
middle and tertiarization syndrome!!!

COMPOSTION OF REAL GDP 2010-2015Q2
COMPOSITION OF REAL GDP 20102015Q2
Activity Sector
AGRICULTURE
2010
Q1 Q2
2011 2012 2013 20142015 2015
23.96 23.59 22.73 21.50 22.9019.79 21.12
MINING&QUARRYING 15.60 15.36 14.09 13.82 10.5810.61
9.95
MANUFACTURING
6.60
6.95 7.41 7.91 9.95 10.2
9.55
OTHER INDUSTRY
3.61
4.02 4.34 4.66 4.39 4.84
5.02
SERVICES
50.23 50.07 51.42 52.11 52.1754.56 54.36
REAL GDP
100.00 100.00 100.00 100.0 100.00 100.0 100.00
COMPOSITION OF GDP 2010-2015Q2
COMPOSITION OF REAL GDP 2010-2015Q2
120.00
100.00
80.00
60.00
40.00
20.00
0.00
2010
2011
AGRICULTURE
2012
MINING AND QUARRYING
2013
MANUFACTURING
2014
OTHER INDUSTRY
Q1 2015
TRADE
SERVICES
Q2 2015
…………..contd
 Table
3 indicates that Nigerian real GDP growth rate
rose steadily from 5% in 2011 to over 7% in 2013 but
collapsed to around 3% in 2014 reflecting impact of
negative growth of oil sector in 2014
 Sectoral growth rates are unstable: Agric declining;
Manuf high and rising but from a low base; services
sector growth was negative in 2011 and 2014

Nigeria’s growth drivers are agric, and services sectors
REAL GDP GROWTH RATE, 2011-2014
REAL GDP GROWTH 2011-2014
Activity Sector
AGRICULTURE
MINING AND
QUARRYING
MANUFACTURING
OTHER INDUSTRY
TRADE
SERVICES
REAL GDP
2011
3.45
2012
2.76
2013 2014
1.62 9.61
3.51 -2.15 5.30-21.19
10.62 13.77 14.65 29.45
17.02 14.98 15.39 -2.98
-2.10 18.40 7.80 -0.07
8.12
5.62 9.35 4.52
5.09
6.66 7.41 2.90
 Employment Generation by Drivers of

Growth
Given the identified growth drivers (agric, and services sectors) it is
pertinent to ex-ray their employment generation capacity
As shown in Table 4, agricultural sector is the most employment
generating sector (49.1%), followed by services (38.6%), whilst
extractive sector is the least employment generating driver of growth.
 Manufacturing, though with little contribution to GDP has higher
employment generation capacity than extractive sector.

Table 4. Total employment by economic activity, 2005 - 2009
Year
Total
employment
Agric.
49,552,722
2005
52.3
50,388,650
2006
51.6
51,763,909
2007
51.3
52,074,137
2008
50.9
50,709,317
2009
49.8
51,224,115
2010
49.1
51,181,884
2011
48.6
52,090,000
2012
47.0
53,060,000
2013
46.0
53,475,000
2014
44.6
2005-2014 51,551,973
49.1
Sources: NBS and Manpower Board
Share of activity sectors in total employment
Building and
Extractive Manufac.
services Others
construction
1.1
9.3
1.8
34.2
1.3
1.1
9.1
1.8
35.1
1.3
1.2
8.8
1.9
35.5
1.3
1.4
8.5
1.9
36.2
1.1
1.4
7.0
2.5
38.2
1.1
1.4
6.8
2.7
39.0
1.1
1.3
6.5
2.9
39.6
1.0
1.2
6.5
2.9
41.4
1.0
1.2
6.2
3.1
42.5
1.0
1.2
6.0
3.3
44.0
1.0
1.2
7.5
2.5
38.6
1.1
…………..contd
NBS 2014 Labour Force Survey shows that Agric and services
continued to provide main jobs for majority of employed
Nigerians
 However the sectors also provide paid jobs for very small
percentage of employed Nigerians
 The relatively low percentage of paid employment in
manufacturing suggests preponderance of casualization of
workers
 This explains the paradox of growth and rising poverty in
Nigeria


Distribution of Employed Persons by
Main and Paid Jobs, 2014 Q3
Economic Sector
Main
Job
Paid
Job
Agriculture
41.3
0.9
Mining and Quarrying
0.3
1.1
Manufacturing
8.3
4.4
22.8
2.1
Transportation and Storage
3.9
4.6
Pub. admin. defence, security
2.3
18.8
W/esale & retail trade, Veh. repair
 Unemployment
is not evenly distributed
among zones in Nigeria
Highest
in North West and lowest in South
West
 There
feminization of Unemployment all
over the country
UNEMPLOYMENT BY ZONE AND SEX,
2014Q3
ZONE
MALE
FEMALE
TOTAL
NORTH EAST
15.4
35.9
23.9
NORTH WEST
12.7
54.7
30.0
NORTH CENTRAL
12.3
19.3
15.1
SOUTH EAST
13.9
16.0
15.1
SOUTH
WEST
7.3
10.3
8.9
SOUTH
SOUTH
19.0
18.3
18.7

Employment elasticity of output is generally low in Nigeria

Employment elasticity of output is highest for services
sector, followed by Agric sector but the jobs are largely
informal, largely unpaid, the quality of employment is low

Employment elasticity of output is lowest in
manufacturing sector although it the sector that can
generate decent jobs that could have generated decent
incomes and reduce poverty

Employment elasticity of output in mining sector is low
reflecting its capital intensive nature limiting its capacity
ot generate decent jobs
EMPLOYMENT ELASTICITIES OF OUTPUT

Employment elasticities of output for 1970-2014 are as
follows
 Agriculture:
0.48
 Manufacturing :
0.30
 Mining
0.43
 Services
0.85
 Total GDP
0.12
 Implications Of Growth Drivers For
Unemployment Generation And
Poverty Reduction
 The growth episodes and the performance of the different sectors driving
the growth process have several implications for unemployment and
poverty reduction.

First, agricultural and services sectors that contribute the bulk of growth
are largely characterized by informal and indecent jobs that cannot
guarantee sustainable employment and poverty reduction over time.

Second, the employment elasticities of output are generally low in Nigeria

Unemployment varies across zones of the country

Unemployment among female folks is much higher than among men implying
feminzation of unemployment in Ngeria
…………contd.
 Obviously
sustenance ( and increase) of the current
growth rate of the economy over a long period of time,
is unlikely to contribute significantly to reducing
unemployment and poverty given the low employment
elasticities of overall and sectoral outputs.
 This scenario, therefore, calls for several result oriented
actions some of which are proposed next.
 Pathways for Addressing the
 In
order for growth to be able to generate adequate employment and income
Challenges


that will lift the country out of the present endemic unemployment rate and
poverty, rapid and sustained diversification of the economy from dominance
of agric and service sector is key:
Diversification of the economy is likely to be achieved in the medium to longterm.
In order to address the pressing challenges of femnized and regionally
differentiated unemployment in Nigeria, all levels of government and private
sector should:



Promote Modernization and transformation of agriculture through generation and
adoption of productivity enhancing technologies to make the sector attractive to the
youths and generate decent employment and income;
This calls for support for agricultural research and extension and strengthening of ARCN
by the Legislative and Executive arms of Federal and State Govt
Promote and support technological upgrades for the manufacturing sector in order
for the sector to be competitive and meet the increasingly stringent standards
…………..contd
 Promote
and support revival of labour intensive
manufacturing, especially textiles and agro-processing
industries in order to address the challenges of
feminization of unemployment in Nigeria
 In place effective legal and administrative framework
for systematic, dated and enforceable deletion
programmes in major industries, especially in the
modern service sectors thereby further strengthening
the link between manufacturing and the nascent
modern services
………………..contd.


Encourage growth and development of the emerging modern service sector
with incentives for them to patronize locally produced agricultural and agroprocessing commodities
For these initiatives to thrive:
There should be massive investment in infrastructural upgrades, power, esp.
electricity, S&T, Agric Research and Extension
 Human resource capacity should be upgraded through post secondary and postgraduate skill building training programmes necessary for addressing the
challenges of missing middle in the human resource structure
 All aspects of security challenges should be addressed in order to create enabling
environment for smooth and orderly inclusive growth and structural
transformation

…………..contd

There should be serious commitment to participatory development
planning, strong plan-budget link and plan discipline




The creation of Ministry of Budget and Planning is in the right
direction
There is need to rebuild the capacity of government bureaucracy at
all levels of government through training and re-training as well as
provision of modern facilities
Meritocracy and security of tenure should be restored to the public
service
Leadership at all levels should be committed to national development
with zero tolerance for corruption in all spheres of national life
 Concluding Remarks

Nigeria is a country with abundant resources and great potentials, hence,
the current phenomena of high levels unemployment and poverty are
undesirable.

The recent impressive growth episode has been unable to yield adequate
employment opportunity and reduce poverty because the employment
generation ability of the major drivers of the growth is low.

Agricultural, manufacturing and services sectors have great potentials of
generating high employment, they therefore need to be re-engineered,
modernized and transformed to facilitate improved intersectoral linkages,
generate more decent employment, income and fasten the pace of poverty
reduction.
Thank you for listening