September 2020 Nigeria Economic Alert - PwC

NigeriaEconomicAlert

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Unemploymentrateexpectedtohit30%amidtheeffectofCOVID­19ontheeconomy...

AccordingtotheNationalBureauofStatistics'(NBS)LabourForceSurvey,Nigeria'sunemploymentratewas27%inQ22020­fourpercentagepointshigherthanthe23%reportedinQ32018.Thisisthefirsttimeinsixquartersthatthecountry'sunemploymentdatahasbeenpublished.AccordingtotheSurvey,theunderemploymentratewas29%,whichwashigherthanthe20%recordedinQ32018.Whencombined,52%ofthelabourforceiseitherwithoutjobsorworkingbelowtheirpotential.Someofthefactorsthataccountfortheriseintheunemploymentandunderemploymentratesincludethelowlevelofindustrialisationinthecountry,sloweconomicgrowth,lowemployabilityandqualityofthelabourforce,slowimplementationofthenationallabourpolicy,inadditiontolackofcoordinatinglabourpoliciesatthesubnationallevel.PwCestimatesthatunemploymentcouldreach28%inQ32020and30%byQ42020,basedonourinternalmodels.

Introduction

NB:Analysisisonyearly(y/y)exceptotherwisestated

September2020

PleasenotethatintheseBulletinsweusetheofficialstatisticsissuedbytheNationalBureauofStatistics.Theseareissuedto3orinsomecases4(e.g.inflation)significantdigits.Inaneconomywheremorethan50%oftheeconomicactivityisintheinformalsector,itisdifficulttoestimatetothisnumberofsignificantdigits.However,atPwCNigeriawehavetakenthepositiontousetheofficialnumbersforourreports,albeittoasingledecimalpointorthenearestwholenumber.Youthunemploymentishigherthanforolderworkers,asshowninfigure1–the15to24agegrouphadunemploymentof41%,andagegroup25to34withanunemploymentrateof31%.Nigeriahasoneofthelargestyouthcohortsintheworldwithover35%ofthecountry'spopulationfallingwithintheagegroupof15to34.Withunemploymenthighestamongthisdemography,therisksofsocialvices,depressionandapathyareespeciallyhigh.Anexaminationoftheunemploymentratebylevelofeducationshowsthat41%ofthelabourpopulationwithabachelor'sdegreearewithoutemployment.Theunemploymentrateamongbachelor'sdegreeholdersishigherthanthe18%forpeoplewithvocationalskills.Theunemploymentrateforpeoplewithvocationalskillsisalsolowerthanpeoplewithmaster's(23%)anddoctoratedegrees(23%).Whatthismeansisthattherecouldbemorevocationalorblue­collarjobopportunitiesthanwhitecollarjobsinNigeria­pointingtothelargesizeoftheinformaleconomy,wheremostblue­collarjobsoperate.Butitalsomeansthatauniversitydegreeisnotanassuredroutetogainfulemploymentandpolicy­makersshouldbethinkingaboutstrengtheningthecountry'svocationaltrainingtoprepareyoungpeopleforworthwhileandproductivebluecollarcareers.

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Figure1:UnemploymentbyAgeGroup

Source:NationalBureauofStatistics0%5%10%15%20%25%30%35%40%45%

15­24 25­34 35­44 45­54 55­64Proportionoflabourforce Unemploymentrate Underemployment

DecompositionbyAgeandEducation

Figure2:UnemploymentbyLevelofEducation

Source:NationalBureauofStatistics

0%5%10%15%20%25%30%35%40%45%50%

Unemploymentrate Proportionoflabourforce

Onagenderbasis,23%ofmalesinthelabourforceareunemployed,while32%ofthefemalesareunemployed.Femaleunemploymentishighereventhoughtherearemoremalesthanfemalesinthelabourforce(male:42million;female:39million).Evenamongwomenthatareemployed,theyarelikelytobepart­time.While19millionfemaleemployeesareinpart­timeemployment,only16millionmaleemployeesarepart­time.Overall,theratiooffull­timetopart­timeemployeesis1.3formalesand0.8forfemales,averylargedifference.Ofcourse,morefemaleemployeescouldpreferpart­timejobsbecauseoftheadditionalresponsibilitiesofprovidingcareservicestotheirfamilyorhouseholds,butthislargediscrepancyneedstobeunderstood.Ifmorewomenareworkingpart­timewhentheywanttoworkfull­time,Nigeriaislosingasignificantpartofitslabourforcecapacity.Beyondthis,itraisesissuesofgenderparityinNigeriansociety.AccordingtotheUnitedNations(UN),theworkofcaregivingmustbevaluedbysociety,financiallysupportedbygovernmentsandsharedmoreequallybetweenmenandwomen.TheUNResearchInstituteforSocialDevelopment(UNRISD)statesthatcaregivingwasnotonlyessentialformaintainingthesocialfabricandbuildinghumancapital,itwasalsoamuchbetterindicatorof.1asociety'squalityoflifethanitsgrossdomesticproduct

DecompositionbyGenderandLocation

Figure3:UnemploymentratesbyGender

Source:NationalBureauofStatistics

32%23%MaleFemale

Ruralunemploymentwasestimatedat25%whileurbanunemploymentwas28%.Thismeansthatunemploymentisequallysevereinboththeruralandurbanareas,asjobopportunitiesremainrelativelyscarcedespitethegrowingrural­urbanmigrationrateinthecountry.UnemploymentdataacrossstatesandregionsinNigeriashowthattheSouth­West(average:17%)regionhadthelowestunemploymentrateinQ22020.TheSouth­WestwasfollowedbytheNorth­West(23%)zone.South­South(35%)andtheNorth­East(28%)geopoliticalzonesrecordedhigherunemploymentrates.Growingindustrialisation,commercialactivitiesandbusinessopportunitiesarereasonsforthelowerunemploymentrateintheSouth­Westrelativetotheothergeopoliticalzones.Acrossstates,Imostate(labourforce2.5m)hadthehighestunemploymentrate(49%)whileKwara(1.4m)hadthelowestunemploymentrate(14%).ThelargediscrepanciesbetweenStateshighlightthesignificantdifferencesindevelopmentbetweenStates.InthecaseofUnderemployment,thereisanimportanttwist.TheNorth­EastandNorth­Westhadthelowestratesbecausemostoftheactivepopulationintheregionsarefarmers,whichisaseasonaloccupation.Thisseasonalitycoupledwiththesecuritychallengeswhichhasimpactedcommercialandagriculturalactivities..ThehighestunderemploymentrateinQ22020wasfromtheSouth­Southzone.

Decompositionbystatesandregions

1.https://www.un.org/press/en/2009/wom1715.doc.htm

Figure4:Unemploymentrateacrossstatesandregions

Source:NationalBureauofStatistics

PwCestimatesthatunemploymentcouldreach28%inQ32020and30%byQ42020.Thisestimateisbasedonthefollowingassumptions: AnestimatedrealGDPofaboutNGN280,000isrequiredtoabsorbasingleemployedpersonfromQ22020toQ42020duetotheeconomiceffectsofCOVID­19. WeassumethattheGDPwillshrinkby5.4%(IMF). Thelabourforcecouldgrowtoover80millionbyQ42020.

PwCestimates–acknowledgingtheeffectofCOVID­19TheobviousconsequencesofthehighunemploymentrateinNigeriainclude: Fallinaggregatedemandandsupply Continueddependenceonimportsduetolowerdomesticproductivityandoutput Fallinhouseholdincome;likelytofurtherwidentheincomeinequalitygap Increaseincrimerate Disincentivetogetaformaleducation,whichincreasestheproportionofunskilledandsemi­skilledlabour,andexpandstheinformaleconomy

EffectsofunemploymentinNigeria

Q22020(Actual) Q32020(Estimate) Q42020(Estimate)Labour force 80,291,894 80,500,000 81,000,000Real GDP** (Millions of Naira) 1,640,000 1,610,000 1,580,000Employed 59,235,383 58,160,000 57,100,000Unemployed 21,764,617 22,340,000 23,900,000Unemployment rate (%) 27% 28% 30%

©2020PricewaterhouseCoopersLimited.Allrightsreserved.Inthisdocument,PwCreferstoPricewaterhouseCoopersLimited(aNigerianlimitedliabilitycompany),whichisamemberfirmofPricewaterhouseCoopersInternationalLimited,eachmemberfirmofwhichisaseparatelegalentity.

ContactsAndrewS.NevinPh.DPartner,WestAfricaFinancialServicesLeaderandChiefEconomistandrew.x.nevin@pwc.com OmomiaOmosomiManager/Economistomomia.omosomi@pwc.com MichaelOgunremiJuniorEconomistmichael.ogunremi@pwc.com

AccordingtotheVicePresidency,thegovernmentanticipates239.4millionjoblossesbyDecemberduetothepandemic.ThehighrateofunemploymentinNigeriaisnoteasytosolve,butPwCbelievesthereisapathforward.Forastart,theremustbeacommitmenttolabourprogrammesenshrinedintheNESPandtheNationalEmploymentPolicy.However,labourprogrammesarenotsolelyenoughtoabsorbthecurrentstockofunemployedNigerians,letalonenewpopulationthatwilljointhelabourforceinafewyears.Thisiswhereeconomicreformscometoplay.

Recommendations FiscallabourinitiativescanonlycomplementeconomicreformsthatpromoteindustrialisationandthegrowthofMSMEsinreducingunemployment.IndustrialisationandtheentrepreneurialdrivearecrucialtosolvingtheunemploymentcrisisinNigeria;andagain,bothfactorsarepreconditionedontheperformanceoftheeconomyandgovernment'swillingnesstoeasetheprocessofdoingbusiness.Finally,asarecommendation,improvingtheskillsoftheNigerialabourforcecanreducetheunemploymentrate.ThisalsodependsontheeducationalinstitutionsinNigeria,andthequalityofthecurriculum,especiallyinthelightofSTEMandthefourthindustrialrevolution.2.https://www.theafricareport.com/33300/pandemic­to­poverty­nigeria­in­the­post­covid­future/

CurrentpoliciesaimedatreducingtheunemploymentrateThetablebelowshowsasummaryofsomeofthetargetsandstrategiesencapsulatedinselectedpoliciesoftheFederalgovernment,whichareaimedatreducingtheunemploymentrateinthecountryandgrowingtheeconomy.