By Felix Oladeji
Nigeria posted strong growth in 2021 and the first quarter of 2022 amidst the waning impact of the COVID-19 pandemic. The economy grew by 3.4 percent in 2021 compared with an output decline of 1.9 percent in 2020. The current economic growth is stronger than its pre-pandemic level, which stood at 2.3 percent in 2019. The rapid economic recovery could be attributed to significant improvements in non-oil sector performance and the complete re-opening of the economy to productive activities after the COVID-19 lockdown measures.
The non-oil sector – which accounted for 92.8 percent of the country’s GDP – grew by 4.4 percent in 2021 compared with a 1.3 percent contraction in 2020. This performance was bolstered by impressive growth recorded across some industrial activities (notably, manufacturing and construction sectors) and services sub-sectors (particularly, transportation & storage, financial services, trade, and information & communications technology). Conversely, the oil sector posted a negative growth of 8.8 percent in 2021 relative to a contraction of 8.3 percent in 2020.
In nominal terms, the size of the economy in 2021 stood at N173.5 trillion (US$417.1 billion). Having recovered from the pandemic-induced recession in the fourth quarter of 2020, Nigeria consolidated its recovery with economic growth of 3.1 percent in the first quarter of 2022.
However, the current economic growth is lower when compared with its level in the fourth quarter of 2021 (4 percent). This stellar growth was driven by the improved performance of sectors including agriculture (3.2 percent), manufacturing (5.9 percent), construction (4.8 percent), ICT (12.1 percent), trade (6.5 percent) and finance (23.2 percent) in the first quarter of 2022. The non-oil sector grew faster to 6.1 percent (year-on-year) in 2022Q1 relative to 0.8 percent growth in 2021Q1. Meanwhile, the oil and gas sector, remained in the contraction territory, posting a negative growth of 26 percent in 2022Q1.
Whereas, the fact that unemployment is a prevalent problem in Nigeria is neither one that demands particular enquiry before it is noticed, nor is a team of soothsayers required to show how devastating such a problem is to Nigeria. Interestingly, unemployment plays the dual role of being both a symptom and a causative factor of Nigeria’s economic woes. In highlighting how precarious the unemployment problem is, it is important to stress that Nigeria currently ranks second on the global unemployment list of countries with the highest unemployment rates. The current unemployment rate is 33.3 percent (NBS, 2022).
In recognition of the woes precipitated by unemployment in the society, the current administration has been – or at least appears to be – making efforts to curb the growth and, at the same time, reduce the rate of unemployment in the country. Despite that, statistical trends continually show that whatever the government is, or says it is doing, is having no desirable effect on the problem of unemployment. In fact, the problem has persisted; it is continually increasing. This undesirable status quo then begs the question, why? That is why the continued growth in the unemployment rate when the government seems to be making efforts against it. The importance of giving a proper answer to this question is such that it helps create a solid foundation upon which viable solutions can be built.
An overview of the government’s approach to solving the problem of unemployment shows that the government is heavily reliant on direct involvement in creating jobs for the masses; that is, the government tries to reduce unemployment mainly by creating more openings in its ministries and parastatals and absorbing more people into the civil service. Unfortunately, this approach is only plausible on the surface. An in-depth analysis of the approach in tandem with Nigeria’s economic realities and civil service structure lays claims to almost any argument that can be brought forth to support it.
Nigeria’s economy has constantly fallen in and out of recessions in the past five years. Aside from this, the country’s public debt profile is on a consistent rise, while inflation rate averaged 16 percent in the first four months of 2022 (NBS, 2022). With such problems already being encountered, the government would be placing itself under an extra back-breaking burden by directly creating jobs. Also, it is asserted that the Nigerian government is the largest employer of labour at all levels. Unsurprisingly, 50.6 percent of total budget expenditure and 88.5 percent of revenue in the last decade have been allocated to recurrent expenditure, respectively.
Additionally, unceasing complaints are made about the poor working conditions and inadequate emoluments of civil servants. Thus, the government should prioritise better working conditions rather than directly creating jobs, which will only promote an apathetic civil service if insisted upon, without adjusting to the present status quo. On demography: Here, a juxtaposition of Nigeria’s population growth alongside the government’s job creation rate will elucidate the need for a switch of approach on the government’s side regarding job creation. Currently, Nigeria’s population is slightly over 200 million and is expected to cross the 400 million threshold by 2050. On the other hand, the current administration creates just about 20,000 jobs annually, which is far short of the five million annually over a decade recommended by IMF. This narrative implies that the problem of unemployment is continuously worsening.
Undoubtedly, Nigeria’s civil service is riddled with plenty of problems that make any attempt at expansion a problematic venture. While it is realistically impossible to have perfect civil service, two significant factors in the civil service make the government approach an otiose effort at tackling unemployment.
(a) Duplication of functions: The Nigerian civil service ostensibly possesses the undesirable element of duplicating functions, with many civil servants occupying positions in which they are redundant with no clear-cut duty or responsibility. This, alongside its perceived inefficiency, makes its expansion to create job opportunities a step in the wrong direction.
(b) Ghost workers: The issue of ghost workers and the Nigerian civil service at all levels of government can be likened to Siamese twins that have proven inseparable despite numerous attempts at separating them.
Expectedly, the continual presence of ghost workers within the civil service costs the government a huge amount of money. For instance, between September 2013 and May 2015, the federal government lost N220 billion to 103,000 ghost workers. In the face of this persistent problem, expanding the civil service would only make it more susceptible to the penetration of more ghost workers, resulting in a loss at both ends.
In light of the overwhelming amount of work that needs to be carried out for Nigeria to catch up on its infrastructural deficit, it is proposed that the government adopt a Public-Private Partnership. The effectiveness of this approach can be easily seen in its adoption by Lagos State. It would come in handy in providing funding for cost-intensive capital projects, especially in the transportation sector.
Also, in recognition of the time that may be needed to cut back Nigeria’s infrastructural deficit, a proposed short-term solution would be clustered SME hubs. This means a shared working environment built by the government to provide needed facilities like workspace and electricity to SME owners. Apart from reducing business costs, this would help the government monitor and enforce the product quality of such SMEs and, where necessary, create a platform for the branding, and exportation of products with international demand. Other advantages to this idea would be; a more efficient tax monitoring process for SMEs and the encouragement of diverse start-ups with an opportunity for connections among such entrepreneurs.
For instance, a logistic firm operating in such a hub could partner with several businesses requiring logistic services, creating a self-sustaining economic network. These cluster hubs can be established on a local government basis. That is one for each local government. It is noteworthy that this is different from the shared workspaces, which are gaining traction in Nigeria, as it offers government leverage in terms of access to infrastructure and export. Besides, many shared workspaces in Nigeria today only cater for the tech sector – a feature which largely ignores the reality of most Nigerian SMEs operating outside of that sector.
Indigenous businesses should be encouraged by tax breaks, grants, and increasing duties on products, for which demand can be locally satisfied. The potential effectiveness of a ‘Made in Nigeria’ policy can be gleaned from China’s adoption of the same policy in 2015, a step which is transforming China into an economic powerhouse. Perhaps the government can lead the way by ensuring all government parastatals use Made- in-Nigeria vehicles.
•Oladeji writes from Lagos.