Job Creation

THE CONTEXT

Nigeria is a youthful country. By 2030 its population is projected to reach 264 million, half of whom will be under the age of 25.[i] The country faces a pivotal moment. If it harnesses this youth bulge successfully, it could turn it into a demographic dividend; if not, the challenges it faces could multiply. However, unemployment and underemployment remain significant problems. While Nigeria experienced strong economic growth between 2010 and 2015 – on average 6% a year – job creation did not keep pace.[ii] Recently the situation has worsened with a slowdown in the economy, and the unemployment rate has been on the rise. Recent data from the National Bureau of Statistics (NBS) puts Nigeria’s unemployment rate at roughly 19% as of the third quarter of 2017, up from 5% in 2010.[iii]

In 2017, Nigeria was home to 63 million people between the ages of 15 and 35,[iv] representing 33% of the population. Sadly, 23 million individuals, or about a third of this youth population, were either unemployed or underemployed, accounting for more than half of the youth in the workforce.[v] The number of Nigerians aged 15–35 is projected to grow by 3% a year, reaching 91 million by 2030.[vi] To reduce the unemployment rate and absorb this youth bulge, Nigeria needs to start creating 3.5 million new jobs every year.[vii] As such, it is crucial to make the right investments that will deliver inclusive growth and help build a productive labour force.

THE CHALLENGES

While the Nigerian economy experienced steady growth from 2010 to 2015, an insufficient number of jobs were created. Available data from the NBS suggests that, although at least 3 million young Nigerians enter the workforce every year, only about 1.2 million jobs are created annually.[viii] More recently, job creation and the quality of jobs have both fallen significantly, resulting from a slowdown in economic activities after the oil price crisis in 2014–16. By 2016 the number of jobs created had decreased to less than half the number created in 2014.[ix]

Youth represent two-thirds of unemployed and underemployed persons in Nigeria. The quality of jobs created is declining, reflected by the low number of working youth who earn enough to meet their basic needs. Today, four out of every five individuals between the ages of 15 and 24 in the workforce earn less than ₦1,000 or $3 per day.[x]

While there are limitations on waged employment, numerous barriers also impede Nigerian youth from seeking out entrepreneurial opportunities. These include constraints on business management training and other relevant skills, a lack of access to finance, inadequate infrastructure, restrictive regulations and bureaucratic hurdles that make the cost of doing business discouragingly high. These barriers are explored in more detail below.

Scarcity of Skills

The scarcity of relevant skills has been identified as a major challenge to doing business in Nigeria by PricewaterhouseCoopers (PwC).[xi] The country still faces significant barriers that contribute to poor education outcomes, largely due to deficiencies in the quality of teaching and education infrastructure. As a result, there is a significant mismatch between the skills required by employers and the skills that young people are able to acquire in school. Additionally, in the North, women and girls are significantly disadvantaged in terms of completing school and acquiring a quality education[xii] (for more detail, see the section on education below). Technical and vocational training mostly reaches young men and does not cater for the needs of young women; for example, training sessions do not take account of the time and mobility constraints that women face due to the burden of unpaid care work.[xiii]

Ease of doing business

A healthy business environment is necessary to attract private investment that will provide a sufficient number of formal jobs and entrepreneurial opportunities. Unfortunately, Nigeria’s business environment is very challenging. Currently, it ranks 145th out of 190 countries in the World Bank’s Ease of Doing Business assessment.[xiv] Although this represents an improvement compared with its rank of 169th out of 190 in 2017,[xv] most Nigerian businesses and start-ups face significant challenges. These include a lack of supporting infrastructure, limited access to finance, insecure property rights, multiple taxation schemes and weak institutional support.

According to PwC, most private companies identified inadequate infrastructure as a limiting factor for their survival and expansion. Nigeria lacks critical infrastructure, particularly transport and electricity supply, which are necessary for inclusive growth. Less than 15% of the country’s roads are paved and only about 25% of its power generation capacity of around 13,000MW is available for distribution, owing to limited transmission capacity and disruptions to supply.[xvi]

Insecure property rights are also hurting the expansion of many businesses, especially start-ups. The World Bank ranks Nigeria 179th out of 190 countries for the ease of registering property, reflecting a high incidence of land grabbing across many regions of the country and weak land rights.[xvii] Women face additional social and economic barriers to accessing and exercising control over land and property.[xviii]

Access to credit is limited, especially for young business starters. In 2017, fewer than 2% of Nigerian youth (here defined as persons aged 15–24) borrowed to finance any form of business.[xix] This was due to lack of adequate collateral and high lending rates, among other challenges.[xx]

THE SOLUTIONS

Increasing quality job opportunities, particularly through investing in the expansion of high-multiplier sectors, will be key to achieving inclusive growth in Nigeria. Evidence has shown that agriculture in sub-Saharan Africa is 11 times more effective at reducing poverty when compared with other sectors of the economy, due to its ability to generate jobs.[xxi]

Without educated, employed and empowered young people, it will be difficult for Nigeria to reap the benefits of growth. In addition, the potential demographic dividend will only be fully realised if the government makes sure that young women have equal education and employment opportunities. The government should integrate in its national demographic dividend roadmap key investments to tackle the barriers faced by rural youth and women and to trigger a broader economic impact. It also needs at the same time to invest in other sectors (technology, infrastructure) with strong forward and backward linkages to the economy.

Some key investment areas are:

  1. Agriculture: This should include rebranding agriculture in primary and secondary schools and funding post-school trainings that are geared towards promoting entrepreneurship and skills enhancement. In the same vein, the government should encourage the private sector to provide training and mentorship support. Agriculture is discussed in more detail in the final section of this brief.
  2. Access to Productive Inputs: The productivity of smallholder farmers can be improved with better access to financial services (savings accounts, conditional cash transfers and subsidies to buy fertilisers), secure land tenure (co-titling and individual titling, leasing and renting), labour (access to credit to hire labour) and storage facilities. All of these interventions should be youth- and gender-responsive.
  3. Financial Technology: This can enable access to financial services, extension training on sustainable practices and up-to-date information on local markets. According to the most recent World Bank Findex data, more than 60 million Nigerians are unbanked and there is a 40% gender gap, which means that women are even less likely to control their finances through formal channels.[xxii] Financial technology such as mobile savings accounts can help change this.
  4. High-Multiplier Sectors: The government elected in 2019 should scale up interventions to have a broader impact on the economy and invest in high-multiplier sectors such as the service sector and trade-oriented manufacturing. These two industries have the potential to absorb many of the young people who will leave school or their family farms (as agricultural productivity increases).
  5. Ease of Doing Business: The government should improve the ease of doing business, in particular focusing on regulations related to property rights, business registration, access to credit and infrastructure development.

[i] UN DESA. ‘World Population Prospects’ database, op. cit.

[ii] Nigeria National Bureau of Statistics (NBS) database. ‘GDP by Production Backcasting Series (1981– 2017)’. http://nigerianstat.gov.ng/resource/GDP%20by%20Production%20Backcasting%20Series%20from%201981-2017%20post%20rebasing%20fn.xlsx (last accessed 23 August 2018)

[iii] NBS database. ‘Unemployment Data Series’. http://nigerianstat.gov.ng/resource/q1%20q2%20q3%202017%20Unemplyment%20Data%20Series%20by%20Age%20and%20Qualification.xlsx (last accessed 23 August 2018)

[iv] ‘Youth’ is defined as people between the ages of 15 and 35.

[v] UN DESA. ‘World Population Prospects’ database, op. cit.; and NBS database. http://nigerianstat.gov.ng/elibrary (last accessed 23 August 2018)

[vi] UN DESA. ‘World Population Prospects’ database, op. cit.

[vii] ONE’s internal analysis of data retrieved from UN DESA. ‘World Population Prospects’ database, op. cit. and NBS database, op. cit.

[viii] ONE’s internal analysis of data retrieved from the NBS database at: http://nigerianstat.gov.ng/elibrary?queries[search]=GDP and International Labour Organization (ILO) (2018). ‘Employment by sector – ILO modelled estimates, May 2018’. https://www.ilo.org/ilostat/faces/oracle/webcenter/portalapp/pagehierarchy/Page3.jspx;ILOSTATCOOKIE=_6aHF54bP9TJgiNHmTbc4v5lUaopUwyGn7jnAPrxhKKWADL9gElM!1669746576?MBI_ID=33&_adf.ctrl-state=guov2gtos_62&_afrLoop=195363598850913&_afrWindowMode=0&_afrWindowId=null

[ix] Ibid.

[x] ONE analysis, based on ILO (2018). ‘Employment by economic class – ILO modelled estimates, May 2018’. https://www.ilo.org/ilostat/faces/oracle/webcenter/portalapp/pagehierarchy/Page3.jspx;ILOSTATCOOKIE=I1mGciP1FjU5FKLdvOox67inc4akxcuEIcMgeobqe-6AqNKHc8Ic!1669746576?MBI_ID=50&_adf.ctrl-state=116ewx90n0_50&_afrLoop=184518888620900&_afrWindowMode=0&_afrWindowId=null#!%40%40%3F_afrWindowId%3Dnull%26_afrLoop%3D184518888620900%26MBI_ID%3D50%26_afrWindowMode%3D0%26_adf.ctrl-state%3D1d81b1te65_4 (last accessed 23 August 2018)

[xi] PricewaterhouseCoopers (PwC) (2017). ‘Seizing the opportunity: An economic assessment of key sectors of opportunity for UK businesses in Nigeria’, p.5. https://www.pwc.com/ng/en/assets/pdf/uk-trade-investment-in-nigeria.pdf (last accessed 23 August 2018)

[xii] World Bank (2017). ‘Girls’ Education’. https://www.worldbank.org/en/topic/girlseducation (last accessed 29 August 2018)

[xiii] T.M. Fapohunda (2012). ’Gender and Development: Challenges to Women Involvement in Nigeria’s Development’, p.20. International Journal of Academic Research in Business and Social Sciences. http://www.hrmars.com/admin/pics/808.pdf (last accessed 29 August 2018)

[xiv] World Bank (2018). ‘Doing Business 2018: Reforming to Create Jobs’, p.4. http://www.doingbusiness.org/reports/global-reports/doing-business-2018 (last accessed 29 August 2018)

[xv] World Bank (2017). ‘Doing Business 2017: Equal Opportunity for All’. http://www.doingbusiness.org/reports/global-reports/doing-business-2017

[xvi] PwC (2017). ‘Promoting Economic Prosperity: Analysis of the State-Level Business Environment in Nigeria’, p.24. https://www.pwc.com/ng/en/pdf/promoting-economic-prosperity-fco-report.pdf

[xvii] World Bank Doing Business (2018). ‘Registering Property’. http://www.doingbusiness.org/data/exploretopics/registering-property (last accessed 23 August 2018)

[xviii] Ibid.

[xix] Youth defined here as those aged 15–24. World Bank Global Findex Database. https://globalfindex.worldbank.org/sites/globalfindex/files/2018-08/Global%20Findex%20Database.xlsx (last accessed 23 August 2018)

[xx] World Bank (2017). ‘Nigeria: New Credit Infrastructure to Improve Access to Credit and Financial Inclusion’. http://www.worldbank.org/en/news/feature/2017/03/14/nigeria-new-credit-infrastructure-to-improve-access-to-credit-and-financial-inclusion; and PwC (2017). ‘Promoting Economic Prosperity: Analysis of the State-Level Business Environment in Nigeria’, op. cit.

[xxi] FAO (2012). ‘The State of Food Insecurity in the World’. http://www.fao.org/docrep/016/i3027e/i3027e.pdf; and L. Christiaensen et al. (2011). ‘The (evolving) role of agriculture in poverty reduction: an empirical perspective’. Journal of Development Economics, 96(2): 239-254. https://www.wider.unu.edu/sites/default/files/wp2010-36.pdf

[xxii] World Bank Global Findex Database (2017). https://globalfindex.worldbank.org/ (last accessed 30 August 2018)