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Tackling unemployment and poverty in Nigeria 13 Jun 2023

The high rates of unemployment and poverty in Nigeria are entwined. They constitute serious macroeconomic challenges to the country. Both have been known to drive the spikes in crimes and various forms of insecurity in the country. Without addressing the twin issues, other development challenges will remain with the society.

According to International Labour Organisation (ILO), unemployment is the inability of persons who are willing and able to work to find adequate paid employment, or the inability of people who are willing to work at the going wage rate to find jobs. The definition of unemployment in Nigeria includes people (aged 15 to 64) who are eligible for work and are actively seeking employment but are yet unemployed.

The drivers of unemployment in Nigeria include demographic issues, especially accelerated population growth. With population growth outpacing economic growth, as average data over the past eight years have shown, there is lack of absorptive capacity in the economy for the increasing number of people looking for jobs. Whereas any specific policy may not be directly responsible for the growing unemployment rate, the inability of policy to counter it is a major concern. From 19.26 percent in 2016, Nigeria’s unemployment rate climbed to 33.28 percent in 2021, according to Statista.

Poverty, on the other hand, has been defined by ILO as a situation of deprivation in which an individual or group of individuals in a society lacks the requisite resources and livelihood to live a healthy life. It also entails the lack of basic life requirements, such as water, food, shelter, clothing, sanitation, and a minimum level of medication. Poverty has been classified into relative and absolute poverty. The former affects households that earn 50 percent less than average household incomes, while the latter refers to a situation where people lack the ability to purchase the basic essentials of life like food, clothing, shelter, basic education, etc. It could also be referred to as a condition of destitution (extreme or abject poverty).

Poverty in Nigeria has manifested in several dimensions, such as lack of income and productive resources sufficient to ensure sustainable livelihoods, hunger and malnutrition, poor health, limited or lack of access to education and other basic services, inadequate housing, unsafe environments, social discrimination, exclusion, and lack of participation in decision-making.

Between 2016 and 2022, an additional 18.41 million Nigerians fell below the poverty line, according to World Bank data that put the total number of poor Nigerians at 88.43 million last year. This high rate of poverty is driving poverty-deepening high dependency ratio, which averaged 89.02 percent between 1981 and 2020, according to World Development Indicators. Moreover, youth unemployment in Nigeria was at 53.40 percent according to data released by the National Bureau of Statistics in 2022.

High, especially double digit, unemployment rates have been empirically identified as a driver of poverty. Therefore, in Nigeria, the number of people living in poverty is going in the same direction as the unemployment rate. For instance, the country's poverty incidence was 53.36 percent in 2016 while the unemployment rate was an average of 14.23 percent. By 2020, however, the unemployment rate had increased to 27.10 percent while the poverty incidence had increased to 59.69 percent.

The trends in Nigeria’s unemployment and poverty have not eluded the attention of policymakers. Some of the policies that have been enacted to curb the menaces include Operation Feed the Nation, aimed at achieving self-sufficiency in crop production in the late 1970s; Green Revolution, introduced in 1980 to continue the previous programme, and Better Life for Rural Women initiated in the late 80’s. Others are the National Economic Empowerment and Development Strategy (NEEDS), introduced in 2003 during the administration of President Olusegun Obasanjo as a comprehensive economic growth and development policy package; Subsidy Reinvestment Programme (SURE-P) under President Goodluck Jonathan to funnel savings from the removal of petrol subsidy into poverty alleviation; and micro-loan for trader called TraderMoni and the N-Power initiatives under President Muhammadu Buhari. But the policy frameworks all failed in varying degrees, due largely to lack of adequate technical framework to drive their success, the absence of transparency in their implementation, and lack of continuity in the policies by the successor governments.

However, many countries have successfully addressed the two macroeconomic challenges. According to World Bank report on Malaysia, economic diversification, trade openness, and investment have been instrumental in employment creation and income growth in the country, with about 40 percent of jobs in Malaysia linked to export activities. Since the Asian financial crisis of 1997-1998, Malaysia’s economy has been on an upward trajectory, averaging growth of 5.4 percent since 2010 and is expected to achieve its transition from an upper middle-income economy to a high-income economy by 2028.

China’s success is even more renowned. The country’s speed and scale of poverty reduction are historically unprecedented. The number of people in China with incomes below $1.90 per day has fallen by close to 800 million over the last four decades, accounting for close to three-quarters of global poverty reduction since 1980, according to World Bank’s findings. Targeted infrastructural development for poverty alleviation and market-oriented reforms to drive the expansion of economic opportunities in tandem with classical economic theories of development are two of the broad, anti-poverty and employment generation strategies assiduously implemented by China.

Markets and business played a key role in China’s economic transformation. But the role of government policy was quite instrumental. The success benefited from effective governance, which enabled the effective implementation of the economic growth strategy and the targeted poverty reduction policies. China used its endowment of high administrative capacity to provide public goods and overcome collective action failures. This is most evident in the expansion of public infrastructure that helped integrate rural areas with urban economies, and in the coordination of stakeholders in the targeted poverty reduction, according to Brookings Institution.

China’s success remains astounding to other countries. Now the world’s second-largest economy, China has simultaneously driven development outcomes with education, export orientation, sustained public investment in infrastructure, and structural policies that support market competition.

Nigeria should take a page out of China's book on intervening robustly in the human capital development of the country through a sustainable increase in the provision and funding of free, qualitative, and technical education. Adequate attention should also be given to agriculture, due to its capacity to employ a sizable proportion of the teeming population across the value chain of the sector. Some of the interventions that can raise economic output, generate income, and reduce unemployment and poverty include extension services to farmers, production subsidies (for instance for the acquisition of farming implements), and investment in transport infrastructures to link the rural production areas with major markets in the suburban areas and major cities.

Important as policy interventions are, experiences of developed nations have shown that the private sector is a major driver of employment generation and poverty reduction. Therefore, private sector participation in raising economic activities and output, and consequently poverty reduction, should be emphasised and supported. Since economic theory also suggests that businesses cannot thrive in an environment with poor infrastructure, there is need for aggressive investment in economic, social, and institutional infrastructure in terms of power, good transportation networks, information technology, and strong legal frameworks.

Olabusuyi Rufus Falayi, PhD, is a Senior Lecturer, Department of Economics, KolaDaisi University, Ibadan, Oyo State, Nigeria.