Why Change The Metrics?

Introduction

As an undergraduate in Nigeria, one concern you'd likely have would be how easy and quickly you'd get a job after graduation. You may have even wondered if you'd ever get a job because of the fierce competition in the country. To realistically analyze the situation, you'd ask yourself how many universities and polytechnics there are in Nigeria and do a quick mental count of how many students would probably be graduating and getting into the job market at the same time as you. As an alternative, you may have commenced the acquisition of a supplementary skillset as a prudent measure, should unforeseen circumstances arise. 

However, like every cause-and-effect situation, unemployment in Nigeria can be traced to various causes, which this article will explore. Already, Nigerian universities churn out nearly 600,000 graduates every year with little to no adequate plans in place for their employment. Reports have shown that, on average, it takes Nigerian graduates 3-5 years to obtain gainful employment, leaving some depressed and exposed to social vices and others in hot pursuit of opportunities abroad. Gainful employment in this context refers to employment or work where an individual earns a wage, salary, or income sufficient to support their basic needs and maintain a reasonable standard of living. In essence, it depicts a situation where a person is paid well enough at their job to financially sustain themselves and their dependants (if any) without relying on others. Aside from sufficient income, an individual can also be said to be gainfully employed if they are happy with their job, feel secure and have opportunities for growth/advancement. 

Unemployment in Nigeria remains a hot topic and is still one of the major social problems facing Nigeria today. Before delving into the topic of unemployment in Nigeria, let's understand some important terms used in this context: employment, unemployment, and underemployment. 

What is Employment?

Employment is simply the state of having paid work. It is a contractual relationship between two parties, the employer and the employee, in which the employer provides paid labour services to the employee, who agrees to perform work as instructed by the employer. The terms of employment, such as the wage or salary, the frequency of payment, i.e., daily, weekly, monthly etc., the hours of work, and the benefits, are usually agreed upon in advance and specified in a contract. The International Labour Organisation (ILO) defines a person in employment as one aged 15 or over who has done at least one hour's paid work in a given week. The whole concept of employment implies that an individual invests their skill, time and abilities, and gets payment in return. International child labour standards set the minimum age for employment or work at 15 years, with a lower limit of 13 years for light work. The minimum age for hazardous work is 18 years but can be lowered to 16 years under strict conditions.

What is Underemployment?

Underemployment occurs when a worker is employed but cannot use their full skills and experience in their current position. This can happen when a worker is overqualified for their job, or when they are working part-time or in a job that does not match their abilities. This situation indicates that an individual may be highly skilled but unable to find relevant job openings that enable them to put their skills to the best use. Underemployment usually results in low wages, little to no benefits, and limited opportunities for advancement. This commonly leads to difficulty in making ends meet and increases financial hardship.

An example of underemployment can be seen when a graduate works as a fast food/supermarket/fuel station attendant. Normally, these jobs do not require post-secondary qualifications, therefore, the graduate is underemployed. Also, if a graduate can work full time but is only offered part-time work, they are underemployed. Underemployment remains a problem in developing countries, where the formal job market is often small and the informal sector is large. In these countries, many workers are self-employed or work in small businesses, where they are usually paid very low wages/salaries. 

What is Unemployment?

According to the Organisation for Economic Co-operation and Development(OECD), Unemployment is defined as the state of joblessness amongst people of working age (usually 15 and above) who are available for work and have actively searched for work in the prior four weeks. The unemployment rate is a measure of the proportion of the labour force that is unemployed. It is calculated by dividing the number of unemployed people by the total labour force and multiplying by 100. There is a lot of debate regarding the actual meaning of unemployment when taking "willingness to work" into consideration. It is, however, typically accepted that not everyone who is not working is unemployed and that only those who are seeking employment but haven't found, can be put in this group. This means that a stay-at-home mum for instance, who has no plans of looking for a job, would not be considered unemployed.

Why is There So Much Unemployment in Nigeria?

Now that we've understood what unemployment is, it is safe to say that there is a high level of unemployment in Nigeria, as there are people who have actively been seeking employment for years but have still not been able to get any substantial offer. Nigeria had an unemployment rate of 33% in 2022, which meant that one in four Nigerians was unemployed. Sadly, leading audit and tax advisory firm KPMG has projected that Nigeria's unemployment rate will reach 40.6% in 2023 as a result of factors including slow economic growth, limited investment by the private sector, and the speedy influx of new job seekers into the labour market matched by the inability of the economy to adequately absorb these new entrants in their millions.

One of the major reasons for the high rate of unemployment in Nigeria is the mismatch between population growth and economic growth, with population growth being faster. Reports from the National Population Commission (NPC) in 2022, revealed that Nigeria's population growth rate has increased to 3.2% per annum in 2023. This is higher than the GDP growth rate of 3.10% and 2.3% in 2022 and Q1 2023, respectively, implying that the country's population is growing faster than its economy. Again, reports show that on average, Nigeria's economy has grown at the rate of 1.4% per year over the past eight years, while its population has grown at 2.5% per year over the same period. This means that there would likely not be enough economic resources to go around, leading to a fierce survival-of-the-fittest battle for the limited resources including jobs. As of 2022, reports from Spectator Index revealed that Nigeria was ranked 4th among the top 10 countries in the world with the highest youth unemployment.

Aside from the government, the private sector employs a sizeable portion of the labour force. Statista reported that as of 2022, the services sector (comprising of telecommunications, financial services etc.) mainly run by the private sector, boasts the largest volume of employment compared to the other sectors. The unfavourable economic conditions in the country, however, have negative effects on the private sector causing many companies to reduce their staff strength, leading to heightened unemployment. 

Previous Metrics Used to Calculate Unemployment 

Now that we have clearly defined who makes up the Nigerian labour force and who does not, it is not correct mathematics to determine unemployment as a percentage of the entire Nigerian population. In 2014, the National Bureau of Statistics(NBS) held a congress to determine and choose the standard metrics for calculating unemployment statistics in Nigeria. It was decided then that against the International Labour Organisation's benchmark of one-hour paid work per week counting as employment, the NBS would enact an adjusted methodology that would only consider 40 hours and above of paid work per week as full-time employment. Anything less would be counted as underemployment, and the state of having no work despite actively seeking would be counted as unemployment. 

Unemployment would then be calculated thus: 

Unemployment rate =            Unemployed                 x           100 

                                             Unemployed +Employed                        1

What Changed in the Metrics?

On 25 August 2023, The National Bureau of Statistics (NBS) released a revised methodology for calculating unemployment in Nigeria. The new methodology resulted in a significant drop in the unemployment rate, to 4.1% in Q1 2023 from 5.3% in the preceding quarter, Q4 2022. One would wonder how this is even possible with the level of unemployment still prevalent in the country. The new calculation method is criticism-worthy as it misrepresents the true level of unemployment in the country. The National Bureau of Statistics (NBS) however defended the new report by explaining that it aligns with the rates in other developing countries, where even just a few hours of work count as employment. 

For the average Nigerian who reads these statistics, the figures do not add up. Even before the fuel subsidy removal and the various economic challenges in recent times, many large companies such as ShopRite, Procter & Gamble, Deli Foods etc., had already begun the exodus out of Nigeria. But the National Bureau of Statistics (NBS) confidently reported that the rate of informal employment among employed Nigerians was 93.5% in the fourth quarter of 2022 and 92.6% in the first quarter of 2023. This begs the question, how?

The Bureau also released the labour force statistics report for the fourth quarter of 2022 and the first quarter of 2023. The report showed that the share of wage employment in Nigeria remained low, at 13.4% in Q4 2022 and 11.8% in Q1 2023, indicating a scarcity of wage-paying jobs in the country. Some other points to note include:

• In Q4 2022, 2.6% of the employed population were apprentices or interns, and 2.2% were helping in a household business without pay or profit. A further 10.7% were engaged in farming activities. This suggests that most Nigerians are self-employed or work in the informal sector.
• Underemployment rate was 13.7% in Q4 2022 and 12.2% in Q1 2023. This means that about one in eight employed persons worked less than 40 hours per week and were willing and available to work more hours.
• One-third of employed persons worked less than 40 hours per week in both quarters especially women, individuals with lower levels of education, young people, and those living in rural areas.
• Lastly, in Q4 2022, 21.4% of the working-age population was not employed, decreasing to 19.8% in Q1 2023.

Essentially, what the NBS tried to establish was that approximately three-quarters of Nigeria's working-age population was employed, with rates of 73.6% in Q4 2022 and 76.7% in Q1 2023. They also indicated that a significant portion of the population engaged in some form of paid or profitable work even for just an hour a week.

They also went ahead to adopt the employment calculation metrics used by the International Labour Organization by taking paid work even if for only an hour a week into consideration, and including apprentices in the labour force, thus resulting in much lower unemployment figures. 

Demerits of the new Methodology/Metrics

The new methodology adopted by the NBS has one major demerit: It can potentially culminate in wrong policy decisions by the government. The old methodology defined employment as "work done for pay or profit", and excluded apprentices, who are learning a trade and are typically unpaid workers. The new methodology, however, defines employment as "work done for at least one hour in a week, for pay or profit", and includes apprentices, as well as other unpaid workers such as volunteers.

These new inclusions automatically lower unemployment rates and can ultimately mislead the government into enacting policies that halt job creation in the country, thereby worsening the already deteriorating economy.

Final thoughts

These new inclusions adopted by the NBS in the definition of employment somewhat take attention away from the actual realities of the Nigerian economy. One of the major highlights of the Labour Statistics shared by the NBS was the cost of production which had gone up to N788.7 billion in 2022, from N630.7 billion in the first half of 2021. This means that more and more micro, small and medium enterprises will halt operations in the near term as a result of rising operation costs, leading to increased unemployment.

Regarding the unemployment rate determination, the United Kingdom uses these new metrics also but has recorded an unemployment rate of 4.3% as of July 2023. One might then ask, does it mean that Nigeria has better employment than the UK whose economy grew by 4.1% in 2022, compared to Nigeria's 3.1% and which recorded a GDP per capita of 32,904 GBP ($41,088) as of 2022, compared to Nigeria's $2,184? Elsewhere, Canada's unemployment rate stands at 5.5% while that of Germany and France currently stand at 5.7% and 7.25 respectively, all more developed countries with rates higher than Nigeria's. This goes to show that this employment calculation method may be flawed. 

Furthermore, it would appear contradicting that while the unemployment rate is low, poverty is on the rise. World Bank reports showed that 89.8 million Nigerians were already living below the poverty line at the start of 2023 but by May, this number had increased to 93.8 million, an increase of 4 million. 

While the ILO guidelines serve as a global reference for employment metrics, allowing data to be carefully collected over a period of time rather than at a single point in time, it's crucial for Nigeria to establish its specific guidelines that adequately mirror the job outlook in the country as it is economically detrimental for a country to report more employment than there is.