Rethinking Nigeria s Job Creating Strategy

Transcription

1 Nextier Advisory Centre for the Study of Economies of Africa Rethinking Nigeria s Job Creation Strategy Skills, Infrastructure, Innovation A paper developed by Nextier Advisory for and in collaboration with Centre for the Study of Economies of Africa. September 2013 Rethinking Nigeria s Job Creating Strategy [1] September 2013

2 Rethinking Nigeria s Job Creation Strategy Skills, Infrastructure, Innovation A paper developed by Nextier Advisory for and in partnership with Centre for the Study of Economies of Africa September 2013 Cover photo credits: Rethinking Nigeria s Job Creating Strategy [2] September 2013

3 This report sets forth the information required by the terms of Nextier s engagement by Centre for the Study of Economies of Africa and is prepared in the form expressly required thereby. This report should be read and used as a whole and not in parts. Separation or alteration of any section or page from the main body of this report is expressly forbidden and invalidates this report. Information furnished by others, upon which all or portions of this report are based is believed to be reliable but has not been independently verified. No warranty is given as to the accuracy of such information. Public information and industry and statistical data are from sources we deem to be reliable; however, we make no representation as to the accuracy or completeness of such information and have accepted the information without further verification. The findings contained in this report may contain predictions based on current data and historical trends. Any such predictions are subject to inherent risks and uncertainties. In particular, actual results could be affected by future events which cannot be predicted or controlled, including, without limitation, changes in government policies, changes in market and industry conditions, changes in law or regulations and other contingencies. Nextier accepts no responsibility for actual results or future events. The opinions expressed in this report are valid only for the purpose stated herein and as of the date of this report. No obligation is assumed to revise this report to reflect changes, events or conditions, which occur subsequent to the date hereof. All decisions in connection with the implementation or use of advice or recommendations contained in this report are the sole responsibility of Centre for the Study of Economies of Africa. This report does not represent investment advice nor does it provide an opinion regarding the fairness of any transaction to any and all parties. This report is for the exclusive use of the Centre for the Study of Economies of Africa. There are no third party beneficiaries with respect to this report, and Nextier does not accept any liability to any third party. In particular, Nextier shall not have any liability to any third party in respect of the contents of this report or any actions taken or decisions made as a consequence of the results, advice or recommendations set forth herein. Nextier Advisory info@nextierlimited.com Rethinking Nigeria s Job Creating Strategy [3] September 2013

4 Table of Contents 1 Executive Summary Introduction Purpose of the Paper Our Approach The unemployment story in Nigeria Historical review of unemployment Structural Shift of the Nigerian Economy Sectoral Employment Intensities and Labour Absorption Output and Employment (Historical sectoral patterns, labour absorption) Situational Analysis of the Job Market Demography The Nigerian Labour Market Job Creation by Sectors Who is unemployed in Nigeria? What are the causes of unemployment in Nigeria? Poor Policy Choices Poor Implementation Constraints to Job creation and Employment in Nigeria Understanding Nigeria s Employment Strategies Review of Nigeria s Job Policy The Colonial Era (Pre-1962) The Era of Fixed Term Planning ( ) Rolling Plan Era ( ) New Democratic Dispensation (1999-date) Review of Nigeria s Employment & Poverty Alleviation Programmes The Role of Government in Job Creation Key Government Reform Programmes on Job Creation Rethinking Nigeria s job creation strategy What should be the job creation policy goal? How should the government approach this goal? What should be the elements of the job creation strategy? Skills Infrastructure Innovation A Call for Action: Delivering Nigeria s Agenda for Growth and Jobs List of Tables Table 1: Structure of the Economy: Sectoral Shares of Output and [Employment] Table 2: Distribution of Employment by Economic Activity Table 3: Types of employment as a Percentage of the Labour Force Table 4: Types of Wage Employment Table 5: Nigeria: Unemployment rate by gender Table 6: Nigeria: Unemployment rate by age group Table 7: Nigeria: Unemployment rate by state Table 8: Nigeria: Unemployment rate by place of residence Rethinking Nigeria s Job Creating Strategy [4] September 2013

5 Table 9: Nigeria: Unemployment rate by educational level Table 10: Review of National Policies, Objectives and Shortfalls Table 11: Causes of unemployment and sample list of government s intervention programmes Table 12: Sample Government Job Creation Initiatives List of Figures Figure 1: Changes in Sectoral Distribution of Output [top graph] and Employment [bottom graph] Figure 2: Employment to Output Ratio Figure 3: Demographic Profile of Nigeria (2000, 2010) and South Africa (2010) Figure 4: Contributions to Non-Oil GDP Growth in percent Figure 5: At A Glance: Nigeria Economic Empowerment and Development Strategy Figure 6: Graph showing Nigeria's GDP growth rate, poverty level, unemployment rate and government intervention policies and programmes Footnotes Rethinking Nigeria s Job Creating Strategy [5] September 2013

6 1 Executive Summary What institutions and policies are needed to ensure the growth-driven productivity that will enable Nigeria s participation in the dynamic world economy of the twenty-first century? After years of inadequate investment in skills, infrastructure and innovation, there are longstanding structural weaknesses in the economy, all rooted in a failure to achieve stable planning, strategic vision and a political consensus on the right policy framework to support growth with jobs. In addition, successive administrations have failed to drive a culture of implementation as the single most important factor to deliver effective development. This weakness must be resolved if Nigeria is to meet its current and future challenges. Job free economic growth will further exacerbate underemployment and unemployment, especially among the youth, fuelling a growing culture of conflict with adverse implications for domestic, regional and global safety and security. A review of the Federal Government budget over the last two decades shows that the strategy has been to invest in all sectors probably with the intent to move all sectors forward, even if only marginal progress is achieved. This is not a viable strategy. Government policy and programme should focus on creating a favourable environment for the select sectors of the economy that have demonstrated an increasing contribution to GDP growth and the potential to create high numbers of waged jobs. Nigeria needs to migrate purposefully and urgently to become a society where stable and favourable business conditions give certainty for the private sector to invest and grow in size, strength and competitiveness and so, constantly, increase the numbers of waged employees. Nigeria must become an ideal growth and development society. The role and strategy of government is to frame, create and sustain such conditions in the priority, winning, growth sectors of wholesale and retail industries, information and communication technology, real estate and construction, agribusiness, and large-scale, export-focused industries. Within each sector the cross cutting agenda is to ensure the availability of the necessary skills and infrastructure combined with a readiness to innovate. The reforms we propose here are a crucial response to a rapidly changing world where skills, flexibility, openness and receptiveness to technological change are becoming ever more important for prosperity. Together, they constitute a Nigerian Agenda for Growth with Jobs, which we call on all Nigerian stakeholders to support. Rethinking Nigeria s Job Creating Strategy [6] September 2013

7 2 Introduction The 2013 outlook for job creation in Nigeria is bleak. It has been problematic since 1980 when Nigeria started tracking employment data. The government, through the National Bureau of Statistics (NBS), indicates that 27.4 percent of the labour force is unemployed (as at 2012). Reality is probably worse than the government data acknowledges. For instance, only 164,293 jobs (NBS, 2013) were created in the third quarter of 2012 in a country where there are at least 64 million unemployed young Nigerians (Awogbenle and Iwuamadi, 2010). Furthermore, most unemployed Nigerians are outside the labour force. Discouraged, they have stopped looking for work in the formal sector. The core public policy problem is that unemployment in Nigeria continues to worsen whilst the economy has grown on average at 7 percent 1 for the last 10 years. This has been achieved in the face of a global financial crisis that has seen GDP growth rate drop to about 0.3 percent in the Eurozone and 2.5 percent in the United States. Although Nigeria s 2013 GDP growth rate will probably drop to about 6.6 percent, this is still higher than the estimated 2013 GDP growth rate for the largest emerging economies (Brazil, Russia, India, China and South Africa). Although the government of Nigeria acknowledges that unemployment has increased from 6.4 percent in 1980 to 27.4 percent in 2012, the reality may be much worse than reported. In fact, the NBS (2013) acknowledges that currently there is neither a systematic nor reliable means of generating data in Nigeria on the number of jobs created or lost during any given period. Akintoye (2008) estimates that about 70 percent of Nigeria s labour force is in the untracked, informal sector. It seems likely; therefore, that unemployment and under-employment rates are grossly under-reported. Poverty in Nigeria, a consequence of under- and unemployment, has also increased since the 1980s. The poverty rate stood at 28.1 percent in 1980, peaked at 88 percent in 2002 before declining to 45 percent in An NBS press release (June 2013) stated that 112 million Nigerians live below the poverty line. This 67 percent poverty rate (using a population estimate of 168 million people) indicates that the Nigeria s poverty profile is increasing. Of particular concern is the fact that Nigeria s youth are the most adversely affected by the unemployment trend. Nigerians below the age of 25 years account for about 63 percent of the population. In 2011, 37.7 percent of Nigerians aged between 15 and 24 years in the labour force were unemployed percent of unemployed Nigerians are between the ages of 15 and 44 years widely recognized as the most economically productive years of an individual. The scale of unemployment is of great concern because, without experience of useful and productive activities in these formative years, the Nigerian workforce will lack the 1 As remarkable as this growth rate appears when compared to growth in other developed and emerging markets, it is important to highlight that the Nigerian government had estimated a 10 percent GDP growth rate for the period (The Nigeria Economic Empowerment and Development Strategy (NEEDS, 2004)). Notwithstanding, it is still a remarkable growth rate that has been attributed to relative macroeconomic stability particularly evidenced by the reduction in the level of fiscal deficits that dropped from 4.3 percent in 2001 to less than 1 percent in Fiscal deficits have risen to 2.97 percent in 2012 that is still within the international acceptable range of 3 percent. The drop in fiscal expansion resulted in low rate of inflation that dropped from 18.9 percent in 2001 to 5.9 percent in 2007 and 8.9 percent as at July Rethinking Nigeria s Job Creating Strategy [7] September 2013

8 skills required for global competition. Furthermore, the evidence already suggests that should this cohort of Nigerians remain under- or unemployed, this will constitute a major threat to safety and security in Nigeria with implications for the region and globally. Nigeria s increase in violent crime (robbery, kidnapping, thuggery, terrorism) correlates (Ajaegbu 2012) with the rise in youth unemployment in Nigeria. Successive Nigerian governments have understood this reality. Every government since Nigeria s independence has set out policies to create jobs and eradicate poverty. Several intervention programs have been implemented. None are without merit. Nevertheless, the harsh fact is that Nigeria has neither been successful in reducing poverty to manageable levels, nor in creating sufficient jobs for the rapidly growing population. The reasons for this failure include - but are not limited to - weak policy design, poor coordination, inconsistent implementation, ineffective programme targeting, and lack of political commitment. Most of the intervention programmes started out as ad hoc government agencies but ended up as huge bureaucracies with limited accountability for efficient and effective use of public funds. 2.1 Purpose of the Paper Faced with the prospect of the unfulfilled potential of a generation of young Nigerians, lacking any productive skills or work experience from their formative years, two, independent Nigerian policy institutions - Nextier Advisory and Centre for the Study of Economies of Africa have joined forces to advocate for a rethinking of Nigeria s job creation strategies. Both firms will jointly organise a conference to develop a Nigerian Agenda for Growth with Jobs. The main objective of the conference is to bring together decision takers and opinion formers - labour market experts, policy makers, politicians, researchers and other public and private sector stakeholders - to rethink doable job creation strategies in Nigeria. Every government of Nigeria (military and democratic) has, over the years, initiated interventions to create jobs and alleviate poverty. Yet, despite best efforts, Nigeria s unemployment remains high - one of the highest in Sub-Saharan Africa. Changing the government s thoughts and action on growth with jobs is the impetus for the conference. The conference will seek to understand why past interventions failed to deliver the desired results and what should now be done differently both to continue to grow and create jobs. All critical stakeholders will be represented at the conference to ensure broad-based support for the Agenda for Growth with Jobs. This briefing paper sets out the background to unemployment issues in Nigeria. It is one of the conference briefs that participants can use in preparing to contribute at the conference. The policy recommendations in this paper will be considered with other proposals that participants present at the conference. The aim is to prepare and agreed a position paper and implementation plan to guide cohesive national action towards job creation and growth. 2.2 Our Approach We intend this paper to provide the context for conference participants to rethink Nigeria s job creation strategy. The body of knowledge around unemployment and job creation is huge, well-trodden Rethinking Nigeria s Job Creating Strategy [8] September 2013

9 and daunting. Our value addition is to bring together a range of perspectives from academia, policy-making institutions and business. We have relied mainly on existing research in scholarly publications and recommendations by our policy analysts. Although we have drawn on the best available research, a recurring theme is the paucity of good material on the Nigerian experience with implementing job creation and poverty alleviation programmes. We started with a review of Nigeria s job creation strategies. We sought to understand what worked, what didn t, and why. Then we discussed the causes and challenges of unemployment in Nigeria and how most of the interventions have had too narrow a focus rather than a coordinated, holistic approach to job creation. In the concluding section we provided a review of job creation goals as outlined in successive government s policy documents and made policy recommendations on how to create enough jobs to meet the needs of a fast growing population. Rethinking Nigeria s Job Creating Strategy [9] September 2013

10 3 The unemployment story in Nigeria The 2012 national unemployment rate in Nigeria was 27.4 percent, a sharp increase from the 6.9 percent of This worsening situation is not for want of effort. Every government of Nigeria since its independence in 1960 has implemented a set of programmes to address the causes and challenges of unemployment. Yet it still appears that Nigeria is losing the battle against unemployment and poverty, and this is at a time of sustained economic growth over the last decade. Here we present an overview of the unemployment situation in Nigeria. Section 3.1 is a historical review of unemployment in Nigeria from the colonial days to date. Section 3.2 relies on data from the National Bureau of Statistics to paint a composite picture of the typical unemployed Nigerian as a context for an effective policy review and design. Section 3.3 argues that the causes of unemployment in Nigeria can be summarised into the two broad themes: deficiencies in policy design and programme implementation. 3.1 Historical review of unemployment Pre-1950, the unemployment rate in Nigeria was below 2 percent and acceptable. At the time, the Nigerian economy was dominated by agriculture, which contributed about 65 percent of the GDP and 70 percent of total exports. The former colonial government drove an export-led development strategy focused on the export of raw materials comprising agricultural produce and extracted minerals. Consumer goods were imported. By the 1950s, with the increased agitation for independence, the colonial government started an industrialisation plan with a range of protectionist policies (such as tariffs, and quotas) to support the local enterprises. Import substitution industrialisation strategies were implemented to get the local industries to produce hitherto imported goods. As expected, protectionism created short-term success for industry and jobs were created. Nigerians began to leave their farms and rural communities to migrate to the cities for jobs in the manufacturing enterprises and in the government bureaucracy that provided the administration and logistics to support the growing economy. By the end of the 1960s, unemployment was still below 2 percent. Inflation and unemployment rates were low and acceptable. However, local manufacturers did not take advantage of the protectionist shield to improve productivity because there was no incentive to do so. Overwhelming local demand and the protectionist walls ensured there was still a large market for their products. However, such good fortune could not go on forever. Data from 1960 to date shows that Nigeria has a largely agrarian economy although the share of agriculture decreased from 57 percent in the 1960s to about 40 percent in the current decade. Mining and Quarrying increased from 4.0 percent in the decade of the 1960s to about 34 percent in the decade of the 1990s to a decline of about 15.2 percent in the current decade. Other sectors like manufacturing, building and construction, commerce and distribution, and services have made marginal changes to their contribution to the national economy. The game changer, however, was the discovery of crude oil in commercial quantities in January 1956 coupled with the 1973 political crisis in the Middle East that led to sharp Rethinking Nigeria s Job Creating Strategy [10] September 2013

11 increases in oil prices and huge foreign exchange inflows to Nigeria. With a bulging treasury, the military government of the day embarked on an extensive infrastructure development while expanding the size - and the cost - of the government bureaucracy. These investments created demand for other services, and commerce continued to expand, thus resulting in the contribution of building and construction to the economy. The subsequent sharp drop in international crude oil prices precipitated an economic depression throughout the 1980s. Between 1980 and 1989, Nigeria experienced an average of 6.0 percent rate of unemployment. In response to the economic depression, government of Nigeria implemented a range of stabilisation measures including stringent import restrictions to support the local industries and safeguard the jobs. However, with most of local industry dependent on imported materials, many enterprises went out of business or downsized operations resulting in massive staff retrenchment. Even the government had to downsize the bureaucracy and place an embargo on recruitment. All of these actions increased unemployment at the start of the 1980s. By July 1986, the government of Nigeria had few options but to implement a reform package labelled the Structural Adjustment Programme (SAP) as a panacea for the mounting economic challenges. The key elements of SAP were to diversify the country s economic base, achieve fiscal and balance of payment viability, achieve non-inflationary growth, reduce dominance of unproductive investment in the public sector and encourage private sector-led growth. Scholars have yet to agree on the impact and performance of SAP on Nigeria s economy. Noteworthy, however, is that unemployment dropped to an average of 3.1 percent in the years from 1990 to In fact, unemployment in 1995 was 1.8 percent. The return to democratic rule in 1999 saw the implementation of a combination of reforms aimed at increasing the role of the private sector as drivers of the economy with the government playing the role of an enabler. Privatisation of public enterprises and liberalisation of the economy were expected to increase the productive capacity of the economy leading to increase in the number of jobs for Nigerians. Unfortunately, unemployment jumped from 3.5 percent in 1998 to 17.5 percent in Although it dropped to 13.1 percent in 2000, and hovered around an average of 13.9 percent from 2000 to 2009, unemployment in Nigeria increased to 27.4 percent in The increase in unemployment following the privatisation of public enterprises is not wholly surprising. Privatisation is expected to drive efficiency, productivity, and competitiveness that, in turn, will increase employment opportunities. However, new owners of privatised enterprises tend to reduce staff levels, as state owned enterprises are usually over-staffed. Boughrara (2010) found that depending on the level of corruption in the country and how the proceeds of the privatisation are applied to the economy, unemployment might increase in the years following the privatisation. From 2003, the government s macroeconomic policies gave an increased emphasis to job creation. The government created a National Employment Policy in line with the overall direction of its reform agenda - private sector-led growth. The intention was to stabilise the economy through a combination of a check on inflation, market-driven exchange rates, liberalised trade, increased national savings, improved productivity, and privatisation. The government argued that all these elements taken together would lead to job creation, economic recovery and growth. Successive governments from 2003 to date have each promoted an economic agenda. Although the branding is different, the policy content is essentially the same. The current Rethinking Nigeria s Job Creating Strategy [11] September 2013

12 Transformation Agenda (2011), for example, is not philosophically different from the Seven-Point Agenda (2007) or Nigeria Economic Empowerment and Development Strategy (NEEDS 2004). However, notwithstanding the branding and re-branding of economic policies and programmes, unemployment continued to rise from 13.1 percent in 2000 to 27.4 percent in Structural Shift of the Nigerian Economy The depression of the 1980s highlighted the gap between petro-dollar earnings and real investment in the economy. Logical causes such as debt servicing and repayment and the emergence of a culture of corruption contributed to this situation. More to the point, however, investments in physical capital funded by the oil boom of the 1970s were not maintained or developed further, leading to collapse of the nation s infrastructure. The mining sector grew in size to 33.5 percent of the economy during the 1980s (from 4.0 percent in the 1960s), but the resources were hardly felt in the real sectors. The share of construction fell to 3.2 percent and manufacturing during the period declined. Simultaneously, the combined services sector dropped to 25.5 percent of the economy. Thus, while the country produced and sold more oil, the revenues failed to translate into meaningful real investments and thus the economy lost its momentum. At the inception of the fourth republic, the democratic government embarked on a mission to expand agricultural production and thereby promote food security. Alongside, the administration also pursued reforms and encouraged investments in ICT and communication sectors. As a result, the agricultural sector returned to dominating the economy, accounting for about 40 percent of the economy, and the services sectors (including commercial services) also grew aggressively to reach 38 percent of the economy during the most recent years. It is expected that the services sector will dominate the economy in the immediate future. Treichel (2010), in a comprehensive study on employment and growth in Nigeria, pointed out that the growth in Nigeria s agricultural sector can be attributed to a significant rise in the price of agricultural commodities, driven by a rise in both international and local prices of agricultural commodities, coupled with protectionist trade policies that led to import bans on items like cassava and poultry. The study attributed the rise in local demand to the emergence of an urban middle class in Nigeria. Furthermore, the study pointed out that the growth in the sector was driven mainly by increased land use, rather than productivity increases, and by extension, the economic growth witnessed in Nigeria was largely as a result of factor accumulation. However, the evidence shown for the strong assertion, which consists of a plot of total factor productivity over time, is rather doubtful as it does not necessarily explain the direction of productivity in particular sectors. Table 1: Structure of the Economy: Sectoral Shares of Output and [Employment] Sector Agriculture 57.0 [n.a] 30.0 [68.0] 31.2 [63.2] 33.9 [58.3] 40.6 [52.7] 40.1 [n.a] Mining & 4.0 [n.a] 21.1 [0.5] 33.5 [0.7] 34.2 [0.6] 24.4 [1.1] 15.2 [n.a] Quarrying Manufacturi ng 6.5 [n.a] 6.9 [11.5] 6.6 [13.0] 5.0 [12.3] 3.9 [9.2] 4.1 [n.a] Building & 4.7 [n.a] 8.2 [1.0] 3.2 [1.1] 1.8 [1.2] 1.8 [1.7] 2.1 [n.a] Construction Commerce/ 12.8 [n.a] 16.7 [11.1] 15.2 [11.3] 13.8 [15.2] 14.0 [18.6] 19.3 [n.a] Distribution Services 15.0 [n.a] 17.1 [7.9] 10.3 [10.8] 11.3 [12.5] 15.3 [16.7] 19.2 [n.a] Rethinking Nigeria s Job Creating Strategy [12] September 2013

13 Note: Employment data compiled from National Rolling Plan ( ), NBS (Statistical Fact Sheets), NMB (Data File, ) and CBN Annual Report (2012). Employment data series were available up to Figure 1: Changes in Sectoral Distribution of Output [top graph] and Employment [bottom graph] Agriculture Mining & Quarrying Manufacturing Building & Commerce & Construction Distribution Services Agriculture Mining & Quarrying Manufacturing Building & Construction Commerce & Distribution Services Figure 1 above presents a graphical description of the data in Table 1. There are three noteworthy observations with regards to the transition of the economy. First, emigration of labour from agriculture over time is not associated with a decrease in agriculture s share of the economy. Rather, agriculture share of the economy increased over time. This is an irregularity when viewed in the light of historical trends associated with the experience of more developed countries. This outcome is a confluence of three factors: 1. statistical agencies generally associate rural labour with agriculture, 2. increase in agriculture value-added was driven largely by high prices and expansion of land under cultivation (Treichel 2010), and 3. developments in the urban non-agricultural service and commercial sectors were more attractive, thereby inducing rural-urban migration. Second, manufacturing and services account for the most growth in output and employment since the 1980s (i.e. on average, these sectors absorb the most labour per Rethinking Nigeria s Job Creating Strategy [13] September 2013

14 unit of output). If Okuns law - which posits that increased levels of output result in a decrease in cyclical unemployment - is to be held as valid, then these sectors could provide important lessons for job creation and employment strategies. Sectoral Employment Intensities and Labour Absorption Labour absorption rates have continued to increase in both the real sector (building and construction) and commercial sector (wholesale and retail). Figure 2: Employment to Output Ratio Agriculture Mining & Quarrying Manufacturing Building & Commerce & Construction Distribution Services Growth Note: Computations are based on data in Table 1 above In the case of real estate and infrastructure, the boom in housing construction can be attributed to the shift in labour absorption. Moving from the period where construction arising from urbanisation is dominated by large infrastructure projects, to an era where an emerging affluent class in society is driving demand for housing and other more labour-intensive real estates, the production function in the sector is likely to have become more absorptive of labour. Although the manufacturing sector is where labour absorption is highest in history, the real estate sector holds the greatest potential for labour absorption growth. Output and Employment (Historical sectoral patterns, labour absorption) Economic theory predicts a negative relationship between changes in unemployment rate and changes in output. Okun s law, based on the empirical observation of Arthur Okun in the 1960s, predicts that shifts in aggregate demand would lead to output changes that would result in changes in unemployment rate (Ball, et al. 2013). In particular, the law predicts an increase of 1 percent in unemployment when output decreases by 3 percent. Thus a macroeconomic policy that stimulates demand, which Rethinking Nigeria s Job Creating Strategy [14] September 2013

15 consequently increases output, is usually considered as a means of reducing unemployment. However, despite the empirical observations of Okun s law fitting the output and unemployment data of advanced countries, there have been some exceptions. In the German miracle usually cited as the major deviation from the law, unemployment decreased as output fell in the years following the Second World War. The jobless recovery witnessed in the last three recessions in the United States has heighted the case against the law (Ball, et al. 2013). Also, the numerical response of unemployment to a fall in output has not always followed Okun s law. The recent output drop in European Union countries such as Spain and Ireland by about 8 percent was accompanied by an increase in unemployment rate of more than 7 percent (IMF, 2010), which was far above the 2.67 percent predicted by the law. The idiosyncrasies witnessed in the output and unemployment relationship of different countries point to the idea that other factors affect output fluctuations, aside from unemployment. Structural differences across countries relating to institutions, labour market policies and shocks could also explain the variation. This is true of East Asian countries that have been identified as following the Okun s law with variations in its coefficient across countries. The strong economic growth witnessed in East Asian countries led to significant job creation, but in different degrees across countries. However, the negative relationship between unemployment and economic growth was seemingly evident in non-agricultural sectors, as the agriculture sector typically witnessed a drop in unemployment amidst economic downturn, contrary to the Okun s law (Hanusch 2013) 3.2 Situational Analysis of the Job Market Demography The most recent population estimates for 2012 by the Population Reference Bureau (PRB 2012) provides a mid-year population of about 170 million with 44 percent of the population aged 0-14 years, 53 percent of working age years, and 3 percent over 64 years. The age dependency ratio of 89 percent is an increase from 85 percent in 2011 and 80 percent in A disaggregation of the working age population by the World Bank shows that the population in age group 15-24, typically considered as youth population, constitute only 19 percent of the population while the and age groups constitute 30 percent and 4 percent respectively. Figure 3 shows the Nigerian population pyramids for 2000 and 2010 as well as the South African population pyramid for 2010, for comparison purposes. As the pyramids show, the majority of Nigerians are still at home or in school compared to South Africa where the majority is ready for work or already working. Whereas South Africa is already experiencing a youth bulge, Nigeria is very far away from that point. Indeed, the youth bulge is not likely to arrive prior to 2025 due to unyielding fertility rates. 3 2 The NBS (2012) estimates a population distribution where 40% are ages 0-14, 56% are aged and 4% are aged 65 and above yielding a dependency ratio of 79%. 3 The reports of the Nigeria Demographic and Health Surveys show that the Total Fertility Rate (TFR) increased from 5.2 to 5.7 children per woman between 1999 and Indeed, Nigeria has not started the Rethinking Nigeria s Job Creating Strategy [15] September 2013

16 Figure 3: Demographic Profile of Nigeria (2000, 2010) and South Africa (2010) The population aged years (referred to as the youth) constitutes similar shares of total population in Nigeria and South Africa at 19 percent and 20 percent respectively. However, the fact that Nigeria s population is about 3.2 times the size of South Africa implies that the sheer size of the youth labour force will be many times higher in Nigeria than in South Africa. Be that as it may, the most important distinction between the two countries lies in what is yet to come. The population not ready for work constitutes 44 percent of Nigeria s population compared to 29 percent in South Africa. The distribution of this population by age group as shown in Figure 1.1 implies that, over the next 15 years, new entrants into the labour market will arrive at increasing rates in Nigeria but at decreasing rates in South Africa. Thus, while the labour market and unemployment situation can get better in South Africa, it can only get worse in Nigeria. The Nigerian Labour Market Nigeria s labour market can be characterised using three (3) segmentations, namely, Rural-Urban, Private-Public, and Formal-Informal Segments. The rural labour markets are characterised predominantly by agriculture and self-employment, which has a large proportion of women. Workers in the rural labour markets face poor quality jobs with long and irregular working hours, which often pay low wages. As Oloni (2013) notes, such workers are also deprived of pension and other social benefits. The urban labour markets largely comprise employees in the public and private sectors as well as the informal sector. Wages in the urban labour markets are generally higher than those in rural markets and this is attributable to the fact that urban labour markets attract more educated and better skilled employees than you would find in the rural markets. The formal labour market mainly consists of employees in the public sector and private enterprises. These formal markets are characterised by institutional determination of wages, which are often higher than those in the informal markets, provision of social benefits, and tenured employment. Although minimum wages are higher in the public sector than in the private sector (because minimum wages are set in the former), average wage rate is higher in the private sector. The informal market is largely unregulated and course of demographic transition. TFR dropped by only one child from 6.5 to 5.5 over a period of 60 years from 1950 to Rethinking Nigeria s Job Creating Strategy [16] September 2013

17 comprises unregistered enterprises, which generally do not pay taxes. Market forces largely determine wages in the informal sector. With low employment growth in the formal sector, the informal labour market has become the key source of new employment in the Nigerian economy. In recognition of the importance of the informal labour market as a veritable and sustainable source of new employment, the government has instituted many reforms and initiatives, which are principally designed to encourage people into employment in this sector. The public sector is the largest single employer of labour in Nigeria. This comprises employment at all three tiers of government, that is, Federal, State, and Local Governments. As aforementioned, although average wages are lower in the public sector, they are attractive to many people because of job stability, social benefits, and generous pensions at retirement. However, the private sector is better able to attract younger, upwardly mobile Nigerians given that the starting wages are higher, promotions are more based on merit than seniority or age, and the possibility of getting to the top ranks of Management in shorter time is higher. Wages are generally negotiated between the employers and employees but there is a high rate of labour turnover in this market. In terms of the share of employment by sectors in the economy, a majority of the active labour force work in the Agriculture, Forestry and Farming sector (See Table 2 below). This sector alone accounts for over 30 percent of all employed persons in Nigeria. Table 2: Distribution of Employment by Economic Activity Sector Percent of Total Agriculture, Forestry and Farming 30.5 Trade, Motor and Motorcycle Repairs 24.9 Manufacturing 11.0 Other Service Activities 7.1 Accommodation and Food Services 5.6 Transportation and Storage 4.1 Education 3.2 Construction 2.4 Public Administration and Defence 1.6 Professional, Scientific and Technical Service 1.6 Human, Health and Social Work 1.5 Arts, Entertainment and Recreation 0.8 Financial and Insurance Activities 0.4 Mining and Quarrying 0.3 Others 5.0 Total Source: National Bureau of Statistics The other dominant sectors in terms of employment in Nigeria are Wholesale and Retail Trade (25 percent), Manufacturing (11 percent), and Accommodation and Food Services (12.7 percent). In addition to Agriculture, these sectors account for nearly 80 percent of the total employment in the country. Job Creation by Sectors Data from World Bank (2009) show that the available jobs are predominantly in three sectors: family agriculture, non-agriculture self-employment and wage employment. Rethinking Nigeria s Job Creating Strategy [17] September 2013

18 Table 3: Types of employment as a Percentage of the Labour Force Economic Sectors Total Family agriculture Non-agricultural self employed Wage employment Apprenticeship Non-agricultural unpaid family work Unemployed Unemployed Source: General Household Survey as presented in World Bank (2009) Nigeria: Employment and Growth Study Family agriculture accounts for about 50.7 percent (2006) of the jobs available to the labour force in Nigeria. These jobs (small-scale and subsistence) do not allow room for large capital investments. The low capital intensity implies the sector s inability to create high numbers of wage employment. However, in spite of its low capital intensity, agriculture is the largest sector of the Nigerian economy, contributing about 42 percent of GDP. The current administration of President Goodluck Jonathan has taken a value chain approach to addressing the challenges of the sector with the aim of transforming agriculture from a focus on rural development to developing agribusiness enterprises that can create large numbers of wage employment. Nigeria is well placed to meet rapidly rising global demand for increased agricultural production when it addresses challenges including access to appropriate financing for farmers, liberalisation of access to farm inputs, including fertilizer, improved seedlings, tractors, etc.; improvement in processing capacity for selected products, and increased linkages between the production enterprises and markets. Non-agriculture self-employment accounts for 30.7 percent (2006) of the jobs available to the labour force in Nigeria. Most of these jobs are not in the manufacturing sector as capacity has been on a decline from the mid-1980s to date. Annual growth rate in manufacturing in Nigeria declined from 18.5 percent (in ) to negative growth of 3.9 percent in (Anyanwu, 2004). This decline is a result of a mix of factors including over dependency on oil revenue, weak infrastructure (power, logistics, telecommunications, etc.), shortage and mismatch of skilled labour, access to capital, cost of capital, etc. Wage employment accounts for 13.5 percent (2006) of the jobs available to the labour force in Nigeria. This is a significant problem as this is the type of work desired by most young Nigerians. As at 2006, 45.6 percent of these jobs were in the government institutions while 18 percent were created in private companies. Most analysts do not expect to see significant growth in wage employment. The public sector - the main source of wage employment - already has a bloated bureaucracy with the government spending over 72 percent of the federal budget on recurrent expenditure (staff costs, travel, office expenses, etc). The government is determined to reduce this cost and has placed an embargo on recruitments or salary reviews. The required level of job creation is not expected from the federal government in the short term. Table 4: Types of Wage Employment Types of Wage Employment Total Parastatal or Ministry Rethinking Nigeria s Job Creating Strategy [18] September 2013

19 Private company Public company Others Source: General Household Survey as presented in World Bank (2009) Nigeria: Employment and Growth Study According to World Bank (2009), the decline in wage employment is primarily a result of three developments: 1. The high number of staff retrenchments arising from privatisation of previously stateowned enterprises. The privatisation process is yet to deliver the expected increases in wage employment. 2. The decline of the manufacturing sector, which is capable of creating large numbers of wage employment. At its prime in the mid-1980s, Nigeria s textile industry was one of the largest employers of labour in the manufacturing segment. In the last 20 years, the sector has suffered a near collapse as a result of high production costs caused mainly by the weak electric power infrastructure. 3. Those sectors of the economy that have grown quickly such as the wholesale/retail trade and agriculture are based mainly on informal, non-wage workers. On the other hand, industries in the formal sector, such as telecommunication, financial services, and hospitality, are not employment intensive, or added labour from a very low base. Figure 4: Contributions to Non-Oil GDP Growth in percent Source: World Bank (2009) Nigeria: Employment and Growth Study It may be that job growth can be achieved in those sectors of Nigeria s economy that have made high contributions to the GDP and which have experienced consistent growth over the last decade. 3.3 Who is unemployed in Nigeria? Determining the unemployment rate in Nigeria is especially difficult because of the lack of reliable data. There are two key sources of unemployment data in Nigeria: the General Household Survey, and the Nigeria Living Standards Survey, and they present different Rethinking Nigeria s Job Creating Strategy [19] September 2013

20 data sets. The key sources of their difference lie in their differing definition of those in the labour force and the questions used to generate the data. For Nigeria, it is advisable not to rely exclusively on published unemployment data. Analysis of household level data from the General Household Surveys (GHS) conducted in 2006 shows a labour force participation rate of 75 percent (Haywood and Teal 2010). The closeness of these estimates suggests that the labour force participation rate is in the neighbourhood of three-quarters of the economically active population. 4 Haywood (2007) argued that the unemployment number is distorted because it does not cover the large number of people who are no longer in the labour force because they are discouraged from seeking wage employment. In their case, lack of economic work that pays more than the opportunity cost for idleness has dissuaded them from seeking wage employment. As a result, they are not covered in the conventional measures used in tracking unemployment rate. Using the conventional measures of unemployment, and in spite of the different data sets, we conclude that a composite picture of an unemployed Nigerian is most likely a person aged between 15 and 24 years who lives in the northern part of the country, most likely in a rural area. She or he probably has up to nine years of formal education (Junior Secondary School) but no prior employment experience. The elements of this picture comprise: Gender: There is a slight difference between the unemployment rates in females (24.3 percent) and males (23.5 percent) probably due to the gender disparity in education. For instance, in 2008, there are 85 girls for every 100 boys registered in primary schools in Nigeria (UN MDG 2010). The ratio declines to 80 girls for every 100 boys registered in secondary schools. In 2010, women accounted for about 38 percent of new students in Nigerian universities (CBN 2011). Overall, women account for about 56 percent of Nigerians who cannot read or write (African Economic Outlook, 2012). Table 5: Nigeria: Unemployment rate by gender Gender Urban Rural Composite Male Female Source: National Bureau of Statistics (2011): Socio-Economic Survey Young: Almost four out of ten unemployed Nigerians are aged between 15 and 24 years. Even more disturbing, 60.1 percent of unemployed Nigerians are between 15 and 44 years. This is the most productive age bracket for any nation. The rising rates of youth unemployment is plausibly due to the arrival of new entrants into the market who are generally less favoured in urban labour market, for lack of experience, compared to older adults in the labour market, and lower rates of willingness to engage in rural agriculture among the youth. Youth unemployment is naturally expected to rise most significantly during periods of job losses or lack of robust job growth. 4 Labour force participation rates provided by the international development organizations (World Bank, etc.) generally relate the labour force to population older than 14 years. This practice is probably due to the negligible share of population that is older than 64 years, which is estimated to be around 3%. However, this practice is problematic because it also assumes that everyone older than 14 years is out of school and therefore enlarges the denominator quite substantially. As a result, the reported rates have generally been stable around 55% over the period Rethinking Nigeria s Job Creating Strategy [20] September 2013

21 Table 6: Nigeria: Unemployment rate by age group Age Group Urban Rural Composite Source: National Bureau of Statistics (2011): Socio-Economic Survey State of Residence: NBS (2012) shows that Zamfara state in the North West had the highest unemployment rate of 42.6 percent while Osun in the South West had the lowest unemployment rate of 3 percent. 13 out of the 19 states in the northern part of Nigeria have unemployment rates higher than the national average of 23.9 percent. Only six out of the 17 states in southern Nigeria have unemployment rates higher than the national average. Table 7: Nigeria: Unemployment rate by state NORTH WEST NORTH CENTRAL NORTH EAST State 2011 State 2011 State 2011 Sokoto 17.9% Kwara 7.1% Taraba 12.7% Kano 21.3% Benue 14.2% Borno 29.1% Kebbi 25.3% Kogi 14.4% Adamawa 33.8% Katsina 28.1% Plateau 25.3% Yobe 35.6% Kaduna 30.3% Nasarawa 36.5% Gombe 38.7% Jigawa 35.9% Niger 39.4% Bauchi 41.4% Zamfara 42.6% FCT 21.1% SOUTH WEST SOUTH SOUTH SOUTH EAST State 2011 State 2011 State 2011 Osun 3.0% Cross River 18.2% Abia 11.2% Lagos 8.3% Akwa Ibom 18.4% Anambra 12.2% Oyo 8.9% Bayelsa 23.9% Ebonyi 23.1% Ekiti 12.1% Rivers 25.3% Enugu 25.2% Ondo 12.5% Delta 27.2% Imo 26.1% Ogun 22.9% Edo 35.2% Source: National Bureau of Statistics (2012). Social Statistics in Nigeria: Part III Health, Employment, Public Safety, Population and Vital Registration). Abuja, Place of residence: NBS (2011) shows that unemployment rates in 2011 were 25.6 percent in rural areas and 17.1 percent in urban area. Table 8: Nigeria: Unemployment rate by place of residence Place of Residence Urban Rural National Unemployment Rate Source: National Bureau of Statistics (2011): Socio-Economic Survey Educational Level: NBS (2011) data on unemployment by education level shows that Rethinking Nigeria s Job Creating Strategy [21] September 2013

22 the highest unemployment rate in Nigerians occurs amongst Nigerians with the Junior Secondary School certificate and residing in the rural area (36.9 percent). The lowest rate is recorded for Nigerians with a Masters degrees and living in urban areas (3.2 percent). It is interesting to note that unemployment rate for Nigerians with technical or professional qualifications in the urban centres is 5 percent, lower than the unemployment rate for Nigerians with a doctorate degree (9.1 percent). Table 9: Nigeria: Unemployment rate by educational level Educational Level Urban Rural Composite Never Attended Primary School Modern School Vocational/ Commercial Junior Secondary School Senior Secondary School "O Level" Senior Secondary School "A Level" NCE/ OND/ Nursing BA/ BSc./ HND Technical/ Professional Masters Doctorate Others Source: National Bureau of Statistics (2011): Socio-Economic Survey 3.4 What are the causes of unemployment in Nigeria? Commentators and scholars have cited a long list of factors that cause high unemployment in Nigeria. In broad terms, these can be categorised under two themes: poor policy choices and poor implementation. Poor Policy Choices Every government since colonial times to date have implemented policies and programmes to improve employment and/or reduce poverty. None are without merit. However, none made a comprehensive assessment of the social, economic, political and administrative climate. In agriculture, for example, governments from the early 1960s implemented myriad programmes to address various problems without sustainable results. This was because, too often, policy makers adopted approaches without a holistic and comprehensive approach to the policy design. Only in 2011 did the current administration take a value chain approach to agribusiness development. Their policy was rightly based on a full review of the challenges of agribusiness development. The result was the creation of the Nigeria Incentive-based Risk-Sharing Agricultural Lending programme that properly addresses the many inter-connected obstacles to successful agricultural development. Failure of policy design can be attributed to the following factors: Planning without data: Policy design in Nigeria is too often inferred from the personal Rethinking Nigeria s Job Creating Strategy [22] September 2013

23 experiences of planners and is less about interpretation of evidence and data. The lack of data is one of the most significant problems affecting equitable and sustainable development in Nigeria. Witness: the latest poverty and unemployment rates used in this paper date from 2011 (two years ago). How effective can the plans be in the absence of accurate and recent data? Nigerians have the bad habit of not releasing information as it allows for manipulation of the data for pecuniary gain. Even the passage of the Freedom of Information Act has not improved the quality of the data available for planning purposes. The result bears out the widely accepted wisdom: Fail to Plan and You Plan to Fail. Lack of rigour in policy design: Our review of the economic policies from 1946 to date (see table below) shows the lack of a thorough understanding of: the challenges facing the country, the assessment of the policy choices, the estimation of results and the identification of risks and unintended consequences. For instance, in the era of National Development Plans ( ), government realised the need to industrialise Nigeria s production. Yet, the focus was on building industries utilising imported raw materials, e.g., auto-assembly plants, instead of industries to process locally produced raw materials, first, for supply to the local market and then for export. This failure was not due to a lack of resources or ideas. Other countries with fewer resources made the right choices during this same era. Rather, the failures point to Nigeria s limited capacity for policy design and implementation. Lack of Planning for Unintended Consequences: Nigeria s policy planning experience has not given sufficient attention to risk management and contingency plans for unintended consequences. For instance, economic policies from the 1960s focused on production for the domestic market. The aim was to develop the country s production base to meet the needs of the domestic market. These policies for import substitution industrialisation promoted domestic processing of natural resources, and skills development to improve the efficiency of these enterprises. However, the unintended consequences of these policy choices centred on the domestic market was that domestic costs were higher than international costs. The price disparity saw dumping of foreign made goods in the country. In response, the government introduced protectionist trade policies and this, created opportunities for smuggling through neighbouring countries. The result was: foreign goods still found their way into Nigeria and Nigerian industries did not survive. Import tariffs that should have accrued to the Nigerian government were inadvertently moved to the neighbouring countries. Lack of self-confidence: Decades after independence, Nigeria still lacks the confidence to think rigorously and design its own, original, solution to its challenges. The National Economic Empowerment and Development Strategy (NEEDS) of 2004 was Nigeria s first real attempt at an original, homegrown development strategy. Despite the global acclaim, NEEDS has been ignored by successive governments in favour of successive plans produced without rigor. This same lack of self-confidence is apparent in Nigeria s industry where the largest corporations all have foreign origins. Apart from Dangote Group, there is no truly Nigerian company that has both made a significant contribution to Nigeria s economy while winning international acclaim. Over half a century since the commercial discovery of oil in Nigeria, international companies still dominate the sector. Similarly in construction and many other sectors of the economy. Poor Implementation Without effective implementation, an economic policy remains a set of intellectual ideas without any chance of meaningful impact. Policies, by their nature, always encounter implementation challenges. As a result, successful policies need ownership (leadership, Rethinking Nigeria s Job Creating Strategy [23] September 2013

24 coordination and good communication), resources, monitoring and evaluation, and every specified input required to achieve stated goals. This is even more important in Nigeria where the processes and institutions of government are not fully developed. A common characteristic of all our national policies and programmes is poor implementation. Interestingly, most of the plans included an implementation plan; yet, none has been successfully executed. Indeed, the problem was well recognised in Nigeria Vision 20: 2020 which stated past development planning efforts failed adequately to address the region s needs due to lapses in implementation. (NV20: 2020, Vol. 2, p136). No one has suffered any great personal penalty for the failures of policies and programmes. As a result, there is no pressure on politicians or leaders of the civil service to ensure successful implementation of plans. Failures of policy implementation are due to: No accountability structures: Successful governments all over the world have developed frameworks for managing the implementation of policies and programmes. These frameworks set out in clear terms the goals and the process for achieving them. For instance, many internationals aid donors, usually subject to informed and often hostile scrutiny by legislators and civil society, have developed a planning and management approach known as Managing for Development Results. The technique produces a Results Framework which set out the logic and the indicators to show how policy will be implemented and how the desired results will be realised. The Results Framework is used to communicate the vision and intention of the policy and, subsequently, to monitor and manage progress and report publicly on delivery against set goals. It sets out the development outcomes, actual results, and the metrics that will be used to measure the effectiveness and efficiency of the programme. In contrast the Nigerian authorities have no acceptable framework or basis for the planning, design and measurement of programme implementation. Furthermore, there is a lack of accountability structures and institutions to reward or punishing performance. In fact, there is no incentive (for or against) for any one in the public sector to strive to achieve any of the plan goals. By way of example, the UKAid programme is subject to a series of overlapping accountability structures. It is scrutinised by Members of the UK Parliament s allpowerful Public Accounts Committee of and by its International Development Committee. Both are informed by the technical scrutiny of Parliament s auditors, the National Audit Office. In addition, the Independent Commission of Aid Impact undertakes a series of evaluations into the efficacy of aid expenditure. UKAid policy and performance is wholly in the public sphere and ministers and senior officials respond to the direct pressure of accountability be seeking continuous improvements in departmental competence, responsiveness and transparency. Misplaced priorities: Successive governments do not fully appreciate the fact that no one owes Nigeria anything and that nations of the world are in a constant struggle for market share and dominance. As a result, the evidence is of confused priorities and a lack of urgency to implement. For instance, the plan to establish a steel rolling mill as the bedrock of Nigeria s industrialisation was included in the First and Second National Development Plans. However, implementation did not start until the Fourth National Plan about two decades later. To date, the plant is yet to be completed whilst steel-making technology has evolved and moved beyond the current state of Nigeria s investments. Yet during this period when Nigeria could not decide when to commence investment in this fundamental element of its industrialisation, it had the time and resources to host a Rethinking Nigeria s Job Creating Strategy [24] September 2013

25 global jamboree, the Festival of Arts and Culture. There was no steel mill but we did build an entirely new city, Festac Town, to accommodate delegates from all over the globe who arrived in Nigeria for the festival. Inefficient public service: Every nation s development is linked to the capacity of its public service. Nigeria s civil service is widely regarded both as incompetent and dysfunctional. Standards and performance have steadily declined since the 1960s when Nigeria s best and brightest personnel staffed the civil service. Today the Service is a bastion of political patronage. According to a report by the Public Service Reform Team, Nigeria s civil service is rapidly aging (average age of 42 years), mostly untrained and under-educated (less than 12 percent have university degrees or equivalent). It is a large and inefficient bureaucracy with over 70 percent of the 3 million staff at Grade Levels 01 to 06 (sub-clerical level). Although various governments have paid lip service to improving civil service efficiency, all have failed at a fundamental reform of the institution bearing prime responsibility for implementing national development plans. Little wonder the country is stuck in a development quagmire. Lack of implementation discipline: There is no evidence that Nigeria can implement any of its development plans. Projects outside the development plan are sometimes introduced when projects included in the plans are yet to be implemented. For example, Universal Basic Education was not included in the Second National Development Plan but its implementation commenced in that era. Yet, many projects in that plan were never started despite procedures in all the development plans to ensure plan discipline. The political elite is notorious for blatant disregard of these provisions at great consequence for the nation and its citizen. Yet there hasn t been any significant penalty for those who break the rules. Institutionalised corruption: Most analysis of Nigeria highlights corruption as the main reason for the various failures of government policies and programmes. This paper suggests, instead that corruption is, in fact, the least severe of all the problems. Corruption (in its various forms) thrives because of the failure to implement safeguards against abuse of power. Despite its short duration, the War Against Indiscipline campaign mounted by the Buhari-Idiagbon administration ( ) proved that indiscipline or corruption can easily and effectively be curtailed when there is the political will to do so. 3.5 Constraints to Job creation and Employment in Nigeria The constraints to job creation in the Nigerian economy can be understood from the relationships between sectoral output and labour absorption, recent growth drivers, and employment outcomes. A microeconomic analysis of output and employment gives an understanding of the constraints to job creation and employment in Nigeria. The output in this section is majorly from a survey carried out by the Centre for the Study of Economies of Africa. The study focuses on the microeconomic aspects of the labour market and describes the nature of the unemployment challenges from the demand perspective. It presents a clear picture of the constraints to job creation from demand side (firms) of the market presented from the views of the operators and observers. Demand Constraints to Job Creation (Firms) The following are some of the demand constraints to job creation in Nigeria: Weak demand arising from competition Rethinking Nigeria s Job Creating Strategy [25] September 2013

26 Weak demand could arise from imports. For instance, on the basis of costs dominantly from low-cost goods produced in China and also on the basis of preferences, which is as a result of hangover from the fixed exchange rate regime. Also, illegitimate, adulterated and fake goods can cause weak demand. For example, pharmaceutical firms complain about relapse to pre-dora era. Capital/Credit Commercial credits are expensive with interest rates up to 35 percent. BOI and BOA offer rates as low as 10 percent and 14 percent respectively but the conditions are stringent. For example, when BOI approves a loan, the conditions are very strict. There s also the issue of a large swath of mid-size entrepreneurs underserved. Legal Environment Most small businesses are built around the owner who oversees all aspects of operations. This is a reflection of the business environment that is lacking in trust as well as effective and reliable legal means of litigating disputes and most of the operations are informal and outside the purview of the law. Huge Operating Cost Huge operating cost occurs majorly due to inadequate power supply and other infrastructure. Research shows that in African countries small companies start small and remain small mainly due to huge operating cost associated with running the business. Supply Constraints to Job Creation (Workers) Supply analysis views the unemployment challenges from the jobseekers perspective. It reviews the constraints to successful job search from the perspective of job seekers and observers of the labour market. From the surveys carried out the following can be enumerated as supply factors contributing to the unemployment challenges currently plaguing Nigeria. Skills Mismatch Curriculum Design and Vocational Training Nigeria s education system seems to be largely a job-seeking system rather than an entrepreneurship system. Thus, the unemployment problem is partly driven by lack of vocational trainings. There needs to be a redesign of the curriculum to accommodate more entrepreneurship courses and trainings to give students/ pre graduates prior knowledge of the current opportunities in the labour market. Pre-graduation Experience From the surveys, it was discovered that graduates possess very little technical knowledge, approximately only 10 percent of the required knowledge of their field within 5 years post-graduation. However, this can be attributed to lack of pre-qualification practical experience that could be overcome through internship programs and industrial attachments as the case may be. Social and Personal Preferences Employment Choice and Transitions There is a general way in which social expectations affect employment choice in the Nigerian setting. There is an acknowledgement, particularly from the Southwest and Northern parts of the country, that the society s influence on job valuation is critical to employment outcomes. Society tends to value employment generally by the wage. Since self-employment on average (due to risk) yields lower expected returns on employment, the society tends to undervalue the experience, networking and other attractive benefits of self-employment. Rethinking Nigeria s Job Creating Strategy [26] September 2013

27 Empirical evidence established rent-seeking behaviour on the part of workers. There is a sense that wage employment is the essence of any type of education. 5 A small business owner in Abeokuta, Ogun State, reflecting on how society values education in the city, puts the phenomenon this way: The worth (value) of a certificate is a paid job. There is no respect for a graduate without a paid job. Given the social construct, family socioeconomic background influences individual choice between unemployment (and continued job search) and self-employment. Individuals from well off or top income bracket are well connected and typically do not remain unemployed. For example a kid whose parent is a director of a company or public establishment is likely to commence a job immediately after graduation. Individuals from the bottom of the socioeconomic ladder do not have a choice of remaining unemployed because they lack financial support required to stand strong on the job queue. As a result, the stigma of self-employment is lessened, as they must find something to do. These types of entrepreneurs will make up a large fraction of the necessity entrepreneurs. Social expectation is likely to yield very limited impact among these groups. Individuals who are educated, unemployed and searching for jobs are most likely from the middle of the socioeconomic ladder. The rationale here is that the social expectation keeps them searching for paid employment, and financial support available form family keeps them alive in the queue rather than forcing them into self-employment. Rentier vs. Entrepreneur This is particularly rampant in the Niger Delta region of the country but it has nationwide implications. Employers complain of a strong entitlement culture among the Niger Delta state indigenes, which resulted in a preference for rentier income from oil activities, and an aversion towards entrepreneurship and business ownership. Employers complain of a strong entitlement culture among the state indigenes in the Niger Delta area, which resulted in a preference for rentier income from oil activities, and an aversion from entrepreneurship and business ownership. Other challenges include Transparency in recruitment process, demand for experience and information asymmetry that is as a result of a non-functional job placement system. 5 There were several anecdotes to demonstrate that the society considers entrepreneurship as too volatile and entrepreneurs as not responsible. If an individual wants to get married or rent an apartment, the question where do you work? must be answered satisfactorily. A few decades ago, work in private sector was the preference. With few employment opportunities in the private sector in recent years, the public sector has become attractive. Self-employment has not received such acceptance. Rethinking Nigeria s Job Creating Strategy [27] September 2013

28 4 Understanding Nigeria s Employment Strategies Nigeria lacks a clearly articulated national policy on job creation. A review of national economic policy documents reveals tangential references to aspirations for poverty reduction through job creation but without a coherent policy or strategy on how to achieve this goal. Now we review the different economic policies from the colonial era to date to assess the level of priority placed on job creation. In addition, we consider the job creation and poverty alleviation programmes of successive governments to identify what worked, what didn t and why. 4.1 Review of Nigeria s Job Policy From colonial times to the present, Nigeria has gone through various stages of development planning. Ikeanyibe (2009) outlined four stages of national planning: the Colonial Era (pre-1962), the Era of Fixed Term Planning ( ), the Era of Rolling Plans ( ) and, finally, the New Democratic Dispensation (1999-date). In each of these stages, government typically produced a document outlining its development agenda 6. A review of these documents shows that until 2004 (when the NEEDS document was produced), job creation was not central to the planning objectives of government. The Colonial Era (Pre-1962) The focus of the colonial government was to run an efficient, albeit exploitative administration in line with the dictates of the Colonial Office in London. Development planning became necessary with the rise of nationalism and agitation for independence. In response, in 1946 the colonial government introduced the Ten-Year Plan for Development and Welfare for Nigeria. According to Ikeanyibe (2009), this plan primarily guided the allocation of funds to areas such as transport, communications and production of cash crops. The plan paid no attention to a comprehensive development of a productive base for the country or to ready Nigerians for administrative control of their country s affairs. The plan remained in place until 1954 when the introduction of the federal structure reduced its efficacy. It was subsequently replaced in 1962 with the launch of the First National Development Plan.. The Era of Fixed Term Planning ( ) Four successive plans were developed during this period. None had a clear focus on job creation. The First National Development Plan (1 st NDP; ) aimed to build a productive base for the economy. Although truncated by the political upheaval of the mid-1960s and ensuing Civil War ( ), the 1 st NDP was still successful in developing a number of industries that were, until recently, still part of Nigeria s productive base: Niger Dam, Port Harcourt Refinery, Jebba Paper Mill, Bacita Sugar Mill, etc. Some of these plants are either moribund or have been sold to private investors. The Second National Development Plan (2 nd NDP; ) attempted to rectify 6 There were periods of significant socio-political upheaval when the government actions were ad hoc and sporadic and no plan document was produced. Rethinking Nigeria s Job Creating Strategy [28] September 2013

29 shortcomings of the 1 st NDP. It strengthened the planning institution and emphasized the need for the public to contribute to the plan. In the aftermath of the devastating Civil War, 2 nd NDP focused on reconstruction and national reunification. However, there were no specific plans for sustainable job creation. The central objectives of the Third National Development Plan (3 rd NDP; ) and Fourth National Development Plan (4 th NDP; ) were to rectify and diversify Nigeria s economy that had become dependent on oil revenue. Both plans were soon overwhelmed by external factors such as fluctuations in oil prices. According to Okojie (2002: 362), by the end of the four plan periods, the foundation for sustainable growth and development had still not been achieved. Poverty and unemployment rates were beginning to increase to the growing concern of government. Oil price fluctuations necessitated huge government borrowings to fund the 3 rd NDP and 4 th NDP. The ballooning external debt and declining economic fortunes meant greater involvement by external debtors in Nigeria s economic planning.. Led by the Bretton Woods Institutions (World Bank and International Monetary Fund), Nigeria was left no choice but to adopt the Structural Adjustment Programme (SAP) - a reform programme for developing countries. SAP was a policy-based planning system that emphasized the philosophy of private sector-led development.. SAP sought to implement "free market" policies and programs (notably privatization, deregulation and reduction of trade barriers) which some critics believe worsened Nigeria s economic state. SAP was meant to last from 1986 to 1988 but was, in fact, the policy basis for Nigeria s subsequent rolling plans. Rolling Plan Era ( ) The volatility crude oil prices affected the results of the prior development plans. As a consequence, Nigeria decided to replace five-year National Development Plans with three-year rolling plan. The critical difference was that rolling plans were continuously reviewed, annually. Proponents argued that the rolling plans were better suited to an economy subject to uncertainty and rapid change. Nigeria implemented three rolling plans within the period: , , and The performance of the rolling plans was mixed.., Economic fundamentals (such as GDP growth, inflation, etc) improved. ; However, the poverty and unemployment worsened. The national poverty profile deteriorated from 44 percent in 1990 to 72 percent in 1999 while unemployment rate went from 3.5 percent in 1990 to 17.5 percent in By 1996, General Sani Abacha s government dispensed with rolling plans and set up the Vision 2010 Committee. This 250-person commission submitted the Vision 2010 document in September It recommended large-scale deregulation of the Nigerian economy. Vision 2010 was supposed to be the basis for all long term, medium term and annual plans of government. However, the plan did not have a central emphasis on job creation and the vision died with Abacha in 1998 New Democratic Dispensation (1999-date) The return to democracy in 1999 provided an opportunity to create a new direction for the Nigerian economy. The Obasanjo administration replaced Abacha s Vision 2010 with a four-year medium term plan, the National Economic Direction ( ). Its primary objective was the creation of a strong, broad-based economy with adequate capacity to absorb externally generated shocks. This new plan was not radically different from the Rethinking Nigeria s Job Creating Strategy [29] September 2013

30 Structural Adjustment Programme (SAP). Despite the recovery in international oil prices, sale of government enterprises and recovery of stolen loot, the government did not achieve much during: Nigeria Economic Empowerment and Development Strategy With election success in 2003, the Obasanjo government saw an opportunity to rethink its approach to development planning. In 2004, the government released a new planning document with the intention of radical change in national development. The resulting National Economic Empowerment and Development Strategy (NEEDS) is a medium-term ( ), macro-economic plan with the comprehensive vision, goals and principles of a new Nigeria made possible through four key policies: wealth creation, employment generation, poverty eradication and value reorientation. For the first time in Nigeria s development planning history, employment generation and poverty eradication became central to the planning activity. Figure 5: At A Glance: Nigeria Economic Empowerment and Development Strategy (Source: NEEDS (2004). National Planning Commission, Abuja). NEEDS drew inspiration from Nigeria s Poverty Reduction Strategy Paper (PRSP) which had been under preparation since The PRSP was a reform programme aimed at re-engineering the economic growth process. The planning process was participatory and each state of the federation was expected to design their State Economic Development Strategy (SEEDS) to complement the NEEDS document. Similarly, local governments were expected to prepare their Local (government) Economic Development Strategy (LEEDS). With its focus on strategy and policy direction rather than projects, Rethinking Nigeria s Job Creating Strategy [30] September 2013

31 NEEDS sought to decentralise project planning and execution. NEEDS set a goal of creating 7 million jobs by 2007 by making it easier for private enterprises to thrive, by training people in skills relevant for the world of work, and by promoting integrated rural development in collaboration with the states through the SEEDS programme. Although we are unable to validate that the number of jobs were indeed created between 2004 and 2007, NBS data shows that unemployment dropped from 13.4 percent in 2004 to 12.7 percent in Implementation of NEEDS ended with the transition to the Yar adua government in the second half of The government was expected to create a second phase of NEEDS (NEEDS-2) to build on the achievements of the first phase of NEEDS. This expectation was never realised. By 2008, unemployment rate had risen to 14.9 percent and continued increase to 23.9 percent in Vision 20: 2020 The Nigeria Vision 20:2020 (NV20: 2020) is the long-term development goal designed to transform the Nigerian economy to become one of the top 20 global economies by Development of Nigeria s human capital is central to the vision and is captured in the two broad objectives: to make efficient use of human and natural resources to achieve rapid economic growth, and to translate the economic growth into equitable social development for all citizens. The Yar adua administration was unable to implement this vision as other issues intervened, including the failing health of the President and the constitutional questions this raised. Nevertheless, it remains unclear why then government felt it necessary to replace NEEDS with the far less thorough Vision 20:2020. Transformation Agenda In its turn, the Jonathan administration replaced Vision 20: 2020 with its own economic development plan: the Transformation Agenda. The plan made job creation a central policy objective aiming to create 5 million new jobs annually from These jobs are anticipated in the following industries: construction, crude oil refinery, agriculture and food processing, transport and logistics. The employment goals are supposed to be achieved through implementation of the National Action Plan on Employment Creation, the establishment of skills acquisition centres, and implementation of Local Content Policy in all the sectors. The Transformation Agenda also promises to implement an employment safety net support programme including conditional cash transfers and vocational training, development of industrial clusters, alignment of the education curriculum to industry job requirements, enforcing that foreign companies implement the mandatory sub-contracting and partnering with locals and enforcement of the mandatory skills transfer to Nigerians by foreign construction companies. In conclusion, despite the rhetoric and myriad programmes and projects, there is still no clarity on Nigeria s job creation policy. 4.2 Review of Nigeria s Employment & Poverty Alleviation Programmes From its independence in 1960 to date, successive Nigerian governments have Rethinking Nigeria s Job Creating Strategy [31] September 2013

32 implemented various policies, plans and strategies to create jobs and alleviate poverty. But for the National Directorate of Employment (NDE) and the National Poverty Eradication Programme (NAPEP)7, all the other programmes have been wound down. This is an indication of the failure of the programmes to deliver the desired results. A myriad of poverty alleviation programmes were created between 1980 to date; yet both poverty rate and unemployment rate worsened during this period. None of these programmes or projects is without merit; yet, individually and collectively they were unable to deliver the desired result. Figure 6: Graph showing Nigeria's GDP growth rate, poverty level, unemployment rate and government intervention policies and programmes 100.0%! 80.0%! Nigeria : GDP Growth, Poverty Level, Unemployment Rate & Government Intervention Policy and Programmes! : Fixed Term Planning! (1 st -4 th National Development Plans)! : Structural Adjustment Programme! : Policy-based Economic Management! (1 st 3 rd Rolling Plans)! 1997:! Vision 2010! 1999-Date: Democratic Dispensation! National Employment Policy (2003), NEEDS ( ), Seven-Point Agenda (2007), Vision 20: 2020 (2010), Transformation Agenda (2011)! 60.0%! 40.0%! 20.0%! 1980: (Agriculture) Green Revolution Prog.! 1983: (Agriculture) Go- Back-To-Land Prog.! 1986: (Enterprise) Small & Medium Scale Enterprises Programme! 1986: (Jobs) National Directorate of Employment Programme! 1986: (Infrastructure) Directorate for Food, Roads & Rural Infrastructure! 1986: (Housing) National Policy on Housing Sites &Services Scheme! 1986: (Infrastructure) Directorate for Food, Roads & Rural Infrastructure! 1987: (Agriculture) Strategic Grain Reserves! 1987: (Women) Better Life for Rural Women! 1987: (Health) Primary Health Care Programme! 1988: (Health) Guinea Worm Eradication Programme! 1989: (Transport) Urban Mass Transit Programme! 1989: (Transport) National Urban Mass Transit Programme! 1989: (Credit) Peoples Bank of Nigeria! 1989: (Credit) National Economic Reconstruction Fund! 1990: (Credit) Community Bank! 1991: (Agriculture) National Agricultural Land Devt. Authority! 1993: (Women) Family Support Programme! 1994: (Poverty) Poverty Alleviation Programme Development Committee! 1994: (Infrastructure) Petroleum (Special) Trust Fund! 1996: (Poverty) Community Action Programme for Poverty Alleviation! 1997: (Credit) Family Economic Advancement Programme! 1999: (Poverty) Poverty Alleviation Programme! 1999: (Education) Universal Basic Education! 0.0%! 2004: (Health) National Health Insurance Scheme! 1980! 1982! 1984! 1986! 1988! 1990! 1992! 1994! 1996! 1998! 2000! 2002! 2004! 2006! 2008! 2010! -20.0%! GDP Growth Rate (%)! National Poverty Level (%)! National Unemployment Rate (%)! The graph above shows Nigeria s poverty level (in red) increasing from 28.1 percent in 1980 to 45 percent in In the 30-year period, various governments of Nigeria implemented a myriad of national policies and intervention programmes. Each of these programmes had a focus on poverty alleviation with most of the intervention being through the expansion of employment opportunities. In the same period, unemployment rate worsened from 6.4 percent in 1980 to 21.1 percent in The White Paper of the Steve Oronsanye Committee on Restructuring and Rationalisation of Federal Government Parastatals recommended that NAPEP should be scrapped and its functions merged with those of the NDE. Rethinking Nigeria s Job Creating Strategy [32] September 2013

33 Review of Nigeria s Economic Development Policies This Table reviews the various economic policies of successive Nigerian governments with a summary of the policy objectives and design challenges. The intent of governments to address the fundamental economic development challenges is evident from the table. However, problems with policy design resulted in various levels of policy failures. Table 10: Review of National Policies, Objectives and Shortfalls Date Policies Objectives Design Shortfall Ten-Year Plan for Development and Welfare First National Development Plan Second National Development Plan Improving transport and communication infrastructure for trade in selected cash crops (cocoa, palm, cotton, groundnuts, timber) and for administrative purposes Achieve an average of 4 percent GDP growth through a focus on agriculture and use of natural resources to enhance production and economic growth Develop opportunities in specific areas: health, education and employment Enhance access to opportunities in education, health and employment Promote balanced development, equity in income and macro-economic stability Promote private (and indigenous) entrepreneurship Build a united, strong and self-reliant nation; great and dynamic economy; just and egalitarian society; full opportunities for the citizens; free and democratic society Focused on reconstruction and rehabilitation following the Civil War Grants for agriculture, forestry, livestock, Lacked a comprehensive approach to development planning No focus on industrialisation Did not encourage private investment and neglected the grassroots Central government did not focus on rural development; rather, the regional governments invested in agricultural exports with rural development as residual Unintended consequence of Marketing Boards imposing extra taxes on agricultural export commodities Minimal support for social and regional development Government assumed perfect knowledge of the problems of the rural people (without any empirical basis) and failed to involve the beneficiaries in the design and implementation of the programmes Missed the opportunity to set up industries that utilised local materials and exported value added products Focus was on import substitution industrialisation: set up of industries dependent on imported raw materials; e.g., Peugeot and Volkswagen Assembly Plants, etc Missed opportunity to set up agro-allied industries, etc The "Trickle Down Development Strategy" did not Rethinking Nigeria s Job Creating Strategy [33] September 2013

34 Third National Development Plan Fourth National Development Plan 1986 One-Year Economic Emergency Programme fisheries, etc National credit institutions formed and funded Created special Agricultural Development Schemes funded by the Federal and State governments Intended to be the blueprint for Nigeria s industrialisation Increased per capita income, even distribution of income, reduction in unemployment levels, increase supply of high quality manpower, diversify the economy, balanced development, indigenisation of economic activities Reduced focus on agriculture (only 7.2 percent of budget) and increased emphasis on sectors that affect the lives of ordinary Nigerians (housing, healthcare delivery, water supply, education, rural electrification, community development) Continuation of the development process and programs of the Second National Development Plan Focused on laying a strong foundation on economic growth and development, social equity, and price stability High priority on economic infrastructure, industry, agriculture and manpower development Development of technology Promotion of new national orientation Focused on correcting the structural defects in the economy (Structural Adjustment Programme) Create a self-reliant economy driven by market forces Restructure the economy and emphasize linkage between agriculture and manufacturing Reduce public expenditure and budget deficits; deliver the desired results Failed to achieve mass participation in plan design and implementation Plan failed to focus on economic infrastructure and development of agriculture, industries and the required manpower; rather, it focused on social services Well-intentioned salary increases in 1975 (Udoji Awards) worsened the plight of the non-wage earning rural dwellers through the combination of strong naira and massive importation of food and other products Drop in agricultural and industrial productivity due to over-dependence on government contracts (rentseeking activities) Expected GDP of 9 percent crashed to 5 percent as revenue from oil exports dropped whilst there was an increase in the bureaucracy from 12 to 19 states (1976) Over-dependence on crude oil and wrong assumption that crude oil prices will remain high led to frequent revision in projected expenditure Over-emphasis on public investments, distortion in plan implementation, official corruption, poor coordination, and policy inconsistencies High importation of consumer goods put pressure on funds required to finance the plan Not significantly different from the Fourth National Development Plan Rethinking Nigeria s Job Creating Strategy [34] September 2013

35 (a) Year Perspective Plan (b) 3-Year Rolling Plans National Economic Empowerment and Development Strategy 2010 Vision 20: 2020 (This is the basis for the 7- Point Agenda (2010) and the Transformation Agenda (2011) Sources: Ejumudo (2013); repay or restructure foreign debts to improve credit standing Medium term development plan anchored on the following pillars: Empowering People (Social Charter or Human Development Agenda) Promoting Private Enterprise and Changing the Way the Government Does Its Work (Reform Government and Institutions) Create an enabling environment for green and inclusive economic growth Diversify the Nigerian economy Create employment opportunities; and Reduce poverty. Policy was discontinued at the transition to a new government Lack of rigour in the analysis and recommendations Lack of rigour in setting the policy targets Trickle-down approach to poverty alleviation instead of a rights-based approach Review of Nigeria s Unemployment Intervention Programmes The table below presents a sample list of frequently cited causes of unemployment and a list of intervention programmes initiated by various Nigerian governments to address them. Table 11: Causes of unemployment and sample list of government s intervention programmes Causes of unemployment Sample list of government s intervention programmes Poor access to credit and financial Peoples Bank of Nigeria Community Bank Micro-finance banks Bank of Industry Nigeria intermediation Economic Reconstruction Fund Banking Consolidation Poor social structures in rural communities Better Life for Rural Women Programme Family Economic Advancement Programme High poverty rate National Agency for Poverty Alleviation Low wage employment National Directorate of Employment Lack of vocational skills National Board for Technical Education Low technology adoption National Office for Technology Acquisition and Promotion Neglect of agriculture Green Revolution Back-to-Farm Programme Agricultural Development Programmes Rethinking Nigeria s Job Creating Strategy [35] September 2013

36 Death of Small and Medium Scale Enterprises Poor Infrastructure Mismanagement of public funds, corruption, etc Flawed policy SMEIS NERFUND SME Fund Various government funds Directorate of Food, Roads and Rural Infrastructure Petroleum Trust Fund Independent Corrupt Practices and Other Offences Commission Economic and Financial Crimes Commission Structural Adjustment Programme Vision 2010 Vision 20: 2020 Nigeria Economic Empowerment and Development Strategy Seven-Point Agenda Transformation Agenda Rethinking Nigeria s Job Creating Strategy [36] September 2013

37 4.3 The Role of Government in Job Creation The government s primary role in job creation is to create the enabling environment for the private sector to drive economic activities that will in turn create jobs. This goal is achieved through the enactment and implementation of policies and programmes that incentivize the private sector and spur economic growth while providing effective regulation. Keynesian economists may argue to the contrary that it is big government spending that creates jobs. Nevertheless, conservative economic history proves that it is private sector activities under a policy framework provided by the government that creates jobs. Notwithstanding the foregoing, there is valid argument for government intervention programmes that alleviate, albeit temporarily, economic pressures for the unemployed. These programmes undoubtedly become inefficient over time and may crowd out private sector resources that could have been optimally utilized to create wealth and work. As is to be expected, government would need an injection of funds to drive its job creation initiatives. In January 2012, Federal Government of Nigeria implemented a partial removal of subsidy on petroleum products and freed up resources, which hitherto were lost to rent seekers. The funds, which are now managed by the Subsidy Reinvestment and Empowerment Programme (SURE-P), are been invested in job creation programmes and other palliatives. In tandem with the SURE-P initiatives, various government Ministries, Departments and Agencies (MDAs) have successfully implemented a number of job creation initiatives. For instance, the Federal Ministry of Finance has implemented the Youth Enterprise with Innovation in Nigeria (YouWin!) programme to provide funding and enterprise promotion services to Nigeria s young entrepreneurs. The Federal Ministry of Communication Technology has created a number of programmes to promote entrepreneurship in information and communication technology (ICT), and to leverage ICT to match Nigerians with available short-term, freelancing projects in the public and private sectors. Statutory agencies charged with job creation and poverty alleviation include National Directorate of Employment (NDE), Nigeria Economic Reconstruction Fund (NERFUND), and National Poverty Eradication Programme (NAPEP), etc. Government is considering merging some of the agencies with similar mandates to improve their efficient deployment of resources and improve on their effectiveness. Rethinking Nigeria s Job Creating Strategy [37] September 2013

38 Table 12: Sample Government Job Creation Initiatives Subsidy Reinvestment and Empowerment Programme (SURE-P) The SURE-P was inaugurated in February 2012 to alleviate poverty, stimulate economic growth, and catalyse job creation across the country through investments in social safety net programmes and rapid completion of ongoing critical infrastructure projects. There are nine (9) programmes 8 under the Subsidy Reinvestment and Empowerment Programme (SURE-P). These programmes are broadly grouped into three (3) infrastructure development programmes and six (6) social safety programmes. For the sake of this report, we have regrouped the programmes under two broad headings: training programmes and temporary work programmes Programmes Objective(s) Goals Achievements/ Number of Jobs Created Training Programmes SURE-P Technical and Vocational Education Training (TVET) Temporary Work Programmes Public Works Programmes Community Services, Women and Youth Empowerment (CSWYE) Apprenticeship and Work Experience Programmes (Also known as Graduate Internship To reduce unemployment and poverty in Nigeria by developing skills in young Nigerians to make them employable and or equip them to start their own businesses. The programme is a set of short-term projects targeting unskilled and low skilled persons for employment in labour-intensive activities. To create immediate short-term employment opportunities for vulnerable populations including underprivileged women, youth, and people living with disabilities through labour intensive public works projects To promote employability of young Nigerian graduates in all States of the federation and the FCT. It targets SURE-P TVET is expected to train about 6,150 beneficiaries in To engage 370,000 young Nigerians to maintain 17,000 km of federal roads across Nigeria. (30 percent of the jobs is reserved for women and 20 percent for vulnerable groups) FERMA intends to expand the programme to include the FCT and the 36 states. The programme aims to create 370,000 jobs annually with a minimum of 30 percent of the spaces reserved for women Around 100,000 graduates are targeted for engagement on the scheme. With a budget of about N1.9 billion, SURE-P TVET has upgraded training centres in six geopolitical regions From its inception in Q1 2012, about N16 billion has been spent on road maintenance and rehabilitation, development and maintenance of health and school infrastructure, reforestation, community waste management, traffic control, community security etc. By December 2013, about 12,400 young Nigerians had been engaged in the programme. SURE-P records show that the scheme has so far created about 119,000 jobs across the country; out of which about 41,137 are women. So far, 1,399 graduates have been placed with various organisations.

39 Scheme (GIS)) interested unemployed graduates wishing to enhance their job market opportunities through building and improving their skills. Entrepreneurship Programmes A number of programmes have been created under this scheme to provide training, mentoring and capital to Nigerian youths with bankable business ideas. Some of these include; The Youth Enterprise With Innovation in Nigeria (YouWin!) and Information Technology Developers Entrepreneurship Accelerators (idea) The Youth Enterprise With YouWIN! is an initiative of the Federal It is projected that YouWIN! will In October 2011, enterprise promotion Innovation in Nigeria Government of Nigeria to support young provide jobs for between support was provided to 1,095 young entrepreneurs to start businesses that 80,000 and 110,000 entrepreneurs. Around 18 percent of the will in turn create jobs for other young unemployed youth. beneficiaries were women. The people. successful ideas were mostly in agriculture; information and communication technology, food processing, and beverage production The second edition of the scheme focused exclusively on women. A total of 958 women awardees were selected and supported through financial support, technical assistance and mentoring. The first two editions of the scheme have created a total of 26,000 direct and indirect jobs for youths and other Nigerians 4,800 non-winners that qualified for the second round of the competitive process were provided with job creation support through series of workshops and training programmes specifically on how to explore and access alternative sources of financing their business ideas Information Technology Developers Entrepreneurship Accelerators (idea) idea is focused on identifying young Nigerians who are talented in software coding and supporting them to start ICT companies It is focused on creating an ecosystem The programme, which was started in 2012, is in its third round with about 20 companies that have been formed to date. This represents a US$100 million per annum investment opportunity with Rethinking Nigeria s Job Creating Strategy [39] September 2013

40 that will result in the creation of companies and not just codes. hundreds of jobs in the primary companies and a lot more jobs in the support industries. Ongoing Government Job Creation Programmes Various government agencies and parastatals have job creation as their core mandates. They include, National Action Plan on Employment Creation (NAPEC), National Directorate of Employment (NDE), National Poverty Eradication Programme (NAPEP) National Action Plan on Employment Creation (NAPEC) NaijaCloud National Directorate of Employment (NDE) National Poverty Eradication Programme (NAPEP) To create innovative solutions to job creation through the promotion of local employment content in all sectors of the economy and all government procurement activities To create awareness about the work opportunities in the Microwork and ELancing space, create job opportunities for the youth in Nigeria and reduce unemployment, reduce the country s brain drain, create business opportunities for potential Nigerian Microwork and e-lancing Companies, create opportunities for wealth creation for young Nigerians, and showcase opportunities for Nigerian businesses to work more efficiently and compile a database of Nigerian who are available to work. to design and implement programmes that combat mass unemployment To provide skill training programmes for youths (Capacity Acquisition It is expected that Action Plan will generate over 10 million jobs in critical sectors of the economy The scheme is expected to create 15,000 jobs. To continuously deliver on its job creation mandate through technical and vocational education training programmes, enterprise promotion, and collaboration with other government agencies. To continuously create jobs From 2011 to 2013, local content programmes have created a total of about 198,000 jobs across the country. No key achievements yet. The NDE has facilitated the creation of 185,659 jobs in 2011 and 143,195 jobs in (This number does not include additional employees who may have been engaged by the direct beneficiaries of NDE programmes.) Between June 2011 and April 2013, over 80,000 jobs were created and 143,765 Rethinking Nigeria s Job Creating Strategy [40] September 2013

41 The Village Solution Programme), provide trainings and jobs for women (Women Empowerment Scheme) and create mass employment through the establishment of a large number of small scale transportation businesses (KEKE-NAPEP) Construction of small irrigation projects to get farm families engaged in year round micro irrigation schemes To get 5,000 farm families engaged in year round micro irrigation schemes To generate 1.5 million jobs across the country youth trained in different skills The results above were achieved through the following Capacity Acquisition Programme trained a total of 134,420 youths and over 50 percent of this number is now gainfully employed. Women Empowerment Scheme trained 9,210 women and 115 visually impaired persons have been trained in various craft skills with 3,281 jobs created thus far. Provision and distribution of over 14,000 tricycles across the 36 states and FCT. No key achievements yet Rethinking Nigeria s Job Creating Strategy [41] September 2013

42 4.4 Key Government Reform Programmes on Job Creation The current administration has a number of job creation initiatives at the sector level that have achieved significant success. These interventions have leveraged existing opportunities and potential in their respective sectors to develop tailored interventions to meet the needs of specific target populations. Agriculture Nigeria s agriculture sector is undergoing one of the most comprehensive reform programmes under the leadership of the Federal Ministry of Agriculture and Rural Development. The reform, which is articulated in the Agriculture Transformation Agenda (ATA), focuses among other things on diversifying the Nigerian economy through the comprehensive and simultaneous end-to-end development of the country s agriculture value chain for a number of the target products. The transformation is expected to improve productivity and output and further advance the quality of jobs created in the sector. Overall, an estimated 3.5 million jobs are projected over a three-year period of the initiative. This projection includes input suppliers, direct farm labour, storage and processing, logistics providers, product markets, professional services firms, etc. Some of the initiatives contained in the ATA are briefly described below: Growth Enhancement Support Scheme: The purpose of this intervention is to end government participation in the direct procurement and distribution of seeds and fertilizers that had been ongoing for over 40 years and have, at best, delivered sub-optimal results and crowded out private sector participants. The engagement of credible private sector dealers to sell fertilizer directly to farmers at subsidized rates denies unscrupulous government officials and businessmen that have profited from racketeering in this activity over the years. The ubiquity of mobile telephony was leveraged to deliver the subsidies via electronic vouchers directly to endusers. This technology created an audit trail that improves transparency and accountability in the process. By December 2013, over 10 million farmers had registered in the programme ending the long history of corruption in the seeds and fertilizer distribution scheme. With the improved accountability processes, about N25 billion was realised in fiscal savings. With improved and timely access to inputs, farmers were able to improve their economic activities, which, in turn, resulted in more employment opportunities along the agricultural value chain. Agriculture Value Chain Development: There are ongoing government initiatives to develop the value chains of the following priority products: rice, cassava, tomatoes, pineapples, sorghum, horticulture, fisheries, and beef. The main objective is to increase local value addition in these priority products. Amongst the various activities that are part of this robust transformation effort is the designation of 13 anchor Staple Crop Processing Zones across the country. Within these zones, government is providing fiscal, infrastructure, investments, and administrative incentives to attract investors to boost production, economic value addition, and ultimately, create jobs. With this transformation, government is focused on providing the policy and regulatory environment to enable private sector leadership of the development efforts. The transformation has started producing results. Over $200 million has been secured for 18 private sector-owned large-scale cassava flour processing plants with capacity to Rethinking Nigeria s Job Creating Strategy [42] September 2013

43 produce 1.3 million metric tonnes. Contract orders for 3.2 million metric tonnes of dried cassava chips for ethanol production have been secured for export to China. This provides increased employment for cassava farmers in their cassava cultivation and processing. Agriculture financing has also been improved through establishment of the Nigeria Incentive-Based Risk Sharing for Agricultural Lending (NIRSAL) to promote financing in the sector. One key area of success is in rice production. The dry season production through irrigation in ten Northern States (Bauchi, Gombe, Jigawa, Kano, Katsina, Kebbi, Kogi, Niger, Sokoto and Zamfara) resulted in employment of around 268,000 farmers that produced a total of 1.07 million metric tonnes of rice. The government has secured $1.2 billion financing from the China Exim Bank for 100 private sector-owned large-scale riceprocessing plants with 3 million metric tonnes capacity. This would get thousands of rice farmers employed all year round as they make efforts to satisfy the demand. Industry, Trade and Investment: Given Nigeria s large domestic market, the Government is encouraging import substitution, especially in areas where the country has comparative advantage with the aim to increase non-oil exports. The current administration recently launched the Nigeria Industrial Revolution Plan (NIRP), and the National Enterprise Development Programme (NEDEP). These intervention programmes are expected to add N5 trillion (about US$30 billion) annually to the GDP and create jobs millions of jobs across the industrial value chain. This ambitious and comprehensive road map is expected to transform Nigeria s industrial landscape, accelerate inclusive economic growth, boost skills development, enhance job creation and conserve foreign exchange. Focusing on industrial development holds high promise for attracting investments especially from industrialised countries in search of new markets. It also provides excellent opportunities for absorbing the growing population and school graduates that are added to the labour market annually. Moreover, this intervention is helping to resuscitate the once vibrant but now moribund manufacturing sector. Housing and Construction: In the short to medium term, government is emphasizing the use of labour intensive technique in building and construction activities. This is to increase the number of available jobs in the sector. It is expected that about 1 million jobs can be created annually in the sector. Through the National Housing Fund, the Federal Government has built about 65,000 housing units in the six geopolitical zones of the country through highly labour intensive techniques. To solve the financing constraint that has plagued the sector, government launched the Mortgage Refinance Company (MRC) to boost mortgage financing in the country for housing delivery and home ownership. The company, through the support of the government, has secured $300 million soft loan from the World Bank. This intervention is expected to deliver 20,000 affordable housing units within 5 years of its establishment. Given the labour intensive nature of the housing and construction sector, government s interventions are expected to achieve the dual objective of providing affordable quality houses and creating massive jobs across the housing value chain. Creative Industries: The multi-billon dollar creative industry in Nigeria has very high potential for employment across the entire value chain. To harness the potential of the sector and further position it Rethinking Nigeria s Job Creating Strategy [43] September 2013

44 for job creation, the Federal Government has embarked on three main reform interventions: policy reform; infrastructure support; and financial support. The policy reform in the sector aims to protect intellectual properties of stakeholders and businessmen engaging in the sector and ensure fiscal incentives are provided through tax or duty waivers to stimulate investment in the sector. Infrastructure support is being provided through the Ministry of Culture and Tourism. The Ministry has completed the construction of three new Cultural Industry Centres in Taraba, Ogun and the Federal Capital Territory. The National Theatre was also rehabilitated. In terms of financial support, government created the Project Advancing Creativity and Technology (Project ACT) for Nollywood with total grant of 3 billion. This support is available for those engaging in the creative industry value chain including producers, actors/actresses, musicians, marketers, distributors, sellers, etc. The Fund improves access to finance for sector participants to give impetus for improved economic activities and the resultant employment opportunities. Rethinking Nigeria s Job Creating Strategy [44] September 2013

45 5 Rethinking Nigeria s job creation strategy Nigeria needs to migrate purposefully and urgently to become a society where stable and favourable business conditions give certainty for the private sector to invest and grow in size, strength and competitiveness and so, constantly, increase the numbers of waged employees. Nigeria must become an ideal growth and development society. The role and strategy of government is to frame, create and sustain such conditions in the priority, winning, growth sectors of: wholesale and retail industries, information and communication technology, real estate and construction, agribusiness, and large-scale, export-focused industries. Within each sector the cross cutting agenda is to ensure the availability of the necessary skills and infrastructure combined with a readiness to innovate. 4.5 What should be the job creation policy goal? Nigeria s job creation policy goal should be to create the conditions to sustain a growing private sector servicing the needs of Nigeria, the region and the world. This will lead to high numbers of salaried jobs (Wage Jobs) in industries and enterprises that are focused on producing high quality goods for export. The urgent responsibility lies with Nigeria s decision takers and opinion formers. They must argue for and deliver the foundation and conditions for Nigeria to become the ideal growth and development society 9. The main characteristics of the ideal growth and development society are: Secure rights of property to encourage savings and investment Secure rights of personal liberty secure them against both the abuses of tyranny and private disorder (crime and corruption) Enforce rights of contract, implicit and explicit Provide stable government, governed by known rules (a government of law rather than men) based on periodic elections, the majority wins but does not violate the rights of the losers; while the losers accept their loss and look forward to another turn at the polls Provides responsive government, one that will hear complaint and make redress Provide honest government, such that economic actors are not moved to seek advantage and privilege inside and outside the market place. In other words, there should be no rents to favour and position Provide moderate, efficient and ungreedy government. The effect should be to hold taxes down, reduce the government s claim on the social surplus, and avoid privilege. Most Nigerians would welcome this ideal growth and development society. Political leaders tapping into this unmet demand will considerably enhance their prospects of enduring electoral success. The far-sighted politician will know that meeting this unmet demand also means, as Landes pointed out, that certain issues each one with a potential political return - also has to be addressed for the ideal growth society to take place:... gender equality (thereby doubling the pool of talent); discrimination on the basis of irrelevant criteria (race, sex, religion, etc.); also a preference for scientific (means-end) rationality over magic and superstition (irrationality). The scarcity of wage jobs is the primary reason why Nigerians feel that there are no jobs. 9 Landes, David (1998). The Wealth and Poverty of Nations. London: Abacus pg 217 Rethinking Nigeria s Job Creating Strategy [45] September 2013

46 For most Nigerians - especially the young who are better educated - employment means working in an enterprise that pays a salary commensurate with their sense of their qualification. The creation of these types of jobs has not kept pace with the expansion of educational institutions in Nigeria and young Nigerians do not consider employment to be the casual jobs such as selling Gala on the streets. Nigeria needs to create more wage jobs. Yet the World Bank (2009) shows that the most significant structural change that occurred in Nigeria s labour force between 1999 and 2006 is the shift out of wage jobs into agricultural employment. Table 1 in section 3.2 (Types of employment as a Percentage of the Labour Force) shows a decline in wage employment and non-agriculture self-employed and an increase in family agriculture. The pressing question is where will these wage jobs be created? Currently, most of the wage jobs in Nigeria are being created in small and medium scale enterprises (SMEs) with a focus on the domestic market. SMEs are good at creating jobs but they do not create high numbers of high paying jobs. While it is important to encourage the growth of SMEs, Nigeria s development policy needs to move beyond this point and focus on the creation of higher paying jobs in sectors that can produce high numbers of jobs. Creation of high-salaried jobs will have a positive effect on the number of low wage jobs. An increase in wage jobs is a prerequisite for increases in income levels for both the formal and informal sectors. This is because the move of the higher qualified Nigerians to wage jobs will reduce the labour supply in the informal sector that, in turn, will increase the wage levels in the informal segment of the labour market. A review of Nigeria s export profile shows the problems hindering higher numbers of wage jobs. Nigeria s primary export is oil and gas, a sector that creates very low numbers of higher wage jobs. The failure to create local industries to support the oil and gas sector means that the jobs that should have been created in Nigeria (for Nigerians) have been outsourced or exported abroad. The Nigeria Local Content legislation was created to address this issue but it is yet to be fully implemented. That said; it is heartening to note that the ongoing US$15 billion Egina Offshore Oil Project is working towards achieving the stipulated level of local content participation. The other argument for larger scale enterprises is that it is less than likely that Nigeria will win in the competitive international market with low skill industries. High productivity is the critical variable in the international market. Nigeria s experience indicates that high productivity is linked to large-scale enterprises. 4.6 How should the government approach this goal? Given its limited resources, government cannot afford to continue its current scattergun approach to development where a limited budget is spent across all sectors of the economy. Government must encourage the private sector to lead on the development of the economy and on job creation. Any government involvement should focus on supporting and encouraging winning sectors. This section will argue that government should adopt a private sector led development strategy with the government providing the enabling support by focusing its investments on growth sectors of the economy and support the development of large-scale exportoriented industries. Focus on Growth Sectors Rethinking Nigeria s Job Creating Strategy [46] September 2013

47 A review of the Federal Government budget over the last two decades shows that the strategy has been to invest in all sectors probably with the intent to move all sectors forward; even if only marginal progress is achieved. This is not a viable strategy. The government policy and programme should focus on select sectors of the economy that have demonstrated increasing contributions to GDP growth and the potential to create high numbers of wage jobs. The World Bank Group and UK Department for International Development conducted an assessment of the Nigerian economy to identify the sectors where the government should focus its investments. The assessment was guided by four variables: current capacity, potential performance of the industry, potential for employment creation, and capacity for spillovers into other industries. The study also conducted a feasibility assessment of the selected industries using the following criteria: competitiveness, prospective responsiveness to policy reform actions, and the capacity of the private sector to lead the value chains in the industry. Using the above selection criteria, the assessment concluded that government should consider selecting the following industries:! Wholesale and Retail Industries: Despite the inefficiencies in the traditional wholesale and retail marketing chains in Nigeria, this sector accounts for 20 percent of the nonoil GDP. At 15 percent, it is the largest source of employment outside agriculture. However, the inefficiencies contribute to the high cost of food and other products in Nigeria resulting in a higher than average cost of living when compared to countries in Nigeria s peer. The sector is currently going through a transformation with the advent of international marketing chains in the country. Companies such as Shoprite a major South African grocery chain- are beginning to organise the supply chains in the sector, increasing sales opportunities for a number of their local suppliers, which, in turn, leading to the creation of new jobs.! Information and Communication Technology: This sector contributed about 8.53 percent to Nigeria s GDP in March 2013 and is the fourth largest contributor to GDP in the same quarter growing at 29 per cent, faster than any other sector of the economy. Its contributions have been increasing from The sector is estimated to employ about 500,000 - although this does not include all the associated employment opportunities the sector has enabled elsewhere in the Nigerian economy. The Nigerian Communications Commission estimates about one million indirect jobs have been created as a result of the telecommunications revolution. This sector is very important because of its impact and relevance to the many other sectors and value chains. Moreover, it is the platform for Nigeria s entry into the global information and knowledge-based economy.! Real Estate and Construction: With an estimated deficit of about 17 million housing units, Nigeria s housing market holds a significant opportunity for growth and jobs. It is currently underperforming due to a number of structural problems including high costs of building materials driven mostly by importation bans, quotas and other forms of restrictions. The high cost and short-term nature of financing are major impediments to the development of the sector. The current administration hopes to unlock the potential in the sector. For instance, the Mortgage Refinance Company, sponsored by the private sector, the World Bank and the Federal Government of Nigeria, aims to provide mortgages with longer tenures and lower costs.! Agribusiness: Agriculture is the largest sector of the economy, accounting for about 42 percent of total GDP. Nigeria is one of the world s top producers of a number of agricultural products (cassava, cashew nut, tomatoes, millet, shear nut, oil palm, etc). Rethinking Nigeria s Job Creating Strategy [47] September 2013

48 The sector has opportunity to create high numbers of wage jobs. However, most of the produce is unnecessarily affected by post-harvest losses due to inadequate transportation, processing and storage facilities. In addition, Nigeria s agricultural sector has one of the world s lowest levels of productivity. Productivity must be increased significantly for the produce to compete favourably against produce imported from other countries. The sector has opportunity to create high numbers of wage jobs. Focus on large-scale, export-focused industries Productivity is critical to Nigeria s ability to improve the competitiveness of its products. From Nigeria s experience, productivity increases are achieved more in the larger enterprises; therefore, there is need to focus on the establishment of large-scale enterprises. This option does not suggest a neglect of small and medium scale enterprises. Only an export focus will drive the required increase in the domestic productivity and competitiveness of Nigerian goods and services. Government should encourage and frame policies to support the growth of export-oriented industries. Initially, these industries should focus on meeting the needs in the local market. The productivity advances gained from this domestic experience can subsequently be applied in the expansion into the West African regional market. Nigeria s location gives it a cost and time advantage over countries in Europe, Asia or America shipping goods to West Africa over long distances. The next logical step for Nigeria is to serve the international market. However, this will be a challenge given the production capacities of countries such as China and the long-term relationships with between the big global producers and the buyers. Nigeria will need to rely on good foreign relations with the governments of its target countries or markets. Bilateral trade agreements such as the United States Accelerated Growth Opportunities Act (AGOA) will be required to give the Nigerian enterprises a foothold in these international markets. There is always a risk, especially in developing countries, to pick a particular company and make it a winner. Government should resist this policy and, instead, pick industries not companies. Government support should be made available to the entire industry and not to specific companies. Let the best-managed companies survive and win. Picking companies causes distortions in the market and promotes inefficiencies that mean the companies cannot compete on the national or international levels. Private sector led development strategy Governments in most parts of the world have shown that they are not very competent at managing enterprises. As a result, private sector should be enabled to lead the development effort in Nigeria. The government s role should be as an enabler or facilitator. It is the role of the government to frame, create and sustain stable conditions that favour the ideal growth and development society. (See Landis, 1998 above) 4.7 What should be the elements of the job creation strategy? Nigeria s job creation strategy should be driven by improvements in the competitiveness of Nigerian goods and services to achieve an increased volume of business and in consequence, an increase in job opportunities. Improved competitiveness will be achieved through a rapid upgrade of skills in Nigeria s labour force, development of Rethinking Nigeria s Job Creating Strategy [48] September 2013

49 enabling infrastructure and a drive for innovation. Nigeria s ability to create the necessary millions of wage jobs depends largely on its ability to improve the productivity of domestic businesses. Improved productivity will ensure improved competitiveness of Nigeria s products and services in the global marketplace. The improved competitiveness will generate more business opportunities for Nigerian enterprises, which, in turn, will translate, to more job opportunities for Nigerians. Improving competitiveness of Nigerian products and services will enable an effective substitution of imports. And continued improvements will allow Nigeria to export its products and services to other countries in West Africa. Using the experience gained in the region, Nigeria can then begin to export to the rest of the world. It is vital that improvements in competitiveness are not driven by protectionist policies. Although such policies may, in the short run, deliver an improvement in output, over time, they result in products that cannot compete internationally on price and quality. Nigeria s past experience with protectionism has already shown that the world-class products find a way - through the smugglers route - into the country. Uncompetitive local products lose out to imported products. Moreover, import tariffs that should have accrued to Nigeria are lost to the surrounding countries through which the goods are imported and then smuggled into Nigeria. The remaining part of this section will discuss the core elements of skills, infrastructure and innovation as the key elements for an effective job creation strategy Skills Nigeria cannot afford the time to go through each level of Rostow s classic Stages of Economic Growth that all countries are expected to pass through to become developed: 1. Traditional society characterised by subsistent agriculture, 2. Pre-conditions for take off where society develops manufacturing with a national outlook, 3. Take off where industrialisation begins to occur and workers and institutions concentrate around new industry, 4. Drive to maturity where there are increases in standard of living, use of technology, and national economy grows and diversifies, and 5. Age of high mass consumption characterised by mass production and consumerism. As the economic gap grows between the developed world, the developing world and emerging economies, Nigeria does not have the luxury of progressing through Rostow s hierarchy. Nigeria needs a quantum jump in development if it is to cater for its current, rapidly growing population million in 2012 and estimated to reach 440 million by This reality is made more urgent in the face of declining resources from oil earnings, the primary revenue source. Countries such as India, China and Philippines have shown that nations can leverage technology (knowledge) and leapfrog Rostow s classic approach to economic development and arrive at the high skill service sector. These countries created large numbers of jobs in skills intensive service sectors such as software programming, call centres services, back office services (accounts processing), and other information and communications technology services. Nigeria has the resources to be a major player in the skills intensive services industry because of its large population of English language speakers, rapidly expanding Rethinking Nigeria s Job Creating Strategy [49] September 2013

50 telecommunications infrastructure, young and dynamic population, and a geographic location that enables 24-hour support for countries in Europe and North America. However, Nigeria can only achieve this leap forward if it upgrades the skills level in the country. This can be achieved through the following strategies: Link academia to industry: The needs of Nigeria businesses (manufacturing and service sectors) should inform the research projects conducted in academic institutions. There needs to be a close collaboration between the institutions and industry. Government can use financial incentives to promote this goal. For instance, funding from the government to the academic institutions should be tied to evidence that the output of industry has been impacted by the output from the academic institutions. Link School Funding to Measurable Results: The same financial incentive can be extended to institutions that produce graduates who are able to secure jobs. For instance, the number of graduates who secure wage jobs or who start their own businesses six months after leaving school can be used to decide the amount of funding the government provides to academic institutions. This will ensure that what is been taught in schools are continuously calibrated against the needs of industry to ensure relevance and employability. Emphasize Technical and Vocational Education Training (TVET): TVET is required to upscale the skills levels of Nigerians to provide services and create employment. Some of the technical opportunities that exist in manufacturing, construction, technology, etc are currently outsourced to expatriates (including some from neighbouring countries) because of the low skill levels in Nigeria. More importantly, training programmes should be focused on the industries that the government have selected to focus its investments. This is to ensure that the training is relevant to the needs in Nigeria. The National Board for Technical Education (NBTE) should be strengthened to enforce this goal. NBTE is the Nigerian government institution responsible for regulating and promoting the training of all technical and vocational skills that fall outside the university education Infrastructure A nation s infrastructure stock is the backbone for its successful and enduring economic development. It is a critical element of Nigeria s Agenda for Growth with Jobs. However, Nigeria has significant infrastructure deficits. The Central Bank of Nigeria 10 estimates rectification would take about US$14 billion annually over the next 10 years. This estimate is for new infrastructure development, excluding capital maintenance and recurring expenses. Using 2012 as a reference, only 28 percent (US$2.45 billion) of Nigeria s federal budget was spent on new infrastructure. 11 The Nigerian government acknowledges the critical role of infrastructure in the nation s economic development. However, it also acknowledges that it does not have sufficient funds to meet its infrastructure needs. According to the Nigeria s National Planning Commission, given current financing levels, there will be a financing gap of 8 percent of GDP - the equivalent of roughly US$ 370 billion - from 2014 to Given the dearth of resources, government must make some tough choices as to what 10 Central Bank of Nigeria, (April 2013). Development of a National Infrastructure Financing Policy: Drat Policy Recommendations (Yet to be published) 11 The 2012 Federal Budget was N1.34 trillion (US$8.9 billion) out of which 50 percent was allocated to infrastructure and only 55 percent was cash-backed, with 51.2 percent utilised by the end of the year. 12 National Planning Commission, (May 2013). Interim National Integrated Infrastructure Master Plan (Yet to be published) Rethinking Nigeria s Job Creating Strategy [50] September 2013

51 infrastructure to invest in. Investment should be guided by the choice of growth sectors (see section 5.2), which means, the most critical infrastructure for Nigeria includes electric power, broadband coverage, and transportation/logistics. Electric power is the major factor limiting rapid development of the country s economic base. According to the Manufacturers Association of Nigeria, power that is usually 5 percent to 10 percent of production cost in most countries currently constitutes between 30 percent and 40 percent of the cost of production in Nigeria. (BusinessDay, 2009). This is a major reason why Nigerians products are not competitive against imported products. Nigeria forecasts that it needs to increase power generation capacity from the current 7GW to about 350GW. At a cost of about US$1.4 billion per Gigawatt, government of Nigeria must put in place all the required policies and programmes to attract private sector funding. Success of the ongoing reform of the power sector is critical to securing private sector interest in funding this quantum of investment. Broadband supply chain comprises international connections, a national backbone network, metropolitan access links, and the local access network. Nigeria is making varying degrees of progress on all these components. For instance, the submarine cables landing in Nigeria provide about 9Tbits/second of capacity. For the national backbone fibre, most of the long distance telephone carriers have, amongst themselves, fibre presence in all the 36 states and Abuja. What is required to improve the connectivity is for the government to insist on interconnectivity agreements amongst the operators. Metropolitan access links are being developed in major cities. Internet data usage has increased from million in July 2012 to million in June Transportation and logistics infrastructure is central to economic growth. Such infrastructure (roads, aviation facilities, rail, maritime, inter- and intra-city transportation) impacts positively on the cost and competitiveness of a nation s products. According to the National Planning Commission, 40 percent of Nigeria s Federal roads are bad and need rehabilitation, while 30 percent are poor and need periodic maintenance. 78 percent of state roads and 87 percent of local government roads are bad and need rehabilitation. The situation in aviation is improving. Most of the airports were recently physically upgraded. Total radar coverage of Nigeria s airspace has been achieved. State of the art Global Positioning Systems have been installed at the airports. But the railway system is in a dire state. Although the current administration has opened up railway lines that have been largely abandoned over the last 20 years, much investment is still required to ensure the system to a state where it can start contributing significantly to movement of people and cargo. The National Planning Commission estimated that about US$800 billion is required over the next 3 decades to achieve the targets set for the subsectors. The fact is that the government of Nigeria cannot fund its infrastructure financing needs and requirements. Continuing pressures on oil prices and increased spending on security will reduce the resources available for infrastructure investment and development. Nigeria has to attract private funding if it is to develop its infrastructure. Many policy documents in Nigeria outline what is required to secure investment from the private sector. It can be done: many developing countries have been able to secure significant private sector involvement in infrastructure investment and development Innovation The world has become a global innovation village that is creating both prosperity and disruptions. Countries such as the United States that hitherto had dominance over the world economy are beginning to realise that ideas are democratic and those who are Rethinking Nigeria s Job Creating Strategy [51] September 2013

52 able to innovate with their ideas can take over leadership in short order. China and India are examples of how nations can leverage ideas to leapfrog to new frontiers of development. The world has changed. And is changing. Fast. In the early modern era, nations with the biggest and most efficient farms won the race for economic dominance. The 20 th century saw nations with the biggest and most efficient factories win the economic race. In the 21 st Century, nations winning the race for economic dominance are those with the deepest pool of ideas and who are most efficient in using these ideas to transform the way they live, work and play. Paul Romer, an economist, proposed that ideas are the primary catalyst for economic growth by reorganising physical goods in more efficient and productive ways. Countries that are able to leverage ideas and creativity to produce new products and services will win a significant share of the market and create new jobs for their people. National Center of Education and the Economy (2007) in their publication Tough Choices of Tough Times states that those countries that produce the most important new products and services can capture a premium in world markets that will enable them to pay high wages to their citizens. In many industries, producing the most important new products and services depend on maintaining the worldwide technological lead, year in and year out, in that industry and in the new industries that new technologies generate. But that kind of leadership does not depend on technology alone. It depends on a deep vein of creativity that is constantly renewing itself, and on a myriad of people who can imagine how people can use things that have never been available before, create ingenious marketing and sales campaigns, write books, build furniture, make movies, and imagine new kinds of software that will capture people s imagination and become indispensable to millions. This is a world in which a very high level of preparation in reading, writing, speaking, mathematics, science, literature, history, and the arts will be an indispensible foundation for everything that comes after for most members of the workforce. It is a world in which comfort with ideas and abstractions is the passport to a good job, in which creativity and innovation are the key to the good life, in which high levels of education a very different kind of education than most of us have had - are going to be the only security there is. Innovation is not a straightforward process; rather, it is a product of the continuous search for new ways of solving old and new problems. It is usually unexpected and serendipitous. As a result, it is sometimes baffling for policy analysts to deign the best way to arrange for innovation to occur. The Pew Center on the States, a division of The Pew Charitable Trusts presents a framework for understanding the components of innovation or an innovative place:! Expertise: New discoveries, new knowledge, and new insights come from people who are given the resources necessary for success. For innovation to drive economic development, there is need to build expertise by matching financial resources behind research, building strong research capabilities and attracting world-class talent. Nigeria has set up a number of institutions to promote research and innovation: National Office for Technology Acquisition and Promotion, Technology and Innovation Support Centres, etc. There is need to provide finance to support these institutions. However, given that the government does not have enough resources to fund all of its needs, a more efficient strategy may be to link the research centres with industry. Industry will provide the funds to support research that advances their core business.! Interaction: Face-to-Face is still very important for the exchange of ideas and synergy Rethinking Nigeria s Job Creating Strategy [52] September 2013

53 that creates new business models, marketing plans, or products. Countries where innovation is driving economic development are orchestrating interaction by cultivating strong networks, well-designed research facilities and compact geographical areas. These innovation ecosystems will typically include a tertiary institution that is leading research in a body of knowledge that is relevant to the businesses within the geographic area. In some cases, government (or in partnership with the private sector) will set up world-class facilities for the researchers to conduct their work. These geographic areas do not necessarily have to follow political boundaries; rather, they are economic units that may cut across state lines. Hence, there is need for political cooperation amongst the various political units.! Diversity: Ideas will only get better when they are openly discussed and considered by a mix of people with a variety of research fields, backgrounds, approaches, and mindsets. Countries that have been successful in sparking innovation have found creative ways to put together people from diverse backgrounds, experiences and cultures. For instance, managers of an industry cluster or an incubation center can ensure a diversity of companies. The cross-pollination of ideas can trigger new product ideas or new ways of marketing old products.! Application: Ideas are useless unless used. The true proof of their value is in commercialization. Most governments are requiring commercialisation of research to be a critical requirement. This goal is usually achieved through a close working relationship between industry and academia. Rethinking Nigeria s Job Creating Strategy [53] September 2013

54 5 A Call for Action: Delivering Nigeria s Agenda for Growth and Jobs Our core proposals constitute a long term Nigerian Agenda for Growth with Jobs that we believe can form the basis of a national political consensus. The aim is to provide a stable policy framework to encourage long-term investment. But while cross-party commitment to the policies that are needed would be a good and necessary first step, this is not sufficient. If such policies are to have a material impact on growth and jobs, action must be sustained over several successive administrations. Our analysis has highlighted how in many crucial areas notably education, infrastructure, skills, innovation and financing for innovation there has been a sustained failure to implement long-term strategic approaches to policy a weakness recognised in many reviews. We have identified the priority sectors and themes for the Nigerian Agenda for Growth and Jobs. For this to stand any chance of success, Nigeria has to break the familiar cycle of institutional churn and political procrastination to find ways of ensuring that difficult and contentious long-term decisions are based on the best available independent expertise. This is not a plea to take the politics out of long-term investment: apart from its moral imperative, a healthy democracy is vital for keeping policy responsive and government accountable. But politics is best in its right place making strategic choices, setting objectives and holding executive bodies to account. Drawing on examples of effective institutional innovation, we have proposed: implementation of an ambitious long-term growth programme will demand sustained effective direction from the centre of government another area where institutional change is overdue. The national machinery to provide strategic advice and oversee implementation is deficient. It is too informal and too prone to radical change from one government to the next. This needs to change. Our governments are good at talking change. They have a poor record of walking the talk. The absence of stable machinery at the heart of government makes it more difficult to develop and implement a long-term strategy for promoting economic growth with jobs. Strategy and performance management are vital functions that cannot be left to ad hoc units staffed by a shifting population of short-term, often politically appointed staff. Strategy needs continuity. Otherwise it is overwhelmed by short-term politics to the detriment of performance management that becomes interrupted and ineffective. Constant flux at the centre - the uncreative destruction of successive administrations - is wasteful and inhibits the evolution of successful institutions. Nigeria needs a substantive and stable policy framework to win broad-based support for: a permanent, top-level political mechanism for setting strategic direction and overseeing implementation, proper planning processes, which directly involve departments, to translate strategic direction into concrete plans and action across government, implementation plans underpinned by clear accountabilities and proper management Rethinking Nigeria s Job Creating Strategy [54] September 2013

55 information to track progress. Now the challenge is to implement these ideas: to support a clearly articulated long-term strategy for growth with jobs, and make it stick across successive governments. The world is changing radically in terms of technology, sustainability and the global balance of economic and political power. Some of these changes may not be benign, causing instability financial, fiscal, social, political and environmental and potentially derailing paths to increasing prosperity. Some challenges we can anticipate. Others, not. But we must stand ready to respond to them all. This means putting a premium on: Migrating to a shared vision of Nigeria as an ideal growth and development society and, within this framework, design and manage policies and institutions that foster anticipation and flexibility systems that celebrate and encourage entrepreneurship, innovation, opportunity and discovery. Establishing Nigeria as an ideal growth and development society - a strong, stable and credible investment climate for human, physical and innovation capital - is a crucial step for job creation for millions of unemployed and underemployed Nigerians, particularly the youth. We call for groups across society and all of Nigeria s decision takers, opinion formers, leaders of civil society and business, and political parties to work on this Agenda for Growth and Jobs championed in this report. Rethinking Nigeria s Job Creating Strategy [55] September 2013

56 Footnotes African Economic Outlook (2012). Nigeria Ajaegbu, O. O., (2012). Rising Youth Unemployment and Violent Crime in Nigeria. American Journal of Social Issues & Humanities. (ISSN: ) Vol.2 (5) pp Sept Akintoye, R. A., (2008). Reducing Unemployment Through the Informal Sector: A Case Study of Nigeria. European Journal of Economics, Finance and Administrative Sciences. ISSN Issue 11 (2008). Anyanwu, C. M. (2004). Productivity in the Nigerian Manufacturing Industry, Central Bank of Nigeria Awogbenle, C. A., and Iwuamadi, K. C., (2010). Youth unemployment: Entrepreneurship development programme as an intervention mechanism. African Journal of Business Management Vol. 4(6), pp , June Available online at BusinessDay (2009), Manufacturers need 2,000mw of electricity to stay afloat. July 20, Retrieved on September 29, Bhuyan, A., A. Jorgensen, and S. Sharma Taking the Pulse of Policy: The Policy Implementation Assessment Tool. Washington, DC: Futures Group, Health Policy Initiative, Task Order 1 Boughrara, A. (2010). The Economic and Social Impact of State Divestiture: A Comparison Between MENA Countries and Other Regions. FEMISE Research Programme. Research No. FEM33-08, University of Sousse, Tunisia. December Central Bank of Nigeria (2011). Economic Report for the First Half of Ejumudo, K. B O. (2013). The Problematic of Development Planning in Nigeria: A Critical Discourse. Developing Country Studies. ISSN X, Vol. 3, No. 4, Ikeanyibe, O. M., (2009). Development Planning in Nigeria: Reflections on the National Economic Empowerment and Development Strategy (NEEDS) Journal of Social Sciences, Vol. 20(3): pp , 2009 National Bureau of Statistics (2011) Annual Socio-Economic Report. Abuja, National Bureau of Statistics (2012). Press Release on Nigeria Poverty Profile Abuja, National Bureau of Statistics (2012). Social Statistics in Nigeria: Part III: Health, Employment, Public Safety, Population and Vital Registration. Abuja, National Bureau of Statistics (2013). 3rd Quarter 2012 Job Creation Survey: A Collaborative Survey between the National Bureau of Statistics, the Office of the Chief Economic Adviser to the President, Federal Ministry of Labour & Productivity, and National Directorate for Employment. National Center of Education and the Economy (2007). Tough Choices : Tough Times The Report on the New Commission on the Skills of the American Workforce, Obadan, M. I., (2002). CBN Economic & Financial Review, Vol. 39 No. 4 Okojie CE Development Planning in Nigeria since Independence. In: MA Iyoha, CO Itsede (Eds.): Nigerian Economy: Structure, Growth and Development. Benin City: Mindex Publishing. UN-Habitat, (2008). Crime and violence versus employment opportunities in cities and towns. 2nd African Ministerial Conference on Housing and Urban Development. Abuja, Nigeria. Retrieved from United Nations Millennium Development Goals 2010 World Bank, (2009). Nigeria: Employment and Growth Study. Report No NG. November 13, Rethinking Nigeria s Job Creating Strategy [56] September 2013

57 , Nextier Policy Advisory is a multidisciplinary public sector advisory firm focused on driving efficiency and effectiveness in public sector organizations. With a specific focus on Nigeria, Nextier is positioned at the confluence of ideas and implementation. Nextier works closely with public sector implementing agencies to ensure access to new ideas for solving some of societies most difficult challenges. To achieve this mission, it builds close working relationships with think tanks, research and tertiary institutes to ensure access to ideas, and in turn, transform these ideas into implementable programmes that are presented to the relevant public sector implementing agency. Nextier s main office is in Abuja, Nigeria with a presence in Lagos and Enugu , enquiries@cseaafrica.org The Centre for the Study of the Economies of Africa (CSEA) is a non-profit think tank that conducts independent, high quality applied research on economic policy issues in Nigeria and the rest of Africa. Dr. Ngozi Okonjo-Iweala, former Managing Director, World Bank, and currently Nigeria s Coordinating Minister established CSEA in 2008 for the Economy and Honourable Minister of Finance. CSEA s strategic location in Abuja ensures proximity to government agencies and enables the Centre to serve as a forum for policy dialogue by stakeholders from the government, national assembly, private sector, civil society and the media. CSEA's mission is to enhance development outcomes in Africa through evidence-based research. Rethinking Nigeria s Job Creating Strategy [57] September 2013