Rising inflation, interest rates threaten jobs market recovery.
The continued increase in the general prices of goods and services, coupled with the recent hike in the key interest rate, could dent the gradual recovery of jobs in Nigeria’s labour market, analysts say.
As at the fourth quarter of 2020, Africa’s biggest economy recorded an all-time unemployment rate of 33.3 percent, which was intensified by the COVID-19 lockdown measures, according to the
National Bureau of Statistics (NBS).
But there are expectations that unemployment numbers may have reduced slightly due to full reopening of economic activities last year.
“Even though there is no recent data on the labour market conditions for last year, it could be safely inferred that employment conditions improved on the back of a surge in business activities across sectors,” Temitope Omosuyi, investment strategy analyst at Afrinvest Limited, said.
He said the trend might hit a snag in 2022, “no thanks to the heightened high cost of doing business following the spike in energy prices which would no doubt impair the fragile labour market.”
Muda Yusuf, chief executive officer at Centre for the Promotion of Private Enterprise, said the high cost of goods and services, including energy cost, have serious macroeconomic effects on companies, especially for Small and Medium-scale Enterprises (SMEs).
“SMEs account for a large number of employment. So, when they feel this kind of shock, it will get saturated into high unemployment numbers,” Muda said.
According to the NBS, Nigeria’s Consumer Price Index, which measures inflation, surged to 16.82 percent in April, the highest in eight months compared to 15.90 percent in the previous month.
The month-on-month percentage increase (1.76 percent) is also the highest since May 2017. The surge in prices is as a result of rising energy (diesel) costs caused by the ongoing Russian-Ukraine crisis.
The surge in inflation rate led to the recent hike in Monetary Policy Rate (MPR) by the
Central Bank of Nigeria’s Monetary Policy Committee to 13.5 percent from 11.5 percent, the first hike since July 2016.
The key rationale for scaling the MPR stems from the need to curb the rising rate of inflation.
“This will exacerbate the intensity of idle capital assets, worsen the already declining profit margin of private businesses and heighten the mortality rate of small businesses,” said Segun Ajayi-Kadir, director-general of Manufacturers Association of Nigeria (MAN).
Ajayi-Kadir said that it would reduce capacity utilisation, and upscale the rate of unemployment, incidences of crime and insecurity as the capacity of banks to support production and economic growth would be heavily constrained.
Last year, the NBS reported that 20 percent of the full-time workforce in Nigeria lost their jobs due to the pandemic in 2020.
According to the report, the pandemic affected the nation’s workforce and caused an increase in the unemployment rate, from 27 percent to 33 percent between Q2 2020 and Q4 2020.
But when economic activities reopened last year, analysis of the full-year 2021 GDP report by the NBS shows that the growth performance of job-creating sectors like manufacturing, trade, construction and transportation improved on a year-on-year basis.
Trade grew by 8.62 percent in 2021, compared to a contraction of 8.49 percent in 2020; manufacturing grew by 3.35 percent, compared to a contraction of 2.75 percent; and construction recorded a positive growth of 3.09 percent as against a negative growth of 7.68 percent.
Transportation grew by 16.25 percent, compared to a contraction of 22.26 percent.
The NBS household consumption and expenditure data show that the growth rate for compensation of employees stood at 13.7 percent in 2021, compared to 0.9 percent in the previous year.
Ikemesit Effiong, head of research at SBM Intelligence, said many of the sectors are growing but from a systematic point of view, they are actually recovering jobs that have largely been lost during the pandemic.
Last month, MAN said in a report that a total of 8,508 jobs were created in the manufacturing sector in the second half of 2021 as against 3,451 jobs recorded in the corresponding half of 2020 and 7,602 jobs created in the preceding half.
“The trend indicates that manufacturing jobs are also rebounding following the gradual return of economic activities in the sector after a year’s onslaught brought by the pandemic,” the manufacturers said.
A World Bank report, titled ‘COVID-19 in Nigeria: Frontline Data and Pathways for Policy’, said new jobs were created in the small-scale retail and trade sectors following the pandemic. In February 2021, around 26 percent of the working-age population (15–64 years of age) were engaged in retail and trade activities, an increase from 17 percent in January-February 2019.
Higher unemployment in Nigeria is making many jobless Nigerians seek opportunities to travel abroad, fuelling a massive brain drain that is hurting Africa’s largest economy.