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Development

 

Nigeria and the Mirage of Job Creation

The Nigerian government has assured jobless Nigerians that it will create 10 million jobs within the next three years. Sixty per cent of Nigeria’s 140 million are youths. Many of them just idle away with nothing to do. Raising the hope of hapless jobseekers in a time like this is important. However, the reality on the ground suggests that creating the quoted number of jobs within a short time is a tall dream.

 

It is a misnomer for government to think that it can create jobs for millions of people. Often government policies stifle job creation. Across the world, governments do not create jobs but only provide conditions under which millions of jobs can be created.

 

Over the years, officials have continued to put square pegs in round holes. Some time back, programmes and agencies were created to train job seekers for some vocations. Most vocational skills need passion and experience which schooling alone cannot confer. It is difficult to understand how training obtained within six months or less can adequately equip someone to face up to the challenges of the market. In addition, the trainings were not practical and intensive enough in order to survive the level of competition.

 

Creating 10 million jobs is more than sitting in Abuja making wishful statements. It requires a wholesome revamping of policies that undermine economic growth. Unemployment is an intractable problem. The government’s abdication of its primary responsibilities has induced lack of jobs. Unemployment has a direct relationship with inability of the government to perform its required roles in the economy coupled with the prevailing economic policies.

 

It is anybody’s guess if the 10 million people who will be employed in the next three years will join the already over-bloated civil service or will be absorbed by the private sector. Neither the civil service nor the private sector can absorb half of that figure within the next three years.

 

The reasons are obvious. Two years ago, the previous government intended to cut 33,000 jobs, 20 per cent of all civil servants, stressing that the downsize was necessary in order to meet bludgeoning wages. On the other hand, the transaction costs for private sector that has the capacity to employ millions of Nigeria continues to be on the rise.

 

Successive governments have made feeble attempts to create jobs through the establishment of job creation agencies with different acronyms. Many of the initiatives never took off. Right now each state government is trying to avoid political backlash over retrenchment of workers. Most of them are careful not to lay off workers in fear of a political backlash.

 

The  private sector is not only the driver and the engine of the economy but also the superstructure upon which durable economic growth can be built. Where local laws and drastic regulations inhibit the private sector, its capacity to create jobs will be undermined.

 

Nigeria has huge economic potentials. This is evident from the astronomical growth in the capital market which recorded a total transaction value of N28 billion in 2000. Last year the total market capitalisation value rose to N10 trillion. Despite this potential, the private sector is held back by crumbling infrastructure and high cost of doing business. According to Economic Intelligence Unit report 2007, Nigeria is ranked 8th where it is not conducive to do business. Many private enterprises have scaled down operations or closed shop. Unofficial figures put the number of new business that fold up yearly at 40 per cent.

 

Nigerian firms are highly uncompetitive even within Africa. Why won’t they when in 2004 alone, incessant power outages cost Nigeria 15 per cent of the manufacturing output ? This figure is expected to rise since power outage now is at all time low. In addition 85 per cent of manufacturers, including those in informal business, provide themselves power supply.

 

Annually the cost of fuelling private power generators is N16.4 trillion. Out of this amount, factories and commercial enterprises gulp N191.08 billion and N1.57trillion respectively. This amount can either be used to expand existing business or set up new ones. This in turn will help in creating jobs.

 

Apart from this, there are bottlenecks in accessing credit for medium and micro-business enterprises which have the potential to create huge number of jobs. The lending rates at present are far above the Central Bank of Nigeria’s recommendation. While commercial banks take 26 per cent interest on all loans aside from collaterals, the new micro-finance banks established to cater for these categories of businesses charge 10 per cent interest on a monthly basis. Per year the interests will be 120 per cent on any amount borrowed. Interestingly, the amount a depositor has in the micro-finance bank is not part of the total amount borrowed.

 

Under this circumstance, no appreciable jobs can be created. Compared to other economies, the lending rates in Nigeria are high. For instance, the lending rate is 3.5 per cent in Malaysia, 5 per cent in Korea, 9 per cent in Kenya, 11.5 per cent in Egypt and 15 per cent in South Africa. The implications are dwindling growth of the real sector, closure of some industries, low capacity utilisation and inability to expand production and create jobs.

 

It is not surprising that the president of the National Association of Chambers of Commerce, Industry, Mines and Agriculture said: "Nigeria’s hope of becoming the world’s leading economy by 2020 cannot be achieved with the current excessive lending rate which can only kill industries."

 

Jobs cannot be created through mere slogans. The problems confronting private sector are better addressed through public and private partnership. Rather than giving a false hope over job creation, it will be appropriate if officials should first of all look inward and create conditions under which its 10 millions jobs will be created. Failure to do so will make the intention to create jobs for the unemployed a pie in the sky.

 



By Thompson Ayodele
Executive Director, Initiative for Public Policy Analysis (IPPA)
A public policy think-tank based in Lagos, Nigeria


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