Tuesday, September 26, 2023

What’s behind NBS’ methodology that put Nigeria’s unemployment rate at 4.1%?

As Nigeria looks to the future, the narrative constructed by data must offer a clear, unobstructed view of the challenges at hand.

• September 15, 2023
NBS and Nigerian masses
NBS and Nigerian masses

The National Bureau of Statistics (NBS) recently announced that Nigeria’s unemployment rate for the first quarter of 2023 dropped to an eyebrow-raising 4.1 per cent. The NBS had earlier announced Nigeria’s unemployment rate dropped from 33.3 per cent in the fourth quarter of 2020 to  5.3 per cent in the fourth quarter of 2022. This sudden drop has raised questions about the rationale behind such figures.

The Statistician-General of the Federation, Adeyemi Adeniran, said the recent rates were calculated using a different methodology and do not necessarily reflect government performance. He said this was done to align with African contemporaries, such as Ghana and Cameroon, with unemployment rates of 3.9 per cent and four per cent in 2022, respectively, and comply with the new International Labour Organisation standards.

Consequently, the NBS changed its definition of full employment from working at least 40 hours to working for just one hour a week. Although low, the unemployment data released fails to paint the true picture of economic productivity and individual well-being in Nigeria and dismisses the complexity of Nigeria’s labour market.

The new methodology also masks the issue of underemployment. The old methodology defined underemployment as a situation where people worked at jobs below their educational level or when they worked for less than 20 hours per week and had the capacity to work more.

For example, a person with a college degree working in a job that only requires a high school education would be considered underemployed. The new methodology defines underemployment as working for less than 40 hours a week and showing a willingness to take on more work. Thus, the NBS reported the underemployment rate as 12.2 per cent in Q1 2023 from 13.7 per cent in Q4 2022.

It is also important to question whether the high informal employment rate of 92.6 per cent should be considered meaningful employment. Many informal jobs are insecure and do not offer employee benefits like pensions, health insurance, or maternity leave. For example, can labourers in the Nigerian construction industry who earn less than N5,000 for a day’s job be described as fully employed?

When unemployment rates are low, there’s generally less crime. For example, Ghana has an unemployment rate of 3.9 per cent, and its crime rate is 44.5 per cent. This suggests that crime in Ghana is moderate compared to Nigeria, with a crime index rate of 70.76 per cent, according to the International Organisation for Peace Building and Social Justice. The organisation says Nigeria’s youth are driven to crime due to economic hardship and poverty.

Global audit and tax advisory firm KPMG, in its International Global Economic Outlook report released in April 2023, projected that Nigeria’s unemployment rate would rise to 40.6 per cent in 2023. This projection took into consideration the country’s economic realities and factored in the limited investment by the private sector, low industrialisation, the spillover from an expected slowdown in the global economy in 2023 and the Naira redesign policy that resulted in a cash scarcity and reduced economic activity in the fourth quarter of 2022.

While the decision to align with international standards is laudable, ensuring that these standards accurately reflect the on-the-ground situation is crucial. If the NBS argues that wages gotten from minimal work hours, as suggested by the new methodology, is enough for survival –which is highly unlikely– it should be noted that mere survival does not translate to prosperity and relying solely on such statistics can create a misleading sense of security.

Data should tell the full story, not just offer a superficial sense of security. Policy decisions must consider the economically vulnerable population, even if technically “employed,” to effectively address underemployment and informal sector challenges

In conclusion, aligning with international standards is commendable, but it should not be at the expense of on-the-ground realities. Data has the power to drive impactful policies only when it tells the full story. As Nigeria looks to the future, the narrative constructed by data must offer a clear, unobstructed view of the challenges at hand.

Antoinette Onyekwelu is an analyst at SBM Intelligence

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