The combined effect of the coronavirus (COVID-19) pandemic and the sharp drop in oil prices could push Nigeria’s unemployment rate above 35 per cent in coming quarters, the Chief Executive Officer, Financial Derivatives Company (FDC) Limited, Bismarck Rewane, has said.
Commenting on Q2 2020 unemployment data released by the National Bureau of Statistics (NBS) last Friday, Rewane, in the FDC’s latest economic bulletin obtained by New Telegraph yesterday, predicted that the unemployment rate would be much higher in subsequent quarters given the severe impact of the COVID- 19 crisis on the nation’s economy.
He stated: “Nigeria’s unemployment rate climbed to the highest level in a decade in Q2’20 (27.1%) from 23.1% in Q3’18.
The country’s unemployment rate has more than doubled in the past four years as the economy struggled to recover from the 2016 recession. It is worth mentioning that the unemployment rate is a lagging economic indicator, i.e. the impact is felt after the cycle has changed.
“Therefore, the unemployment rate could be much higher in subsequent quarters due to the COVID- 19-induced economic paralysis.
The pandemic disrupted economic activities across virtually all sectors of the economy, making it more difficult for output growth to keep up with the fast growing population (2.6%) and creating some disequilibrium in the labour market.
“The underemployment rate followed a similar trend, rising at a faster pace to 28.6% from 20.1% in Q3’18. This shows deterioration in the quality of employment.
The misery index, which is unemployment + underemployment + inflation, is now 68.26%, making Nigeria the 6th most miserable country in the world.” He pointed out that the International Monetary Fund (IMF) has projected that the Nigerian economy will contract by 5.4 per cent in 2020 due to the twin shock of the coronavirus pandemic and the slump in oil prices.
“This will most likely push the unemployment rate above the 35% threshold in subsequent quarters. Although, the President has launched a programme to engage 774,000 Nigerians in special public works, this will be sub-optimal to make a significant impact on the unemployment numbers,” he said.
Further analysing the NBS report, he noted that unemployment was highest among the youth, especially those in the age bracket (15- 24 and 25-34 years). According to him, “Unemployment within the age bracket (15-24 years) was 40.8%.
These categories of people are new school leavers with little or no experience.
They are also unlikely to be negatively impacted by the COVID-19 pandemic due to their high immune system. Nigeria’s median age is 18.3 years. Youth unemployment increased to 34.9% from 29.7% while underemployment rose to 28.2% from 25.7% in Q3’18.
This suggests that the job creation level is inadequate to absorb the growing number of graduates that enter into the labour market on an annual basis.” Rewane, who is also a member of Presidential Economic Advisory Council, stressed that the surge in unemployment numbers as well as a likely spike in subsequent quarters due to the COVID-19 disruptions “further support the need for more aggressive measures to reduce the pandemic effect on growth and unemployment.”
The FDC boss also noted that the NBS report did not include figures for the past six quarters (Q4’18 – Q1’20), a development, which he said, “Will have a distortionary impact on the trend analysis of unemployment as the Q2’20 numbers will only be compared to Q3’18. It could also lead to a significant bias in policy decision making.”
It will be recalled that Vice-President Yemi Osinbajo had said that unemployment may rise to 33.6 per cent, which means that a total of 39.4 million people would be jobless by the end of 2020 if the country fails “to take prompt pre-emptive measures”.