A recently released report by the global professional service firm, KPMG, has estimated Nigeria’s unemployment rate to top 40.6 percent in 2023 from 37.7 percent in the previous year. In the report titled “Global Economic Outlook,” the rate is expected to climb further. It was noted in the report that unemployment in Nigeria is expected to increase on the back of limited investment by the private sector, low industrialization and slower than required economic growth.
Former Statistician-General of the National Bureau of Statistics (NBS) (who is now Chief Economist at KPMG in Nigeria), Dr. Oyeyemi Kale, and Oluwole Adelokun (Associate Director of Strategy and Economics at KPMG in Nigeria) prepared the Nigerian section of the report. The section is titled, “Challenging macroeconomic fundamentals in a transition period.” Nigeria’s slow economic growth is driven by the non-oil sector, while the oil sector has contracted due to challenges such as oil theft, pipeline vandalization, and underinvestment.
Nigeria experiences slow economic growth as GDP growth estimated at 3%.
According to the report, the GDP growth rate was estimated at three percent in 2023. The rate is influenced by the slowdown in economic activity during periods of political transition. Nigeria’s real GDP grew by 3.52 percent year over year in the fourth quarter (Q4) 2022 compared to 2.25 percent recorded in the previous quarter, with an annual growth rate of 3.1 percent for the year against 3.4 percent in 2021. In 2022, growth was driven by the non-oil sector, as continuous recovery in household consumption boosted spending, particularly in the finance and insurance services, telecommunications, and transportation and storage services.
While the non-oil sector grew by 4.84 percent, the oil sector contracted by 19.22 percent, largely attributed to worsening oil theft, pipeline vandalization, underinvestment, and other operational challenges inhibiting oil production. Meanwhile, Nigeria’s unemployment has been trending upward over the years, reaching a record high of 33.3 percent in Q4 2020 according to the last NBS labor report, with over 23.1 million Nigerians out of jobs. This trend is expected to worsen in recent times considering the ripple effect from the COVID-19 pandemic, economic downturn, high inflation, and massive layoffs in the tech space, among others.
CBN raised monetary policy rate to combat inflation.
According to the report, “Unemployment is expected to continue to be a major challenge in 2023 due to the limited investment by the private sector, low industrialization and slower than required economic growth and consequently the inability of the economy to absorb the 4-5 million new entrants into the Nigerian job market every year.” Officially, the NBS recorded an increase in the national unemployment rate from 23.1 percent in 2018 to 33.3 percent in 2020.
Further highlights of the report show the impact of the high inflation environment on the economy, with projections of at least 20 percent in 2023. The KMPG report stated that annual inflation maintained its upward trend throughout 2022 and reached its highest levels in almost two decades and closing the year at 21.34 percent. Food inflation and core inflation has also grown by 23.75 percent and 18.49 percent respectively. To address the rising inflation, the Central Bank of Nigeria (CBN) raised the Monetary Policy Rate (MPR) by a cumulative 500 basis points in 2022 to 17.5 percent and increased the Cash Reserve Ratio (CRR) from 27.5 percent to 32.5 percent. Despite these measures, inflation has remained adamantly high and is predicted to remain above 20 percent in 2023 due to the persistence of the structural and policy issues.
Some insights from the NBS’s last official report.
Apart from the unemployment rates aforementioned, the last official report of the NBS also highlights some details. The total labor force was estimated at 69.67 million, with only 30.57 million fully employed citizens. Unemployed citizens were estimated at 15.9 million, and the total number of unemployed citizens was 23.19 million as of Q4 2020. The NBS has explained that the delay in the release of the report was due to the process involved in enhancing the methodology and implementation of the Nigeria labor force survey. According to the statistical agency, the result from the Q1 2023 Nigerian labor force survey employing the revised technique and approach is scheduled to be released in Q2.