Economic growth as panacea for employment creation

 

President  Buhari          Minister for Finance, Adeosun

Economic growth as panacea for employment creation

The growth of an economy, especially as it relates to the wellbeing of its citizenry, is best measured by the numbers of its productive class that are meaningfully employed. In this piece FRIDAY EKEOBA x-ray government claims to growth in the face of dwindling economic indicators.

The continued drop in the value of the Naira as against other major currencies round the globe is one albatross that have continued to agitate manufacturers in the domestic economy.

The increased gap in the exchange rate which invariably has resulted to high cost of production and thereby making end users of the manufactured goods and services to pay more, have left a lot of tongue wagging as to what the year 2016 has in stock for the average Nigerians.

However, to ensure that operations is kept going, majority of corporate organisations and Small Medium Scale Enterprises (SME’s), have raise the fear that they may have no other option than to drastically cut down their work force amongst other options that would be taken to navigate the hard times.

Already, most business concern, including the government, who ordinary serve as last resort to most job seekers, can longer pay their workers, as at when due; all due to economic indicators in the domestic economy taking a negative bend for some time now.

There is no gainsaying that the government at the close of transaction in 2015 did not give insight as to what will transpire in 2016, asking Nigerians to get prepared for hard times in the New Year. However, one would have expected the government who has better information at its disposal to put some palliative measures in place to caution the sufferings Nigerians now found themselves.

The recent observation made by the Financial Times of London may just be another signal that policy measure so far put in place by the government is not yielding any meaningful result, except for increase in goods and services and resulting in companies lying off their workers.

Some economic measures recently put in place by the government, include, the Treasury Single Account (TSA), maintaining the fiscal policy which some experts said is not coherent and the proposed 2006 Budget which is yet to be debated on by the National Assembly, but have been described as budget of change despite some criticism to the contrary.

 Government effort so far

The government through its agencies have tried in no small measure to ensure that aside the Real sector taking its pride of place in the domestic economy; funds will equally be judiciously deployed to revamp the Agricultural sector.

The decision to grow the Agricultural cum the Real sector in the country has been viewed as the two main sectors through which the economy can be developed as well as creating the much needed employment avenues for the young productive class to contribute their quotas to economic sustainability of the country. This was equally a major focal point of the recent past administration.

However, while the government vision to achieve a sustainable economic emancipation in the shortest possible time, owning to what it described as massive pillaging of the country’s wealth, economic indicators has since shown that unemployment growth rate in the country may serve as albatross to the government’s developmental strategy.

Recent statistics showed that majority of the productive class which if put differently, ought to be the life wire of a frontier economy, are either unemployed or not gainfully employed.

Also the Real sector have had their complaints about the agencies of government not meeting the desire and the aspiration of going concerns that actually need the government funds to grow their businesses as well as helping to develop the large economy.

To further put question marks to what the government promised during the electioneering period, the level of unemployment in the country is rising on a daily basis, and is yet to abate.

Recent regulatory position

The Central Bank of Nigeria during the President Goodluck Jonathan said that 80 per cent of Nigerian youths are still unemployed, despite repeated figures released by the National Bureau of Statistics stating that the Nigerian economy had been creating millions of jobs in the past years.

The National Bureau of Statistics [NBS] said recently that the Nigerian economy created a total of 469,070 jobs in the first quarter of 2015.

In the job creation and employment generation survey, first quarter 2015, the NBS said this figure represented an increase of 26.95 percent (99,585) over the number of jobs created in the preceding quarter.

Statistician General of the Federation and Chief Executive Officer National Bureau of Statistics Dr Yemi Kale, said the formal sector, which is predominantly “white collar jobs”, 130,941 new jobs were generated, representing 27.92 percent of total jobs generated in the first quarter of 2015.

This is a decline of 5.13 percent (7,085) when compared to the fourth quarter of 2014, according to the statistical agency.

It explained that however, this decline in the formal sector jobs often sought after by graduates created in the first quarter 2015 represents the third straight quarter of consistent reduction in formal sector jobs.

It stated that a total of 5,726 new jobs were generated in the public sector within this period.

“On the other hand, there was also a 30.5 percent (1,339) increase in the number of jobs created in the public sector of the economy, making it 5,726 new jobs generated in the public sector in the 1st quarter of 2015, the jobs generated in the public sector represents 1.2 percent of the total jobs generated during the reference period.

“Under informal jobs, which typically consists of low skilled and often low paying jobs generated by individuals or micro businesses employing less than 10 or those businesses operating with little or no structures e.g. those in subsistent Agriculture and Wholesale and Retail Trade.

Government past moves

While the government decision in taking a bode step to free its citizenry from poverty can be said to be germane as it will to a greater extent checkmate every incidence of crime in the society, the policy statement of the government can be said to be a bogus claims especially as it relate to having poverty statistic been pegged at a level, when to a plausible extent the policy is not rested on anything.

The two main stay of the economy, the Manufacturing and Small and Medium Scale Enterprises by the last statistic in December, the two sectors was described by economic watchers as still the most troubled in the economy.

Notwithstanding the 6 per cent growth recorded in Gross Domestic Product (GDP) in 2013, coupled with the economy said to have enjoyed some growth, the Small and Medium Scale Entrepreneurs (SMEs) and the manufacturing sector remains the most troubled sector as evidenced by the negative investment sentiments expressed by the operators throughout the year.

According to the Lagos Chamber of Commerce and Industry (LCCI) Economic and Business review for 2013, the most disturbing factors affecting business are infrastructure limitations, unabated influx of imported and substandard products, poor access to credit, high cost of doing business, and the inhibitive activities of government regulatory/monitoring agencies in the country.

The Chamber explained that the Federal Government budget approval delays and poor implementation of capital projects remains another major concern for the private sector. “In an economy where government accounts for a major component of expenditure, early passage and proper implementation of budgets are very crucial. Going into 2014, we hope to see a more responsive budget approval processes and improved implementation of the budget at both the states and the FG levels.

“The chamber is concerned about the impunity with which creditors of public and private sector institutions are treated.  This has become prevalent in the economy and needs to be urgently addressed.   Some SMEs have been driven to bankruptcy because of this condition as there is little regard for contractual obligations.   The long, tortuous and costly judicial process has made redress from the courts a difficult option.  We therefore appeal to public and private sector organizations to honour their obligations to their creditors in good time and respect the sanctity of contractual relationships.

Infrastructural statistic

The Nigeria economy, not been an exception had no doubt tried within its limited expertise to ensure that the country and its people continue to enjoy the best of life. However, the gap in the basic necessities of life which is said to be the primary measurement in the poverty life level of the people is still far from being addressed.

The last statistic in the area of infrastructure showed that, there is still 16 million housing deficit in the country. The road networks in the country are still a challenge even as electricity which ought to have librated small businesses which are the major drivers of other economies is still a source of concern.

The outcry that trailed the recent postulation from the office of the Nigeria Bureau of Statistic (NBS), that by 2015, only 27.2 per cent Nigerians will be rightly adjudge as being poor can be said to have further bellied or call to questions whether those figures are real.

Until now the NBS are yet to tell Nigerians on what parameters they based their calculation on.

In a country where 70 per cent of its people live in the rural areas, with virtually no commercial life, and wherein farming to take care of oneself and family is the way of life, while other 30 per cent that live in the city centres cannot boost of 100 per cent of being fully engaged productively further call to question the NBS’s figures.

NBS earlier position

Late in 2010 the NBS said that 112.519 million Nigerians live in relative poverty conditions and since then no new figure is known to have been given

This is staggering when compared with the country’s estimated 170 million population.

Relative poverty is the comparison of the living standards of people living in a given society within a specified period of time.

It is the most acceptable poverty measurement which has been adopted by the NBS for many years.

Apart from the relative poverty index, other poverty measurement standards are absolute measure, which puts the country’s poverty rate at 99.284 million or 60.9 per cent; the dollar per day measure, which puts the poverty rate at 61.2 per cent; and the subjective poverty measure, which puts the poverty level at 93.9 per cent.

Instructively, all the four methods used in measuring poverty by the NBS pointed to the fact that there was disconnect between the country’s Gross Domestic Product growth rate of 7.75 per cent and the high poverty rate.

This relative poverty figure of 112.5 million, which was contained in the agency poverty profile report, represents 69 per cent of the country’s total population.

The 26-page report, which provides details of poverty and income distribution across the country, put the 2004 poverty measurement rate at 54.4 per cent.

The Statistician-General of the NBS, Dr. Yemi Kale, while unveiling the report had noted that the figure might increase to 71.5 per cent when the 2011 figure is computed.

“The NBS estimates that this trend may have increased further in 2011 if the potential impacts of several anti-poverty and employment generation intervention programmes are not taken into account,” he said.

In arriving at the 2010 figure, the NBS boss said data from 20 million households having an average of between four to six family members were collected.

According to the report, the North-West and North-East recorded the highest poverty rates in the country in 2010with 77.7 per cent and 76.3 per cent respectively.

World Bank position on Nigeria

The World Bank recently expressed serious concern over the high poverty level in the country and called for intensification of reform initiatives in critical sectors of the economy as a strategic step towards alleviating its burden on the ordinary Nigerians.

This even as it noted that even when Nigeria’s GDP growth rate promised great sustainable development potential, its current trend remains largely inadequate to tackle the high level of poverty in the country.

The Bank believes that whereas governments’ policy reform agenda remain critical to attainment of the socio-economic policy goals of the current administration, there is a growing need to do more in areas of power and infrastructure development in order to improve lift millions out of the poverty trap.

Proposing its economic palliatives as imperative to leverage the modest achievements of the country’s reforms, the Bank’s Vice President for African region, Makhtar Diop, said the Bank’s initiatives aimed at supporting the Federal Government in the power reform drive were aimed at socio-economic empowerment of all productive agents and improving the nation’s GDP growth

He explained: “My personal assessment shows that the country is in the right direction. There has been sustaining growth of eight per cent for the recent years. Is it sufficient? No. Is it sufficient to reduce poverty at the rate that Nigerian authorities want it, hence the people of Nigeria want it? No. Can it be accelerated? Yes, there are some possibilities. How can we accelerate it? “It can be accelerated by tackling some of the obstacles.

“The most critical of these obstacles is power. Power not only for the big companies and manufacturers, when I am talking about power, I am talking as an African who knows what it is when there is power shortage”, he added.

Diop said, “Our work recently has shown that there is slight reduction in the level of poverty in Nigeria moving from 48 to 46 per cent. The trend is good. It needs to be accelerated obviously.

 Experts’ observation

“There are more negatives than positives. If we look at the outcomes we have had in the past four months, they are quite drastic on the negative side. Gross Domestic Product (GDP) is declining; underemployment and unemployment are increasing, and the general level of economic activities is weak. The capital market is also declining. Coming from the position we were after the elections, when there were local and international goodwill and we had the opportunity to leverage on all that, unfortunately, foreign investment has stayed flat from the level we had in the first quarter,” said Chief Executive Officer (CEO) of RTC Advisory Services Limited, Opeyemi Agbaje.

According to the public policy analyst, the above situation can only be blamed on the absence of an economic direction. “Goodwill, on its own, is insufficient; it needs to leverage on the right policies,” he said, adding: “We have no policies, or at least, not a coherent policy. Nobody has defined a coherent economic agenda. We are just doing things on a day-to-day basis.”

The Treasury Single Account (TSA), particularly, has come under criticism. While experts acknowledged its constitutional basis, they argued that unless it is properly executed, it could stifle key economic nerves.

“The major advantage of the TSA is the fact that it will ensure and improve revenue inflow into the Federation Account, and this will improve the fiscal stability of all the levels of government – federal, state and local. However, it is necessary to caution against the resultant bureaucratic bottleneck that could be created in the disbursement of funds to the Ministries, Departments and Agencies (MDAs) for their operations. If care is not taken, the operations of some of the agencies may be crippled, if there is no adequate framework for speedy release of funds to the agencies for their daily operations. This is an area the authorities need to watch properly,” said Muda Yusuf, Director General of the Lagos Chamber of Commerce (LCCI).

Asked what he thought could happen if the Central Bank of Nigeria insists on its policies, in view of the negative effect some of these have on the real sector, Yusuf said: “Some industries will have to close shop, as their critical inputs diminish. There will be loss of revenue to government through customs duties, as there will be high decline in importation, especially through official channels. Contraction of economic activities will lead to loss of jobs. Nigeria’s country risk, as well as its sovereign risk, will be negatively affected because of the liquidity crisis in the forex market.

“The inflow of forex through autonomous sources will remain low, round tripping will continue to flourish in the forex market, given the high premium between the official and parallel market, as well as the transfer market. Transparency problem in the allocation of forex by the CBN will become more pronounced and vulnerable to corruption. Banks will witness increase in non-performing loans, as some of their customers face challenges with the current polices. Profit margins of businesses will drop because of the increased costs imposed by this policy.”

Manufacturers, a vital component of any thriving economy, have equally faulted policies of the CBN which they say are not in agreement with the fiscal policies of the Federal Government. “The CBN governor, I’m sure, has reasons for what he is doing. I know he carries the interest of the country at heart, but maybe the way he is going about it is faulty,” said President of the Manufacturers Association of Nigeria (MAN), Frank Udemba Jacobs.