KEY POINTS
- Nigeria’s unemployment rate rose to 5.3% in Q1 2024 due to inflation and stagnant wages.
- Over 30,000 jobs were lost as 15 manufacturing companies shut down.
- The government proposed tax reforms, but experts warn of economic uncertainty.
The employment rate in Nigeria has gotten worse, pushing more people into poverty. Diverse economic challenges such as closing businesses, growing petrol prices, stalled wage growth, and soaring inflation has led to this crisis.
This realization came after the publication of the Nigeria Labour Force Survey (NLFS) report for the first quarter of 2024 by the National Bureau of Statistics (NBS). According to the data, the unemployment rate increased from 5.0 percent in Q3 2023 to 5.3 percent in Q1 2024.
The crisis may have an effect on the federal government’s ability to collect personal income tax (PIT) from organised firms because of a rising unemployment rate and faltering businesses.
According to the NBS CIT report, company income tax (CIT) collection decreased by 12.87 percent in Q1 2024 compared to ₦1.13 trillion ($67, 583, 732, 057) in Q4 2023.
Based on the data, CIT collections went down by double digits in the quarter for all industries, including manufacturing, real estate, gas, electricity, steam, and agriculture. With businesses struggling with high inflation and declining consumer purchasing power, a decline in tax payments typically signals a decline in income, profit, or sales.
According to a report by Guardian, discouraged job seekers went from 3.1 percent in Q3 2023 to 3.6% in Q1 2024, indicating that youth unemployment is also rising. Particularly the gig economy and informal sectors may pose challenges for the federal government in meeting its revenue projections. The labor force participation rate fell to 77.3 percent in Q1 2024, down from 79.5 percent in Q3 2023.
Job losses and business closures
The closure of fifteen manufacturing enterprises, including Unilever, Procter & Gamble Nigeria, GlaxoSmithKline, and Kimberly-Clark, resulted in the loss of nearly 30,000 jobs in Nigeria, according to data. Over 6,000 workers were impacted by Kimberly-Clark’s 90 percent workforce layoffs.
According to a report by the Manufacturers Association of Nigeria (MAN), 3,567 jobs were lost in the first half of 2023, as opposed to 1,709 jobs in the same period in 2022. MAN ascribed this increase to a fall in capacity utilisation from 57 percent in 2022 to 56.5 percent in 2023, as well as an unfavourable economic environment and hurriedly imposed measures.
Nigeria’s economy is facing serious difficulties, including a growing number of layoffs and redundancies. Experts caution that as the economy declines, the manufacturing sector—a major employer—is experiencing ongoing job losses.
Additionally, the employment-to-population ratio decreased from 75.6 percent in Q3 2023 to 73.2 percent in Q1 2024, according to the NBS study. In Q1 2024, the combined percentage of time-related underemployment and unemployment dropped to 15.3 percent from 17.3 percent in Q3 2023. In Q1 2024, wage employment increased to 16 percent, up 3.3 percentage points from Q3 2023, while the unemployment rate for those with post-secondary education was 9.0 percent.
While the urban unemployment rate stayed at 6 percent, the young unemployment rate (ages 15 to 24) fell slightly to 8.4 percent in Q1 2024 from 8.6 percent in Q3 2023. Time-related underemployment dropped from 12.3 percent to 10.6 percent, and in Q1 2024, 4.5 percent of people of working age were involved in subsistence farming. NEET rate (Youth not in education, employment, or training) rose by 0.7 percentage points from Q3 2023 to 14.4 percent.
Policy responses and economic concerns
Through the Economic Stabilisation Bills (ESB), the Presidential Fiscal Policy and Tax Reforms Committee, chaired by Taiwo Oyedele, has suggested changes to about fifteen tax and fiscal legislation to foster economic stability. These adjustments include zero-rated VAT for exports, tax breaks for companies that create jobs, and adjustments to the income tax code to increase employment.
Economist Isaac Botti attributed the worsening economic circumstances that have reduced Nigerians’ purchasing power to the country’s growing unemployment rate. He forewarned that the high prices and unstable economy are forcing many enterprises to close or may force them to do so in the near future.
In order to encourage investors and assist companies, Adewale-Smatt Oyerinde, the Director-General of the Nigeria Employers’ Consultative Association (NECA), encouraged the government to expedite stabilisation initiatives. He claimed that initiatives to combat unemployment would be ineffective without enough government support.
Research economist Israel Odubola pointed out that the manufacturing sector’s ability to create jobs has been hindered by its fall. This fall was made worse by high diesel costs and difficulties with foreign exchange.
