Labor is the main asset for the world’s poorest people. This means that the labor market is the primary vehicle through which the proceeds of economic growth are spread to households and individuals. Therefore, understanding the labor market is crucial to achieving Nigeria’s aspiration to lift 100 million people out of poverty by 2030 – an ambitious objective since even before the COVID-19 crisis around 4 in 10 Nigerians were living below the national poverty line.
Providing enough productive jobs for Nigeria’s young (the terms “youth” and “young people” refer to those aged 15-29 years) and growing population presents a particular challenge; even without the pandemic, more than 30 million young people were already projected to need jobs in 2021.
A new report, “Good Jobs for a New Generation: Delivering Quality Jobs for Young Nigerians After COVID-19,” uses two linked panel datasets from before and during the COVID-19 crisis – the General Household Survey (GHS) and the Nigeria COVID-19 National Longitudinal Phone Survey (NLPS) – to examine the make-up of Nigeria’s labor market and assess its response to two recent crises. These are the 2016 recession sparked by falling oil prices and the health and economic “double shock” caused by COVID-19.
The study shows the stubborn challenges Nigeria faces in transforming its labor market – but also how taking advantage of the lessons learned from these crises can shape bold policy choices now, driving key reforms that would strengthen the country’s future productivity and growth prospects.
Informal, precarious jobs dominate Nigeria’s labor market
Unemployment – the share of the labor force seeking work but not finding it – is not strongly linked to poverty in Nigeria. On average, Nigerian states with higher official unemployment rates tend to have lower poverty rates (Figure 1). Unemployment is also concentrated among more highly-educated people, who can afford to be selective about the jobs they take. Since most poverty in Nigeria is “in-work” poverty, the more crucial question is what Nigerians do, not whether they work at all.
Figure 1. State-level unemployment is negatively correlated with state-level poverty
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Panel A: State-level unemployment rate (percent)
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Panel B: Correlation between state-level poverty and unemployment
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| Source: 2018 Q3 Nigerian labor force survey, 2018/19 Nigerian Living Standards Survey, and World Bank estimates. Notes: In the labor force survey, the unemployed are those who were not working (any number of hours) but who were “looking for work” at the time of the interview. The unemployment rate is the share of those in the labor force (those working or unemployed) who are unemployed. This follows the International Labor Organization definition. Official poverty state-level poverty rates are calculated using Nigeria’s national poverty line with data from the 2018/19 Nigerian Living Standards Survey. Borno is excluded from state-level measures of poverty. |
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Informality has long been widespread in Nigeria’s labor market. For at least a decade, around 85% of the country’s workers – more than half of its full working-age (“Working-age” refers to those aged 15-64 years) population – have been engaged in household farms or non-farm household enterprises (Figure 2). Just a small sliver of working-age individuals – about 1 in 10 – were wage-employed. This reflects the fact that structural transformation has not progressed significantly in Nigeria, with the economy continuing to rely on exports of crude oil.
Figure 2. Most Nigerian workers are engaged in farm and non-farm enterprises
Notes: Since information on hours worked is not available in earlier GHS waves, a hierarchical definition of the primary job is used, which prioritizes wage work, then household agriculture, then non-farm household enterprises, in that order. Estimates averaged across post-planting and post-harvest survey visits. “Other” includes trainees and those who cannot be classified by the hierarchical definition. Sample restricted to individuals with non-missing observations of working status, age, sex, and education across all waves of the GHS.
Jobs in household enterprises are unlikely to offer secure pathways out of poverty. Most farms are not commercialized, only around a quarter sell agricultural products, and many lack access to key inputs, such as seeds and fertilizers. This limits their productivity. Similarly, non-farm enterprises are extremely small scale, with almost 9 in 10 not employing anyone outside the household. Both farm and non-farm enterprise jobs are also characterized by relatively few hours worked; since underemployment is more prevalent for poorer Nigerians, this further illustrates the precarious nature of these types of jobs.
Young people cut their education short to cope with recent crises
Given the lack of resilience in Nigeria’s labor market, people – especially young people – entered work following both the 2016 oil recession and the COVID crisis. Between 2015/16 and 2018/19, the share of working-age Nigerians who were working increased from 60.8% to 67.3%, while the share of young Nigerians who were working jumped even more, from 38.6% to 50.7%. Similarly, while employment plunged at the start of the pandemic (specifically, the share of main respondents from NLPS households who were working fell by half between mid-March 2020 and April/May 2020. Main respondents do not represent the full working-age population – on whom information was only collected in the September 2020 and February 2021 rounds of the NLPS – but this group provides a useful pulse for what happened in the labor market), by February 2021 the share of working-age Nigerians who were working was significantly higher than would be expected, given previous seasonal patterns.
Education also suffered when the crises hit. Following the 2016 oil recession, the share of 20-25-year-olds attaining secondary education dropped by around 8 percentage points, while school-to-work transitions accelerated. Similarly, school closures during 2020 reduced children’s – especially older children’s – attendance rates even after reopening, implying that the pandemic could have long-term consequences for human capital. Since Nigeria’s human capital outcomes were well below the average for Sub-Saharan Africa even before the COVID-19 crisis, the country can ill afford these setbacks to learning.
Compounding precarity
The jobs to which people turned in the two crises may have compounded precarity in Nigeria’s labor market. Following the 2016 oil recession, the bump in the share of people working mainly came from household agriculture: the share of working-age individuals with agriculture jobs increased from 27.9% to 35.9% between 2015/16 and 2018/19 (Figure 2). In contrast, the COVID-19 crisis was marked by workers turning to small-scale non-farm enterprise activities in retail and trade, the revenues of which remained highly uncertain in 2021 (Figure 3).
Figure 3. Workers turned to small-scale non-farm enterprise activities to cope with the COVID-19 crisis
Notes: Estimates focus on the primary job, defined as the job in which the individual worked the most hours. The sample is a panel of individuals observed across the relevant 2018/19 GHS and NLPS rounds.
The crises’ labor-market effects were also unequal. In the COVID-19 crisis, the largest increases in working rates were for women and the poor. Far from the new jobs reflecting an increase in productivity and labor demand, they instead represent an “added worker effect,” with households attempting to cope with income losses brought about by the crisis.
Taking action for good jobs
Providing good jobs for all Nigerians – and especially the country’s youth – hinges on three broad policy areas. First, it will be essential to invest in human capital, recouping learning lost during the COVID-19 crisis. This not only provides workers with the skills needed to prosper in the labor market and create jobs themselves but could also aid the country’s fertility transition so that the proceeds of growth are shared among fewer people, enabling a faster rise in living standards.
Second, macroeconomic reforms – for example to exchange-rate, trade, and fiscal policies – could help the economy diversify away from oil and ignite the structural transformation needed to create good wage jobs.
Finally, since waiting for wage jobs for everyone could take decades, it will be essential to help small enterprises thrive and grow. For farms, research into improved crop and livestock varieties as well as public investment to support storage, transport, and market access could help boost agricultural productivity. For non-farm enterprises, policies that loosen credit constraints and build the infrastructure and markets on which small businesses rely could bolster productivity, profits, and job creation.
Policy action in these three areas can help ensure good jobs are available, enabling Nigeria to seize the demographic dividend of its young population and lay strong foundations for future inclusive growth.
