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Nigeria sits of demographic goldmine

Nigeria, Migration patterns, World Bank

Economy

Nigeria sits of demographic goldmine

Nigeria is sitting on a demographic goldmine which could transform the economy. About 60% of Nigeria’s 200 million people are under the age of 25, and that number is expected to increase significantly by 2050. Writes Stephen Onyeiwu

Instead of being an asset, the country’s burgeoning youth population has become an albatross. It poses risks for the economy and social cohesion.

Among Nigeria’s economic challenges, youth unemployment remains the most formidable. The World Bank estimates Nigeria’s youth unemployment at 17.7% in 2019 compared with 10.8% for Africa. Nigeria’s youth unemployment rate is double the national rate of unemployment.

Official statistics on unemployment in Nigeria often underestimate the severity of the problem. For example, they don’t account for the fact that over 80% of Nigerians with primary education or more who are regarded as employed are grossly under-employed in low-productivity informal-sector work.

Activities in this sector typically consist of street hawking, petty trading, tailoring, shoe mending, domestic work, roadside food vending, transportation and subsistence agriculture.

The federal and state governments have introduced various measures to address youth unemployment. These include social investment programs that encourage youth entrepreneurship and support for micro, small and medium-sized enterprises. Others are skills development programs, direct labor for public works projects, loans for agriculture and various initiatives to spur entrepreneurship. Despite all these efforts 65 million young Nigerians, or one in three, are expected to be unemployed in the next four years.

In a recent report the World Bank proposed strategies for addressing youth unemployment in Nigeria.

One is the creation of safe and legal labour migration pathways for young Nigerians to seek job opportunities in other countries. This would be in contrast with the current illegal and perilous migration patterns.

The proposals are laudable, as there are acute shortages of skilled workers in some developed countries. The US, Canada and the UK have introduced special visas for attracting skilled workers from other countries. Workers from Asia, especially India, have benefited from these opportunities.

The World Bank proposes that countries of destination looking to fill labour shortages provide high-quality and industry-relevant training to potential migrants and nonimmigrants in Nigeria. This, it argues, would increase the global stock of workers and contribute to a brain gain.

The onus would need to be on the companies. This is because many young Nigerians lack 21st century skills desired by global corporations.

This proposal is theoretically sound. But it poses a number of questions.

What’s missing

Innovation and disruptive technologies have become salient components of industrialized economies. Robotics, 3-D printing, precision machining, data analytics, bioinformatics, digital imaging, design and animation all feature prominently. Not many young Nigerian possess these frontier skills.

This lack of skills is not only a Nigerian problem; it is pervasive across Africa. This explains it why much of labor migration – about 80% – in Africa is intra-regional, rather than international. It consists mainly of unskilled workers.

Global corporations are looking for workers with “productive capacities” that can be used in manufacturing, science and technology-intensive sectors, as well as information technologies.

The World Bank proposal is based on the old paradigm of competition in which labor abundance is a major driver of competitive advantage. But this is no longer the case, as technology, knowledge, innovation and skills have replaced labor as the major pillars of competition. The World Economic Forum suggests that 85 million jobs worldwide will be at risk because the current job holders lack relevant skills.

Thus, attempts at addressing youth unemployment in Nigeria should focus on raising the skills and productive capacities of young Nigerians.

Local opportunities

In addition to exploring opportunities in the global labor market, the World Bank has suggested the creation of domestic job opportunities. This may be accomplished if Nigeria is able to attract employment-intensive global corporations.

But Nigeria is not very attractive to global value chains and foreign investors. Foreign direct investment in the country has been declining inexorably, from 6% of GDP in the mid-1990s to about 0.5% in 2019.

Why do global IT and pharmaceutical corporations prefer to locate in India and not in Nigeria? Why does Apple manufacture iPhones and iPads in Taiwan? Why do global textile corporations prefer Vietnam, China and the Philippines? Why has Malaysia, and not Nigeria, become a major hub for solar equipment manufacturing?

The answer is simple: their young people possess a critical mass of the needed scientific and technical skills.

The way out

Creating safe and legal pathways for the migration of young Nigerians will only be effective if the following measures are taken.

First, the ongoing de-industrialization of the Nigerian economy must be reversed. Over the past four decades there has been a steady decline in manufacturing value added in Nigeria – from over 20% of GDP in the early 1980s to less than 10% in 2019.

As a result, many young Nigerians have not had the opportunity to acquire industrial, technological and innovative capacities.

Another effect of de-industrialization is that it has foreclosed opportunities for students in Nigeria’s tertiary institutions to apply their classroom learning in industrial contexts. In a survey of companies in Nigeria, 81% said they had difficulty finding workers with the relevant skills. It is also a reason why global corporations do not find Nigeria an attractive location.

The problem with proposed solution

The World Bank proposes a model in which the private sector and the government in destination countries would provide high-quality and industry-relevant training to potential migrants and nonimmigrants within Nigeria.

This proposal is theoretically sound. But it poses a number of questions.

First, how would this training be financed? There may be political resistance by taxpayers in destination countries to finance training programs that benefit the private sector and foreign countries.

Second, private enterprises are often reluctant to invest in training new workers. Investment in training is costly. In addition, it would be difficult to prevent trained workers from taking newly acquired skills to other enterprises or destination countries that did not incur the training costs.

Third, industrial and technical training is a long-term process, but firms are more interested in short-term returns on investment.

Finally, given the bureaucracy and inefficiency of Nigeria’s public sector, it may be challenging to implement a training partnership between firms in destination countries and the Nigerian government.

The World Bank report also notes that Nigerians with relevant skills have found their way to the US where they thrive in various fields. This suggests that the problem of youth unemployment is more about increasing the number of young Nigerians with 21st century skills, and not just about creating more legal migration routes.

Nigeria’s “informal-sector trap” needs to be addressed before promoting a pathway to jobs abroad. Easy entry into the informal sector disincentivizes young people from acquiring high-order skills to enable them to obtain high-paying formal-sector jobs.

Young people are attracted to the informal sector because there are no skills requirements. This can be a blessing and a curse. It is a blessing in that it easily absorbs the teeming population of Nigeria’s unemployed and underemployed young people. But it’s a curse because it provides only a temporary succor, and young people are unwittingly discouraged from acquiring skills desired by global corporations.

Nigeria’s outdated tertiary educational system should be revamped. Tertiary institutions in Nigeria produce thousands of scientists, engineers and technologists every year, but many end up unemployed. This is because their training and education are not relevant in the contemporary labor market.

Without addressing the problems of skills mismatch and the lack of digital skills, young Nigerians will continue to miss out on opportunities in the global labor market.

Stephen Onyeiwu is Andrew Wells Robertson Professor of Economics, Allegheny College

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