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Nigeria’s Economic Insolvency: Anxiety As Unemployment Rate Hits 40.6%

Following Nigeria’s economic bankruptcy, the unemployment rate in the country has climbed to 40.6 percent in 2023. In a report tagged, ‘Global Economic Outlook’, KPMG said the figure is based on her analyses.

Recall that in the fourth quarter (Q4) of 2020, the National Bureau of Statistics (NBS) said the country‘s unemployment rate stood at 33.3 per cent.

Meanwhile, KPMG said unemployment rate as at April 2023 is likely to hit 40.6% due to absence of foreign investors in Nigeria, which it believed was caused by economic meltdown and insecurity problems facing the nation.

It said, “Unemployment is expected to continue to be a major challenge in 2023 due to the limited investment by the private sector, low industrialisation 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.

“Although lagged, the National Bureau of Statistics recorded an increase in the national unemployment rate from 23.1 per cent in 2018 to 33.3 per cent in 2020. We estimate that this rate has increased to 37.7 per cent in 2022 and will rise further to 40.6% in 2023.”

In the same development, KPMG predicted that Nigeria’s gross domestic product (GDP) to grow at a slow pace of three percent in 2023.

The firm said the spillover from an expected slowdown in the global economy and its trade and financial flows implications are likely to drag on the country’s GDP.

According to KPMG, non-oil sectors such as manufacturing, trade, accommodation, food services and transportation has affected by the naira redesign policy introduced by the Central Bank of Nigeria (CBN), further slowing down overall GDP growth in 2023.

“Nevertheless, we expect telecommunications, trade services, as well as an expected recovery in the oil sector, on account of measures being taken to tackle security issues, to drive our forecast of 3% growth in 2023.

“As a result, when adjusting the value of the minimum wage rate for inflation over this period, our estimate suggests that the purchasing power of the average household has been eroded by 40.6 per cent, leaving the consumers worse-off in real terms compared to pre-2019.

“Furthermore, the increase connotes a weaker level of savings – with potential negative consequences for current and future economic health of households.”

Further, a senior analyst at Afrinvest, Damilare Asimiyu, added that the inflation rate in Nigeria rate is not surprising owing to the fact that it started in August 2019 (from an average of 11.4 percent to 18.8 percent in 2021) after land borders were shut to food importation amid the structural plague on domestic capacity.

“The average inflation rate reading has even worsened to 18.8 percent in 2022, no thanks to the additional pressure from the global supply chain stoked by the war in Eastern Europe,” he said.

According to Leadership, Last year, the World Bank said that Nigeria’s accelerated inflation growth has eroded the N30, 000 minimum wage by 35.5 percent and widened the poverty net with an estimated five million people in 2022.

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In its latest Nigeria Development Update report, the international organization, said the higher inflation in 2022 is estimated to have pushed an additional five million Nigerians into poverty between January and September 2022, mainly through higher prices of local staples – rice, bread, yam, and wheat, especially in non-rural areas.

“Between 2020 and 2022, for instance, the inflation shock has pushed an estimated 15 million Nigerians into poverty.”

The report highlighted that the minimum wage, which was $82 in 2019, had dropped to $26.

“Consumer price inflation had heightened, making it one of the highest in the world.”

Apart from the World Bank report, a similar report by Picodi.com, an International e-commerce platform revealed that the basic food items required for survival by an average Nigerian family which cost N48, 130 in January 2023 was 60.4 percent higher than the country’s minimum wage.

An analysis of the report shows that the 60.4 percent is the highest in five years when compared with the same period in 2022, which was 36.6 percent; 17.7 percent in 2021, 8.1 percent in 2020, and 5.1 percent in the same period 2019. Also, the amount in January surged by 52.6 percent from N31, 536 in the same period of 2019.

“This means that the wages of those paid the least increased slower than the food prices and the minimum wage is not enough to cover even such a basic basket of products,” it said.

The Afrinvest report recommends that a modest upward review in the national minimum wage rate, combined with a concerted effort targeted at boosting output level in the near term (to curb demand-pull inflation) and taming supply-side shocks, would be crucial to preventing more households from falling below the poverty line.

“By adopting these measures, Nigeria can mitigate the impact of the pressured macroeconomic fundamentals and improve the living standards of its citizens.”

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