In the usual Nigerian politics manner of making idealistic promises during election campaigns and going back on it after the win, president Buhari or the ruling party APC (depending on personal understanding of who said what and what it meant at the time), a promise was made that all unemployed youths will be paid N5000 monthly. In April, the President said in an interview, that the promise to pay unemployment benefits was his party APC’s idea and not necessarily an idea he agreed with.
The president said “the largesse N5,000 for the unemployed, I have got a slightly different priority. I would rather do the infrastructure, the schools and correct them and empower agriculture and mining so that every able bodied person can go and work instead of giving N5,000 monthly to those who don’t work”.
Looking at Nigeria’s current economic state, the monetary policies are feeding more job loss, states are being bailed out by the federal government to enable civil servants salary payment. Clearly, the country has more pressing priorities. However, not to throw away the baby with the bathwater, unemployment benefits can be a good has the capacity to improve livelihood. But the question is even if Nigeria had the financial capability, is it still a good idea? Does Nigeria have the capacity to target the right beneficiaries and a system that maximises benefit schemes to achieve intended goals (improving livelihood)?. What are impact indicators?
Nigeria’s unemployment rate has been on a steady increase since 2009. Then, the rate of unemployment was 19.9 percent, but it hiked to 21.1 percent in 2011, and 23.9 percent in 2012. However, from 2012 to 2014, there was a significant decline in these figures; unemployment rate plunged to 9.7 percent from 23.9 percent. Nigeria with the average age of 35 years, has a large youth population, this means that the youths are most affected by the issue of unemployment. It is therefore, no surprise that the current rate of unemployed youth stands at over 50 percent, a situation that is clearly detrimental to the country’s economic growth and overall development.
During a press conference late last year, President Buhari stated that the fulfilment of his campaign promise of a N5, 000 monthly stipend to every unemployed Nigerian citizen was in the works and that the implementation of the unemployment benefits scheme would begin early this year. He also said that the country had in the past, wasted its resources, and it was time to focus on investing in the most important resource of any nation – human resources.
Currently, the number of unemployed people in Nigeria is stated to be 25 million. But with the recent increase in job loss, coupled with the government’s inability to create jobs, this statistic does not seem an accurate reflection of reality. The unemployment benefit scheme will cost the Nigerian government N125 billion monthly; that is N1.5.trillion annually. Considering the current economic uncertainties, and the static nature of the economic policies by the present administration, is Buhari’s N5, 000 monthly stipend feasible? How will it be funded? And is there an interim exit plan for when the project term expires?
The cost and other restraining factors of this project do not negate the positive impact it could have in enhancing the livelihood of the millions of Nigerians living in absolute poverty. But from all indications, it does seem like the Nigerian government is ill-equipped to handle this sort of project. Moreover, the complications surrounding the 2016 budget begs the question of priority and provision for this project right now. The nature and framework of such benefits are such that it is practicable and most efficient in functional societies, as it can only be successful if it is built around a long-term goal.
Countries such as Sweden, Denmark and Norway, pay unemployment benefit to people who have worked for over 52 weeks within the last three years. This payment is made for six months while the beneficiaries are actively seeking employment. In Switzerland, beneficiaries get paid full benefits for 8 months, as long as they can prove that they are registered with job centres and are actively seeking employment. In these countries, the framework for these schemes is market driven, as they involve voluntary enrolment and are funded by taxes and government subsidies.
The intricacies of unemployment benefits are such that their planning, implementation, and success are highly data driven and funded by labour, insurance taxation policies, or both. For example, in Denmark, all workers contribute $700 annually to cover social programs for which unemployment funds are part of, but not all workers are eligible to claim the benefit should they be out of employment.
In South Africa, the unemployment benefit is paid through the Unemployment Insurance Funds to people who lose their jobs and are unable to get a replacement. These persons are allowed to apply within 6 months of becoming unemployed and are able to receive payment for up to 34 weeks. They must also undergo various stringent methods of self-identification. This process of identification still poses a challenge in advanced economies, how much more in a developing country like Nigeria.
In December 2015, the Nigerian senate voted against this scheme on grounds that it was open-ended, and that the government had no concrete means of screening and identifying potential beneficiaries of the scheme. The senate argued that such a scheme was susceptible to abuse due to the country’s constant struggle with data and biometrics. Also, this sort of project is grassroots-driven; the government’s inefficiency at this level could also pose a major challenge to its success.
Here are five reasons Nigeria has no business embarking on such projects.
In addition to the country’s present state of economic uncertainties, here are reasons why the unemployment benefit scheme is not feasible for now.
- Sustainability: It is common practice for the Nigerian government to copy foreign initiatives that are at work in the US, the UK, or China, without proper thought and analysis based on the country’s realities. Because Nigeria has no tangible long-term goals; a sectionalized 20 years development plan, there is usually nothing to measure these irrational decisions against. While imitating these western countries, some of the basic questions the government should ask is; is this an investment or a liability? How will it be funded? If it’s an investment, what are the expected outcomes, and how will these outcomes be measured? There is also the question of the project duration and its interim exit strategy.
- Increased Debt: The controversies surrounding the bloated nature of the 2016 budget, and the lack of other alternatives, will see the government having to incur more foreign debt to finance the unemployment benefits scheme. For Nigeria’s continued growth, it needs to enhance its capacity to grow; this involves human capital contribution to economic activities. However, it appears that the implementation of this scheme would breed liabilities – dependency on handouts. The last thing the country needs is incurring debt to create liabilities.
- Lack of a National Database: Presently, Nigeria’s total population is uncertain; how many children are born daily? How many out-of-school children are there? How many people are actually unemployed, or underemployed? And what is the difference between underemployment and unemployment? Some statistics quote the unemployment rate at 25 million, while others place it at 30 or 40 million. How does the government plan to cope with this varying statistics? And how will unemployment and underemployment be differentiated?
- Population Politics: The unemployment beneficiary scheme will breed room for corrupt practices such as the creation of ghost citizens; there is a general assumption that many states in Nigeria have ‘ghost citizens’ used for political and budget manipulation. For example, there is an argument that Lagos state is the most populated in the country, while others say it is Kano state. Again, this reinforces the irregularity of the country’s data statistics, which appears to be based on speculation. If the government cannot ascertain the population of states in the country, then the unemployment scheme is doomed to fail.
- Lack of functional smaller governments: Another challenge to the success of this project is that it will leave many behind as the Nigerian system has major efficiency challenge at the local level. Initiatives of this nature often thrive when it is driven and implemented at the grassroots, and by the local government. However, the framework of the Nigerian government and politics is such that the authority of the local government is restrained and therefore has very little capacity to handle a capital-intensive project of this nature.
Analysis of the possible reasons that aided the reduction of unemployment rates between 2012 and 2014, what quickly becomes apparent is that during this period, the Nigerian economy witnessed the birth of new industries, with a quite a number of new and emerging entrepreneurs. This sheds light on the power of free market economies and its capacity to birth alternative or informal sectors in Nigeria.
Howbeit, recently in Lagos state, governor Ambode endorsed the enforcement of criminalising street hawkers. Global experts have projected the informal sector to be the new driver of Africa’s growth. For Lagos state, what this means is; rather than ban street hawking, finding ways to regulate and license makes more sense.
That way, the government is not pushing uneducated and vulnerable Nigerians into the unemployment market when graduates are struggling to find jobs. The logic is that street hawking is not an obstacle to overcome in building a mega-city but an intricate part of keeping poverty level low. Also, until a government can provide for itself people, the basic needs, it has no right to take away their source of livelihood. Doing so obstructs the balance of reducing the absolute poverty rate in Nigeria.
Further, in an economic crisis such as Nigeria without the availability of basic human needs, it makes no economic sense to kill any form of informal income earning activities. A meaningful step for the government to take is to build structures around the alternative sector and render its maximum support through intentional policies. For obvious reasons, the current economic realities require prioritising investments as well as supporting and maintaining all forms of economic activities to boost the economy and not create more liabilities.
The Nigerian government must avoid the trap of breeding dependency and focus on harnessing human capital, which in turn will contribute to economic growth. The government should harness investment opportunities for better policies that support growth by removing all obstacles to all income generating activities and the free market.