Filed in Business by on April 18, 2010

Threats to nation’s job creation potential worry experts
By CHINYERE FRED-ADEGBULUGBE, Published: Monday, 19 Apr 2010

Minister for Labour and Productivity, Mr. Chukwuemeka Wogu.
Relative poor performance of the non-oil sector, especially manufacturing is the key threat to the job creation potential of the nation economy, CHINYERE FRED-ADEGBULUGBE reports.

That the Nigerian economy is at the crossroads can no longer be argued. The signs are all out for everyone to see. At present, Africa‘s second largest economy is at best described as a land of vast mineral resources, labour and skills.

There have not been successful attempts at transforming these economic positives into wealth for its citizens. The economy has simply been unable to attain its full potential. Even as other economies are talking about recovery after the meltdown, Nigeria, for obvious reasons, cannot be very far from that.

According to the Managing Director of DN Meyer Plc, Mr. Bola Olayinka, ”Whatever yardstick you apply to measure our economic performance will fall flat, except arguably the stock market which provided a beacon of hope at the close of the first quarter. But experience has taught us not to count our stock exchange chickens before they are hatched.”

Everyone agrees that the economy needs to be kick-started.

However, experts and stakeholders insist that one way of ensuring that this happens is to focus on employment creation. Reason, they say, is that the economy will never witness robust growth unless the activities that will lead to employment generation are put in proper perspective.

Recently, the Managing Director of the World Bank, Dr Ngozi Okonjo-Iweala, cautioned that the unemployment rate in Nigeria was on the increase and urged the Federal Government to urgently tackle the problem. She cited a World Bank report which stated that at least 50 per cent of graduates in Nigeria were unemployed.

According to the experts who spoke to our correspondent on this issue, the fact unemployment rate has reached an all-time high is an indication that it is not the best of times for enterprises in Nigeria. And if businesses are stifled, how would they create jobs?

An agricultural economist and the Deputy Director of Africa Leadership Forum, Dr. Olumide Ajayi, says it is high time the Nigerian government created the enabling environment that will ensure that businesses provide jobs. He states, ”Businesses do not exist in isolation. They depend on other actors and stakeholders within the economy to function. The government must play its role as enabler and regulator through the creation of a sound policy environment. The economy functions and responds to the kind of policy and operational environment created by the government. Now if that environment is harsh and not encouraging, activities of the business sector will slow down and the first casualty is jobs. There will be no room for additional ones and the current ones will be downsized to meet the reality of the policy environment.”

Olayinka, who is the President, Paint Manufacturers Association of Nigeria, says that the present situation in the state of economy concerning unemployment is akin to the chicken and egg option. According to him, when the government provides for businesses the enabling environment, redresses infrastructural decay and supports growth with tested policies driven by dedicated and competent people, then job creation will automatically follow.

He believes that the government has not paid enough attention to the manufacturing sector, resulting in the inability of the sector to create jobs. And since the citizens have no jobs, they also lack the purchasing power and therefore the industries cannot expand.

He states, ”Nigeria compared better with South Africa from the population perspective – 150 million against 40 million. But given our paltry per capital, which is about 20 per cent of what obtains in South Africa, we are not surprised about our low purchasing power. The manufacturing sector is seriously hit contributing less than four per cent to the GDP. ”

Speaking in the same vein, the President, Institute of Directors, Mr. Chike Nwanze, who says businesses can only create jobs only when they are expanded, or if production increased, rues the fact the current level of unemployment does not provide for industrial expansion since high consumption leads to expansion of production.

”The more disposable incomes available in the economy, the more the holders of such income consume,” he points out.

Ajayi, who is the coordinator of the Central Bank of Nigeria’s Entrepreneurial Development Centre, adds, ”The popular saying ”One good turn deserves another” is also applicable to economic activities. Good policy environment stimulates economic growth and creates jobs and thus increases the purchasing power of the citizens. When the unemployment rate increases meaning there are no jobs then the purchasing power reduces, manufacturing industry cuts back on production and the economy shrinks.”

For the Managing Director of Vitafoam Nigeria Plc, Dr. Dele Makanjuola, it has become a vicious circle because industries manufacture and expect to have the market but those that are supposed to buy the goods are not economically empowered to do so.

”Whenever I am coming to work in the morning and I see a new sidewalk being made, what goes through my mind would be “Thank God, someone from somewhere will buy my mattress.‘ When there is employment the manufacturing industry prospers. If there is growth then companies will plan for expansion and once there is expansion, there will be room for the employer to employ more people,” he explains.

Makanjuola takes the ball back to the Federal Government‘s court, saying that the manufacturing has now found itself at the mercy of the political leaders and unfavourable policies. He notes, ”The economy is not doing well and so the jobs are not being created because you can only create jobs if there is a quantum in the economy. If there is no growth there can be no job creation as of now, there is no positive gain in the employment profile of the country. I am sure that jobs are being created here and there but companies are also being shut down so there is no net gain in the job market now.”

Ajayi also blames the banking system, which he says, does not support young entrepreneurs. The Nigerian banking system is not structured to assist the young entrepreneurs.

According to him, ”The microfinance policy and its implementation has so far failed and needs an urgent revisit and repositioning. The microfinance banks are only interested in high interest rates and they operate like money deposit (commercial) banks. In other words entrepreneurs do not have access to developmental finance, which is required for enterprise growth and development.”

One way out of the present gridlock, the experts say is to encourage entrepreneurship at all levels.

”There is a link between small enterprises and the large ones. In a well structured economy, the small ones are suppose to feed the big ones through out-sourcing and effective link with the supply chain,” Ajayi adds.


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