Summary:
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This report looks at how industries without smokestacks (IWOSS) might be able to create large numbers of jobs in Nigeria, especially for young people and women.
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In the future, IWOSS sectors are expected to provide the majority of jobs for people just entering the job market.
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The study says that IWOSS sectors could create up to 56% of the 47.3 million new jobs that are expected between 2018 and 2035.
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Most of the problems are caused by the weak environment, which includes poor infrastructure, a lack of skills, a lack of credit options, and a high rate of corruption.
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Lastly, the trade sector is hampered by problems with logistics and transportation infrastructure, long processing times at ports, and limited access to foreign exchange and its volatility.
This report looks at how industries without smokestacks (IWOSS) might be able to create large numbers of jobs in Nigeria, especially for young people and women. With the rise of technology and changes in the global economy, some industries have become more critical to economic growth. These industries are codified as IWOSS. IWOSS are sectors with higher labor productivity relative to traditional agriculture and are also tradable (Bhorat et al. 2020; Heitzig et al. forthcoming) (Bhorat et al. 2020; Heitzig et al. forthcoming). These sectors include agro-processing, financial and business services, information and communications technology (ICT), tourism, formal trade, and transportation. The growing role of IWOSS is vital because there are signs that Nigeria’s biggest problems are now the lack of jobs and the poor performance of its factories.
The study addresses the following questions: i. What’s the job market like in Nigeria? (ii) What is the pattern of sector growth vis-a-vis the performance of IWOSS and non-IWOSS sectors in Nigeria? iii. How big could IWOSS sectors grow, and how many people would they need to hire? The methods employed include evaluating sectors’ performance in growth and wage employment, analyses of present and future levels of employee engagement productivity, and using a value-chain approach to assess employment creation potential and significant constraints. In addition to these methods, a survey will be done with firms from three IWOSS sectors between February and September 2022.
Financial and business services, information and communication technology (ICT), and formal trade were chosen for in-depth evaluations. The sectors were selected because they were productive and had positive employment elasticity. Baccini et al. (2021) noted that industries with higher labor productivity drive economic development in 13 African countries, including Nigeria. Nigeria needs to focus on sectors with increased labour productivity if it wants steady economic growth and a lot of job opportunities.
The results of this study show that Nigeria’s economy has been growing slower than it did in the 2000s. Instead, it has been growing more slowly in the last few years. So, the number of jobs created was less than the number of people entering the job market. This caused the unemployment rate to go up, especially among young people. As of 2019, the service sector, mostly made up of IWOSS sectors, was responsible for 50% of the total output and 53% of the jobs. So, between 2000 and 2020, IWOSS, like construction and ICT, have added an average of 74 percentage points to output, while others, like the mining sector, have dropped by as much as 61 percentage points. Regarding jobs, IWOSS sectors like financial and business services and trade have added more and more jobs from 2010 to 2018. As a result, workers move from low-productivity sectors like traditional agriculture to higher-productivity industries like financial and business services.
The study also shows that IWOSS sectors shrank during the recession caused by COVID-19. However, the recovery rate for IWOSS sectors was faster than for the manufacturing and non-IWOSS sectors. This shows that IWOSS sectors are more resilient, helped the Nigerian economy get back on its feet quickly, and will continue to be important in the years after the pandemic. Even when the pandemic was at its worst, the ICT sector (an IWOSS sector) grew by about 15%. This was because more business activities were moving online. By the first quarter of 2022, other IWOSS sectors had fully recovered.
The analysis also shows that more young people and women work in the IWOSS sectors than in the non-IWOSS sectors. In 2018, for example, women made up 34% of the workforce in IWOSS sectors, but only 32.2% of the workforce in non-IWOSS sectors. Also, the percentage of 25-34-year-olds working in IWOSS sectors (29.8 percent) was higher than in non-IWOSS sectors (26.3 percent). This shows that in Nigeria, IWOSS sectors are more likely to hire young people than non-IWOSS sectors.
But most people who work in IWOSS have a fairly high level of education. In 2018, 76.7 percent of all workers in IWOSS sectors had a secondary or post-secondary degree, while only 57.4 percent of workers in non-IWOSS sectors did. Formal trade and financial and business services were the IWOSS sectors that hired the most highly skilled workers. Export crops and horticulture, on the other hand, was the sector that hired the most low-skilled workers.
In the future, IWOSS sectors are expected to provide the majority of jobs for people who are just entering the job market. The study says that IWOSS sectors could create up to 56% of the 47.3 million new jobs that are expected between 2018 and 2035. However, there will be fewer jobs for people without skills. IWOSS will create 27 million of the 47 million new jobs, and 9 million of those jobs will be for women.
The report also talks about the general and sector-specific problems that make it hard for the selected IWOSS sectors to be competitive, attract investment, increase output, and hire more people. So, the study finds the barriers to growth and job creation in the economy as a whole as well as those that are specific to each sector. The study also looks into how skills are measured in the selected sectors. Most of the problems are caused by the weak environment, which includes poor infrastructure, a lack of skills, a lack of credit options, and a high rate of corruption. At the sector level, financial and business services are held back by the high number of loans that aren’t being paid back, bad corporate governance, and cyber breaches and attacks. In the meantime, the ICT industry is hurt by the fact that schools don’t do a good job of giving students the skills that are in demand. Lastly, the trade sector is hampered by problems with logistics and transportation infrastructure, long processing times at ports, and limited access to foreign exchange and its volatility.
So, the report gives suggestions for how to deal with both general and IWOSS-specific problems. The study shows how important it is to improve financial institutions so they can give more loans, especially to small and medium-sized businesses. The study also says that more money needs to be put into important infrastructure like transportation (roads, trains, and planes), electricity, and communication. The study also shows how important it is to create a policy environment that helps the ICT industry grow, makes the financial sector more competitive, and ensures good governance.
Concerning the skills gap, the study recommends that businesses and higher education institutions work together better and that ICT skills be taught in schools so that students are better prepared. If these policy recommendations and the other sector-specific ones in the report are carried out well, they should help the private sector grow and create more jobs, especially for young people and women.
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