Worries over high unemployment rate

Nigeria’s unemployment rate which stood at 37.7 per cent in 2022 is expected to climb further to 40.6 per cent in 2023, according to a recently released report by global professional service firm, KPMG entitled: Global Economic Outlook.

The report noted that unemployment is expected to increase on the back of limited investment by the private sector, low industrialisation, as well as slower than required growth.

The Nigerian section of the report, which was entitled: “Challenging macroeconomic fundamentals in a transition period” was prepared by former Statistician-General of the NBS, now Chief Economist, KPMG in Nigeria, Dr. Oyeyemi Kale and Oluwole Adelokun, Associate Director, Strategy and Economics, KPMG in Nigeria.

Nigeria’s real Gross Domestic Product (GDP) grew by 3.52 per cent yearly in Q4 2022 compared to 2.25 per cent printed in the previous quarter, with a yearly growth rate of 3.1 per cent for the year against 3.4 per cent in 2021.

Last year, growth was driven by the non-oil sector, as continuous recovery in household consumption boosted spending, particularly in the finance and insurance services, telecoms, and transportation and storage services.

According to the reports, while the non-oil sector grew by 4.84 per cent, the oil sector contracted by 19.22 per cent, largely attributed to worsening oil theft, pipeline vandalism, underinvestment, and other operational challenges inhibiting oil production.

The report estimates that Nigeria’s GDP will continue to grow at a relatively slow pace of three percent in 2023 due to the slowdown in economic activity that typically characterises periods of political transition in Nigeria.

Nigeria’s unemployment has been trending upward over the years, reaching a record high of 33.3 per cent in Q4 2020, according to the last NBS Labour report, with over 23.1 million Nigerians out of jobs.

This statistics is expected to worsen in recent times considering the ripple effect from the COVID-19 pandemic, economic downturn, high inflation, and massive layoffs in the tech space amongst others.

The report reads: “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 growth and consequently the inability of the economy to absorb the four-five million new entrants into the job market yearly.

“Although lagged, the National Bureau of Statistics (NBS) 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 per cent in 2023.”

The report highlighted the impact of the high inflation environment on the economy, with projections of at least 20 per cent in the year.

In a related event, there is palpable fear that the latest wave of Artificial Intelligence (AI), could replace aboutw 300 million full-time jobs worldwide, according to a recent report.

The study, which was conducted by Goldman Sachs, stated that 18 per cent of global work could be computerised, with advanced economies likely to experience greater impact than emerging markets.

This is mainly due to the vulnerability of white-collar workers, particularly administrative staff and lawyers, compared to workers in physically demanding or outdoor occupations such as construction and repair work, who are expected to experience minimal effects.

The administrative and legal sectors are expected to face the highest risk with 46 per cent of administrative jobs and 44 per cent of legal jobs being vulnerable to replacement by AI.

On the other hand, physically demanding jobs such as construction and maintenance face lower risks with only a six per cent and four per cent threat.

Despite the potential job displacement, the implementation of AI could result in increased labour productivity and could even drive global growth up by seven per cent yearly over a 10-year span, as per Goldman Sachs.

Goldman Sachs economists explained that though AI is expected to have a substantial effect on the job market, only some jobs and industries will be fully impacted by automation.

“Although the impact of AI on the labor market is likely to be significant, most jobs and industries are only partially exposed to automation and are thus more likely to be complemented rather than substituted by AI,” the economists added.

The majority of workers are employed in positions that are partially exposed to AI automation. As a result, they will probably utilise some of their newly available time for productive endeavors that enhance output after AI adoption.