Three of the seven members of the Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC), including the chairman and CBN Governor, Godwin Emefiele, at their last meeting between September 25 and 26, 2017, called attention to the nation’s high rate of unemployment rate,
According to their personal comments released at the weekend, they urged collaboration between the fiscal and monetary authorities to bring it down such that the improvements already seen in recent economic data would begin to make sense across the land.
According to Emefiele, improvements in productive activities saw GDP turning positive from -2.3% at the depth of the recession in Q3 2016, noting that “output gap remains considerably negative as real GDP stayed below its potential.”
Despite the continued deceleration in inflation rate from the peak of 18.7% in January 2017 and relative stability and convergence continued, he lamented that macroeconomic indices like unemployment and nominal interest rates, “remain at undesirable levels,” a situation he blamed essentially on “the structural imbalances and associated rigidities, which characterise the Nigerian economy (which) resonate the urgent need for diversification.
“The inevitability of diversification is even more exigent at this time given the planned medium-term phase-out of hydrocarbon fuels by major industrialised economies and the weak shortterm global demand,” he stressed.
Describing unemployment rate in the country as worrisome, Dahiru Hassan Bulami, another MPC member, described it as a critical area of concern, just like inflation and interest rates, despite the positive developments in the economy, calling attention to the wide gap between inflation at 16.01% and the 14% MPR (Monetary Policy Rate).
“In my opinion, unemployment is an important area that requires sound policies both from the monetary and fiscal authorities, to reduce the level of unemployment, which would help spur growth in the economy. What can be done to reduce unemployment in Nigeria by the monetary authority?
“In the past, Ministries, Departments, Agencies and Banks, would visit institutions to interview potential graduates for employment positions. The situation has however changed as unemployment exists among primary and secondary school leavers as well as graduates. It is disheartening that many graduates with First Class and Second Class honours are roaming the streets without jobs. Unemployment refers to a situation where an able-bodied individual with the requisite qualification, and who wants to work, does not have a job.”
The CBN, he said, “has a responsibility to assist in reversing the situation through putting in policies that would facilitate or support economic growth. What can we do to increase employment and livelihood among the youths?”
He tasked the CBN on the “need to intervene in the various sectors of the economy that have a high propensity of employment generation such as: agriculture, small and medium scale entrepreneurship, establishing Silicon Valley centres etc.
“Credits should also be extended to those who have participated in the various centres for entrepreneurship development, in the country. This should be in the form of seed money.”
While seeking support for the private sector as the largest employer of
labour in Nigeria to thrive, Bulami urged government to provide an environment for the private sector to thrive, so as to create job opportunities.
“It is true that graduates do not see themselves going to the farm, and as such, the private sector should be supported to provide employment for our teaming graduates,” he stressed further, calling attention also to the need guarantee power/electricity for at least six hours a day at constant and adequate voltage power, which would go a long way in assisting the private sector.
“For example, those in the welding and hairdressing heavily depend on electricity for their businesses to run. The entrepreneurships centres all over the country could serve as job creation centres through the provision of seed money to trainees on their successful completion.”
He called for a lowering of the MPR to bring down the prime lending rate, thereby making loanable funds relatively cheaper and inducing investors to borrow and invest and in the process generating more employment opportunities, raising the level of income, output, resulting in economic growth.
“However, to lower the MPR, CBN has to study this in relation to the inflation dynamics, monetary conditions, real economic activities, as well as inflation risks in the economy.”
He called for credit targeting to the agricultural sector, calling attention to the history of intervention schemes introduced in the past and the fact that some could destabilize the system.
“What went wrong with the previous interventions? How can they be sharpened or modelled to contribute towards the effective growth and stabilisation of the economy? How can the loopholes in the past schemes be blocked to make them more effective because unemployment is worrisome? Policy makers practically want low interest rates so as to make credit available to economic agents. This means that Deposit Money Banks should be encouraged to direct credit to sectors with high job generation ability. The Central Bank should design an incentive scheme that would encourage banks to lend direct to job creation areas such as agriculture,” he stressed.
A member, Abdul-Ganiyu Garba, warned that despite Nigeria’s exit from technical recession, its macroeconomic challenge remains overwhelming, as it is still a long way from recovery to 2014 level, just as unemployment rate remains high at a time public debt is at N2.01tr, while Federal Government deficit stood at N1.9tr in the first eight months, and debt service at N1.58tr is 2.4x the spending on capital project. As if these were not enough horrible news, he said maximum lending rate rose to 31.2%, prime lending rates, 17.69% and widening interest rate spread to 26.95%; which are not helped by “a very active revolving door of liquidity – pumping in and mopping out.”
Issues that needs resolution at the moment, he continued, are: “The unresolved issues: A forward looking medium to long term strategic macroeconomic management framework for Nigeria as the context for policy analysis and choice; continuing malfunctions in the credit market which tends to allocate credit to sectors with traditionally high NPLs, low output and employment elasticities as well as a tendency to restrict access and to charge maximum rates on credit to sectors and economic agents with traditionally lower NPLs and higher output and employment elasticities; the dominance of rent havens in both the real and financial sectors, and the public space; prevalence of present hedonistic and backward looking orientation; and efficient and effective use of existing Nigerian capacity in all aspect of the political economy.”