Nigeria’s Misery Index Worsens

Nigeria’s Misery Index Worsens

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Q4:2020 Labour Market Statistics: Youth Unemployment at an All-time High
The Nigerian Bureau of Statistics (NBS) released the labour statistics for Q4:2020 and we summarise the highlights. Interestingly, the NBS was able to conduct the survey through face-to-face interviews following the lifting of restrictions imposed by the pandemic compared with the Computer Assisted Telephone Interview method used in Q2:2020.

According to the report, unemployment rate in Nigeria worsened to 33.3% in Q4:2020, from the 27.1% reported in Q2:2020, representing the worst performance on record since the reporting of quarterly data began in 2010. We saw a further decline in the labor force by 10.6 million people to 69.7 million in Q4:2020 majorly driven by a 21.9% decline in the number of female persons available to work to 30.2 million people. This decline in the labor force, despite a 4.3% increase in the working-age population to 122.0 million, implies that more people have lost interest in job search. On the flip side, underemployment rate declined to 22.8% in Q4:2020 from 28.6% in Q2:2020. Since the economy reopened in Q2:2020, we had expected the pick-up in economic activities to boost labour market performance.

A more worrying picture emerges in the youth unemployment rate, which tracks people within the age range of 15 – 34years, as it rose to 42.5% in Q4:2020 from 34.9% in Q2:2020. This is alarming considering the Federal Government’s effort in boosting youth employment, particularly the most recent ₦75.0bn Youth Investment Fund that aims to generate 500,000 jobs by 2023. Rising youth unemployment unmasks the motives behind the youth restiveness witnessed in 2020.

Within two quarters, the number of fully employed people declined by 5.0 million to 30.6 million and total employed people (including underemployed people) also fell 12.0 million to 46.5 million in Q4:2020 from 58.5 million in Q2:2020. Although the pandemic affected the labour market, the Nigerian economic woes pre-date the pandemic as population growth at 2.6% (IMF) continues to outpace real economic growth rate, impeding employment growth. With the associated effects of the pandemic, poor FDI flows and unfavorable macroeconomic conditions, significant improvement in employment may not be a walk in the park. In addition, government appears to lack the necessary creativity and capacity in using data to design job elevation programs for the Nigerian masses.

February 2021 CPI Report: Headline Inflation hits a 4-year High
The Consumer Price Index (CPI) data for February as released by the NBS reveals an unrelenting uptrend in the headline inflation rate for the 18th consecutive month as it rose to 17.3%. Although headline inflation represents the highest level since February 2017, month-on-month inflation flattened at 1.5% (similar to January level).

The food basket remained the pressure point for headline inflation, rising y/y to 21.8% in February from 20.6% the previous month. The m/m data however revealed a slower pace of increase as the food index rose marginally by 6bps m/m to 1.9%. We believe that the sustained insecurity in the food-producing regions of the country, the farmer-herder clash, and the recent blockade of food-conveying trucks from the north fueled the increase in food prices, especially considering that food inflation moderated in January. Core inflation also increased 53bps y/y in February to 12.4%, the highest we have seen since June 2017. The m/m trend however signifies a slowdown, moderating 5bps to 1.2% in February as the effect of the increased electricity tariff wears out.

We believe the risks to inflation remain on the upside over the mid-term. Food prices would continue to pressure headline inflation as we have exited the harvest season. This is especially as food insecurity issues abound amidst unrelenting farmer-herder clash and may disrupt planting season. We may also see increased pressure on core inflation if a new pricing template for PMS is adopted amidst higher crude oil prices.



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