Disappearing jobs, roller-coaster oil prices and trade rules batter the economy
The recession may worsen security clashes across the country
Youth unemployment in Nigeria is now worse than in South Africa, according to the National Bureau of Statistics (NBS) in Abuja. That means that in Africa’s two biggest economies, youth unemployment is running at over 50%, a figure that is neither economically nor politically sustainable.
It is biting hardest in Nigeria, which has over four times South Africa’s population but much lower levels of social protection for the poorest. The NBS records that general unemployment in Nigeria rose to 33.3% in the last quarter of 2020 from 27.1% in the second quarter.
By the NBS definition that means a third of Nigeria’s workforce of 70 million – total population is over 210m – is either doing nothing or working for less than 20 hours a week. The NBS figures reported that 53.4% of Nigerians aged 15-34 were unemployed in the fourth quarter of 2020.
Last year, the pandemic controls, such as lockdowns and transport restrictions, shrank the economy, cutting hundreds of thousands of daily wage jobs. The economy is set to recover slowly this year but will be highly dependent on the strength of demand for Nigeria’s light crude oil.
After prices rose earlier this year, they fell back sharply last week. An allied problem is what happens to the country’s expensive fuel subsidy regime which the state oil company claimed to have ditched last year. It said cutting the subsidy would save around $2.4bn a year.
Although international oil prices were rising sharply at the beginning of this year, local petrol prices in Nigeria stayed the same. Local fuel marketers reckon the subsidy on imported petrol is running at about N40 a litre: the current pump price is N160 a litre.
Already hard-pressed by the crash in export revenues last year, the government would struggle to continue to maintain this level of subsidy. But cutting the subsidies now, when food price inflation is running at its highest level for over a decade, could prove politically risky.
Although the opposition People’s Democratic Party looks weak and divided at the moment with regional groups of activists dominating the scene, it may be able to galvanise support for a campaign to defend the subsidy amid other protests on economic conditions.
Another, more technical problem surfaced last week with the visit of Ngozi Okonjo-Iweala, the new director-general of the World Trade Organization, to Abuja.
Ostensibly, the visit was to thank Nigerians and their government, but Okonjo-Iweala also told Central Bank governor Godwin Emefiele that the WTO had received a complaint from the European Union that Abuja’s foreign exchange management system was being used ‘improperly’ to limit imports from EU suppliers used in Nigeria’s dairy industry.
Emefiele insists the measures are designed both to conserve foreign exchange and to better integrate local dairy companies with the country’s livestock sector. Reaching some agreement on resolving the issue will be vital to help Okonjo-Iweala’s negotiating credentials at the WTO ahead of this year’s ministerial trade conference.
Source: Africa Confidential