Utilising Nigeria’s human capital

As the most populated African country, Nigeria’s human capital is largely untapped. The high population is often viewed as a double-edged sword, with the negative implications getting more of the attention. Given that rural jobs are predominantly in agriculture and are often seasonal, attention tends to focus on unemployment in urban areas, particularly white-collar (and tax-paying) positions in the formal economy. Commercial agriculture and manufacturing are generally thought to have the highest potential for rapid job creation.

Although the economy has emerged from recession, job creation has been patchy. In Q3 2017 alone, the labour force increased by 1.2 million. At the margins, various FGN schemes have slowed the rise in the unemployment rate. In terms of age group, the highest unemployment rate was 33.1% for those between 15 and 24 years, and the lowest 11.7% for Nigerians between 35 and 44 years.

Entrepreneurship has been flagged as a solution to the steady rise in unemployment. Several developing nations have identified small and medium scale enterprises (SMEs) as engines for job creation. The CBN defines SMEs as companies with asset bases between N5m and N500m (US$1.4m), and staff strength ranging from 20 to 300 employees. SMEs account for over 50% of Nigeria’s GDP. However, a large proportion of these firms appear unattractive to jobseekers due to the salary packages on offer as well as low job security. For the latter, despite the fact that the country’s business climate has improved, structural issues still exist, making it difficult for some businesses to break even. Labour cuts are usually a short-term solution.

It is not enough to have just human resources with no training of relevant skills or a poorly educated population. Human capacity development has been neglected over the past several years in Nigeria. Sectors such as education and healthcare struggle with steady flow of government funds as well as investments, making it difficult for them to function effectively.

In the 2018 FGN budget proposal, education and healthcare accounts for just 7% and 4% respectively of the total allocation. The budget is still subject to approval.  For a proper overhaul, the government agencies in charge of these sectors require sizeable investments. Infrastructural deficits such as substandard classrooms, inadequate training of personnel, lack of training centres and special centres for artisans need to be addressed. Remunerations within both sectors also need to be competitive to avoid human capital flight from the very limited stock of well-trained specialists.

The essence of fully functional vocational and technical institutions cannot be overemphasized. Perhaps, polytechnics across the country could be revamped to offer courses that will equip individuals for career paths often cited as “blue collar” and usually captured in the informal sector. For instance, formal education in plumbing, electrical techniques, auto mechanics and carpentry amongst others is likely to offer a decent standard of living for the enrolled candidate post-graduation. Often times, these professions are regarded as inferior but generate appreciable income for several individuals in developed countries.

An advanced developing country which has invested heavily in education to stimulate its economy and increase competitiveness is Singapore. Singapore has refocused on lifelong learning as a means of developing skills through continuing education and training. To this end, the government has made plans to increase funding for continuing education and training from USS$600m per year to USS$1bn in the next two years. Ultimately, this should stimulate employment and encourage innovation in learning technologies.

The Chinese government has in recent years recognised the importance of human capital investment, leading to a substantial increase in investments in education, health care, student nutrition and early childhood development. For China, education is not heavily focused on the formal white-collar inclined disciplines; rather, training for informal jobs and skills acquisition have been the core focus. China has even gone as far as generating export earnings from its human capital. For instance, construction projects delivered in other countries are predominantly handled by Chinese nationals.

A replication is not the advised prescription. Rather, Nigeria has to identify areas in which there are competitive advantages and invest in its human capital through training or formal education. The government should not bear the burden alone; private sector partnerships, both foreign and domestic, can also serve as core drivers. However, workable and profitable training development plans need to be created to lure foreign investors.

Chinwe Egwim is a Macroeconomist and Fixed Income Analyst at FBNQuest Merchant Bank