Growing jobless, self-employed Nigerians dim tax potential 

• Rate rises to 5.3% in Q1 as youths shun job-seeking
• Botti sees more businesses closing down over poor policies
• NECA urges FG to fast-track implementation of stabilisation plan

Due to the closure of numerous businesses in the country, heightened hardship resulting from the increase in petrol prices, stagnant wage growth, and rapidly rising inflation, among other economic challenges, it has been revealed that Nigeria’s unemployment rate may worsen, pushing more citizens into poverty.

This followed the newly released Nigeria Labour Force Survey (NLFS) report for the first quarter (Q1) of 2024 by the National Bureau of Statistics (NBS), which showed that the unemployment rate increased to 5.3 per cent in the first quarter of 2024 from 5.0 per cent in Q3 2023.

This crisis may affect the Federal Government’s tax revenue projections from organised businesses via Personal Income Tax (PIT), especially from an increasing jobless population and already overwhelmed businesses.

In the first quarter of this year, Company Income Tax (CIT) collection declined by 12.87 per cent, from N1.13 trillion recorded in Q4 2023 to N984.61 billion, according to the NBS CIT report for Q1 2024.

The report reveals that CIT collection across agriculture, manufacturing, electricity, gas, steam, real estate, and professional services all declined by double digits in the first quarter of the year. Declining tax payments by companies are also an indication of a slump in revenue, profit, or sales, considering the high inflation rate, prevailing cost-of-living crisis, and dwindling purchasing power of consumers.

With more youths becoming discouraged from seeking employment, as the figure in this category rose from 3.1 per cent in Q3 2023 to 3.6 per cent in the quarter under review, as well as a rising number of people in self-employment, the Federal Government may find it difficult to realise its revenue target via taxes from the gig economy and the rising number of people in the informal sector.

Indeed, a breakdown of the NLFS report showed that the labour force participation rate among the working-age population declined to 77.3 per cent in Q1 2024 from 79.5 per cent in Q3 2023.

According to a World Bank estimate, there are about 17.5 million online gig workers in Nigeria, Kenya, and South Africa, accounting for 80.6 per cent of Internet traffic flow to online platforms from sub-Saharan African countries.

Data showed that over 30,000 jobs have been lost in Nigeria following the closure of 15 manufacturing companies. The data showed that multinationals like Unilever, Procter & Gamble (P&G) Nigeria, GlaxoSmithKline (GSK), and Kimberly-Clark, with a $100 million investment plant, had exited their respective segments entirely.

For instance, at Kimberly-Clark, about 90 per cent of its employees, or over 6,000 employees, lost their jobs, as the company had employed about 1,000 people directly and 5,000 indirectly.

The Manufacturers Association of Nigeria (MAN) stated that the sector lost a total of 3,567 jobs in the first six months of 2023. According to the report, 1,709 jobs were lost during the same period in 2022, representing an increase of 1,855 job losses in the sector over one year.

MAN attributed the increase in job losses to the unfriendly business environment and a slew of hastily implemented policies, adding that there was a decrease in capacity utilisation, dropping to 56.5 per cent compared to the 57 per cent recorded during the same period in 2022.

The economy has been beset with several challenges, making layoffs, downsizing, and redundancies the order of the day. These have impacted virtually all sectors in the last few years.

While the manufacturing sector is the mainstay of every economy, experts have said that the job loss crisis in Nigeria appears unending as the bleeding economy continues to widen the door for the exit of major players.

The Guardian learnt that while the unemployed workers also lose their purchasing power, it has created a cascading effect that ripples through the economy, thereby impacting those who are still employed.

The NBS report stated that the employment-to-population ratio was 73.2 per cent in Q1 2024. This, according to the report, is a decrease of 2.4 percentage points compared to a ratio of 75.6 in Q3 2023.

“The combined unemployment rate and time-related underemployment as a share of the labour force population (LU2) decreased to 15.3 per cent in Q1 2024 from 17.3 per cent in Q3 2023,” it said.

The report said the proportion of workers in wage employment in Q1 2024 was 16.0 per cent, amounting to a 3.3 percentage point increase from 12.7 in Q3 2023.

It explained that the unemployment rate among persons with post-secondary education was 9.0 per cent in Q1 2024.

“The unemployment rate among youth aged (15-24 years) was 8.4 per cent in Q1 2024, a decrease of 0.2 per cent compared to Q3 2023 (8.6 per cent). The unemployment rate in urban areas was 6.0 per cent in Q1 2024, the same as in Q3 2023,” the NBS said.

According to the bureau, time-related underemployment in Q1 2024 was 10.6 per cent, a decrease of 1.7 per cent from the rate of 12.3 per cent recorded in Q3 2023.

It noted that 4.5 per cent of the working-age population was in subsistence agriculture in Q1 2024.

“The percentage of youths not in education, employment or training (NEET Rate) was 14.4 per cent. Indicating a 0.7 percentage point increase from Q3 2023,” it said.

Nigeria’s Presidential Fiscal Policy and Tax Reforms Committee, headed by Taiwo Oyedele, explained that the Economic Stabilisation Bills (ESB), which have been approved by the Federal Executive Council, contain some recommendations of the Presidential Fiscal Policy and Tax Reforms Committee as part of the Accelerated Stability and Advancement Plan (ASAP) of the government.

The ESB seeks to amend about 15 different tax, fiscal, and establishment laws to facilitate economic stability and set the country on the path for sustained, inclusive growth. The key changes to be made to the various laws include amendments to the income tax laws to facilitate employment opportunities for Nigerians in Nigeria within the global value chain, including the digital economy; zero-rated VAT and an improved incentive regime to promote exports in goods, services, and intellectual property; tax reliefs for private sector employers in respect of wage awards and transport subsidies provided to their employees; and tax relief to companies that generate incremental employment and retain such employees for a minimum of three years.

Other changes include fiscal discipline and enhancement of remittances from government agencies and corporations to the Consolidated Revenue Fund of the federal government; and collaboration with states to suspend certain taxes on small businesses and vulnerable populations, such as road haulage levies and other charges on the transportation of goods; business premises registration; animal trade and produce sales tax; bicycle, truck, canoe, wheelbarrow, and cart fees; and shops, kiosks, and market taxes and levies.

Reacting to the NBS report, Economist and Researcher Isaac Botti said the rise in the unemployment rate is caused by the severe economic woes facing the country, whereby the hard economic conditions have resulted in many Nigerians losing purchasing power, a situation that is severely impacting production.

He noted that the hike in the price of fuel, goods, and services has greatly affected business operations in Nigeria, even as businesses are struggling to cope with high operating costs in the face of dwindling revenue (low patronage).

He said that the implication was that many businesses would soon close. According to him, some are already closing, while “many that should be created are not able to start because of the economic uncertainties. That explains the rise in the unemployment rate,” he said.

Botti warned that, with policies that have given way to the galloping inflation the country is currently experiencing, including stunted wage growth and low per capita income, the economy was heading toward a major collapse.

He stressed that the unemployment rate would rise drastically in the coming months as there is no clear plan on the government’s agenda to address the rising inflation level, adding that more businesses would close down. “New ones will not be able to open, and existing ones will cut operating costs by laying off more workers in the coming days, weeks, and months.”

The Director-General of the Nigeria Employers’ Consultative Association (NECA), Adewale-Smatt Oyerinde, said that without the government giving adequate support to businesses and protecting SMEs, efforts toward addressing the time bomb would be fruitless.

Noting that the new release was not far from the truth given the worsening challenges faced by businesses, he said it was important for the government to fast-track the implementation of the stabilisation plan to boost investors’ confidence.

To curb the downward slide and stop the dangerous consequences of the rapidly increasing unemployment rate, the NECA boss said the government must redouble its efforts to provide succour to organised businesses and SMEs.

He added that following the inauguration of the regulatory forum by PEBEC, he urged a more coherent and systematic alignment of regulatory activities and a reduction of overlaps. According to him, regulators must operate with the view of enabling businesses rather than stifling them.

According to Israel Odubola, a Lagos-based research economist, the manufacturing sector is one of the major job-creating sectors in the economy, and the decline in the employment level does not bode well for the economy at large.

He said the high cost of diesel and the foreign exchange crisis were affecting the sector’s operations, thereby weakening its job-creating capacity.