AGBAJE: Job Cuts Are Inevitable In A Docile Economy
Opeyemi Agbaje, a policy analyst, is the Chief Executive Officer (CEO) of RTC Advisory Services Limited. In this interview with IKECHUKWU ONYEWUCHI, he calls for harmonised policies that would create an enabling environment for business to thrive.
How would you appraise the recent gale of job cuts in the country, as against the agenda of job creation, with which the present government rode into power?
WHAT is going on can be directly linked to Nigeria’s economic performance. What is responsible for the job losses is clear: The manufacturing sector has been in recession since the beginning of 2015. It had negative growth of 0.7 per cent and 3.8 in the first and second quarters, respectively. We don’t have data for third quarter yet, but I’m sure it is probably worse than the second quarter. The case with manufacturing is the same with public administration, which is the government itself, and that is the same case for oil and gas sector. The rate of growth in all other major sectors has sharply reduced. In telecommunications, for instance, the rate of growth between the first and second quarter moved from almost 10 to six per cent. In banking, there was a more modest decline, but it is still a decline. The same can be said of the construction sector. And of course, the overall Gross Domestic Product (GDP) growth rate has gone down from six to about 2.35 per cent at the end of the second quarter. The third quarter is likely to be worse as well. So it is the same across board. The institutions in all these sectors are not doing well; therefore, they are forced to cut down jobs.
It has to do with policies, for instance, the one in manufacturing, where the tight government control in relation to foreign exchange management, has starved manufacturers of raw materials. And when they can’t produce, then there is no point keeping people at work. The banking sector has also been affected by series of regulatory actions in the last two years continuing till now. There is a very high cash reserve ratio, AMCON charges, and, most recently, the implementation of the treasury single account. Banking profitability is down and automation in the sector is increasing; they are doing more things with technology, including ATMs, signature verification software and the BVN. Hence, with low profitability and better use of technology, they have to retrench people.
The scenario challenges government’s agenda on job creation. They would have to get to work, stimulate the economy and ensure that the economy begins to create jobs again. The Nigeria Bureau of Statistics (NBS) data at the end of the second quarter shows that the economy created only 144,000 as against 450,000 or more jobs in the first quarter. So, the economy is creating fewer jobs, because of lower economic activity, even those who have jobs are losing them and unemployment and underemployment is increasing. I think the data for the third quarter would be worst. The new cabinet has its work cut out to try and stimulate the economy so that jobs can be created.
What policies do you expect from Dr. Chris Ngige, who has been named the Minister for Labour and Employment?
It is not obvious to me why he is the one going to labour and employment. It is not very apparent. He has very little preparation required for that job. His background is in medicine and politics. I am not so sure he is familiar with the data about the state of unemployment that we are faced with, or whether he has trained his mind to the issue. But he would get there. He would find out what the situation is and would, hopefully, get experts to brief him. His job is to fashion policies on how to create jobs. I won’t rule him out. He is an intelligent person and the job of a minister is to make policy. So, if he is serious about the issue and thinks innovatively and comes up with new solutions, then he may still succeed in dealing with the issue of job creation.
The present government came into power with lofty promises on how they were going to create jobs during the campaigns and brandished what many may call outlandish job figures; how would you appraise the likelihood of delivering, bearing in mind the present economic realities in the country?
I am not sure how much detailed information about the state of the economy the party had when it was fashioning out its campaign promises. It is obviously going to deal with a harsher reality than, perhaps, existed or that it was aware of. But still, it has to create jobs; otherwise, we would have a national disaster on our hands. If we look at the crisis with Boko Haram and agitations about Biafra, the government has a lot to do about unemployed young men and women. Because of current conditions, the government would have to make job creation a priority, and it has to be creative and imaginative on how it treats the issues. I would urge the party, its technocrats and economic advisers to go back to the drawing board and design schemes for job creation and look for how to stimulate economic growth and activities so that the economy would return to its natural state with jobs created.
If government were to pursue a sincere policy on job creation, there ought to be flashpoints, areas where government can design schemes to absorb a large number of unemployed youths; where, in your opinion, should government be looking at?
Government’s main role is to create the environment for businesses to thrive to create employment. In reality, it is the private sector that employs the highest number of people. In what sectors can this happen? In construction, for instance, government can start by awarding construction contracts and engaging in infrastructure projects, which stimulate job creation in the construction industry. There has been a lot of job creation in hotels and restaurant business over the past few years. That has slowed down sharply from the data we have seen. So, government needs to act fast, because one of the reasons the business went down was because of the docility of government. For instance, nobody was able to stay in hotels in Abuja in the last six months, because there was no cabinet and nothing was going on in the city, so, the hotels were empty. Government has a role in creating activities that create the environment for those hotels to be buoyant.
Some policies are hurting the financial sector and causing it to reduce jobs. The Central Bank of Nigeria (CBN) and the Ministry of Finance need to work on that. We also have retail, the likes of Shoprite and others in retail trade. We have people in formal and informal sectors, which is a function of trading activities going on in the economy. Government policies affect job creation, even though it’s not government itself that would employ people, its policies shape the activities for employment.
What short, medium and long-term strategies would you suggest to combat job losses?
The first good thing is that we now have a cabinet. There are people who are now charged with responsibilities for managing the economy, for labour and employment; trade and investment, and all others. Frankly, the major factor for the losses was that we were not responding in any way as oil prices were dropping and the economy, wobbling. Growth was reducing and there was nobody to respond. The only organ responding, or attempting to respond, was the CBN, because that was the only institution that was available. Now, there is a government and we thank God for that. The new ministers would need to begin to get abreast with the reality of the economy as it is today. They are the ones charged with the responsibility of coming up with short, medium and long term plans and ensure they announce the policy of government. The first thing they have to do is to restore the confidence of investors in Nigeria’s economic growth, so that people would begin to invest again and jobs would be created naturally. We need to come up with a policy across sectors that would forge a reasonable view about how Nigeria can diversify its economy and diversify government revenue source away from oil, and how it would improve taxation and use private capital to build infrastructure, and, ultimately, grow the economy. Jobs are a desired and necessary by-product of economic growth and activities. But it can’t be left just as a side effect. There must be a conscious strategy to create the right kind of jobs and attract people to take the right jobs that the economy needs. People need to be trained to boost entrepreneurship. Youth need to be trained in the right skills and competencies.
Government has repeatedly said it is broke, can such government stimulate job creation?
There is talk of a tentative budget figure of about N7trillion, but we don’t know how they seek to fund it. But it is obvious the money is not coming from government. It has to come from other sources. I have no doubt that we can construct the major roads in this country using private capital. We can build road, power infrastructure with international funding. We can get Foreign Direct Investment (FDI) into manufacturing to create more jobs. We can get concessional, development-type loans for education, health infrastructure and rural development. There is capital available in the world. One we are serious and we have the right policies, I don’t think it is impossible for Nigeria to have an N8 trillion budget per annum. However, we must recognise that most of that capital must come from foreign and private sources, either in forms of loans or other Private Public Partnership (PPP) schemes.