The rate of unemployment which sits at 10.4 percent, according to the fourth quarter (Q4) of 2015 unemployment rate report by the National Bureau of Statistics (NBS), is anticipated to rise in the first quarter (Q1) of 2016 as Africa’s largest economy grapples with implementation of the 2016 budget.
Weak demand for products and services (occasioned by lower consumer spending), as well as the inability to replenish stocks, have prompted staff retrenchment and a dip in production levels by import dependent companies.
“The forex restriction that started last year is a major factor that contributed to the unemployment rate recorded during the year (2015). However, the delay in implementation of the 2016 budget would play a role in unemployment rate in the first quarter of the year,” says Ayodeji Ebo, Head of Investment and Research, Afrinvest.
Ebo says the implementation of the budget ought to boost the economy by creating jobs and strengthening the purchasing power of consumers, which have been affected by harsh macro-economic realities.
“With the implementation of the budget, contracts for capital projects will be awarded and this equates to jobs. Consumer spending will also rise, occasioned by government’s spending. These ought to cushion the rate of unemployment,” Ebo said.
Policy analysts, who participated in a BusinessDay survey, predicted a surge in unemployment rate as implementation of the 2016 budget drags to the second quarter of the year.
“Quite a number of jobs will be created on the back of implementing the budget. However, the fresh delay arising, shifting the passage of the appropriation bill into law to April, exposes unemployed Nigerians to an unpalatable environment,” the respondents say.
Most respondents recalled a statement made by the Federal Government to create no fewer than one million direct jobs in 2016 and opined that a delay in implementation of the budget has crippled the economy.
“Government commences budget implementation at the beginning of a financial year. It is quite disappointing that at the end of the first quarter of a financial year, the budget for the year is still hanging,” the respondents submitted.
The budget implementation suffered a fresh delay of at least two weeks as the house of representatives says it needs these weeks to send the details of the budget, following the refusal of President Buhari to append his signature on the appropriation bill without reviewing its details.
Buhari says he will check the 2016 budget bill passed by the senate “ministry by ministry” before signing it, signalling further delays before the legislation takes effect.
Gregory Kronsten, Chief Economist at FBN Capital, expects the unemployment rate to trend upwards as forex restrictions bite hard on manufacturing companies.
“The trend is upwards, you would think that if manufacturing companies cannot access imported inputs, you expect them to lay-off staff,” Kronsten said in a telephone interview with BusinessDay.
Kronsten pointed out that the budget, were it implemented before now may have had little effect on unemployment rate in the first quarter of the year since capital spending usually begins in the second quarter.
“The budget is predicated on capital projects, and it is unusual for capital spending to begin in the first quarter but in the second. If you have a programme that ought to create jobs, it isn’t created immediately,” says Kronsten.
Looking ahead, experts expect a prompt passage of the budget appropriation bill into law to buffer the adverse effects of the conspicuous economic crux on the economy.
“Government should speed up actions in implementing the budget. Domestic sectors have been pegged to receive a boost and this will have a trickle-down effect of job creation on the back of increased activities,” Ebo said.
LOLADE AKINMURELE
