Yesterday, August 24, the Nigerian Bureau of Statistics (NBS) released the Q4 2022 and Q1 2023 Labour Force Survey.
The report revealed that Nigeria’s unemployment rate stood at 5.3% in the fourth quarter of 2022. While in the first quarter of 2023, it was 4.1%.
The report released yesterday generated a lot of buzz online, with people questioning the new data released by the statistical agency, especially as the unemployment rate in the fourth quarter of 2020 was pegged at 33.3%.
The one question many people asked was if Nigeria’s unemployment rate dropped from 33% to 4.1% in about three years.
Technically, the unemployment rate has not reduced. The NBS only changed/adopted a new methodology. Hence the current 4.1% unemployment rate.
What was the old unemployment methodology and the new one?
The NBS old methodology classified those within the labour force who were completely inactive, that is, those who did not work at all and those who worked less than 20 hours per week as unemployed.
On the other hand, with the new methodology, only people who did nothing, either for pay or profit, are considered unemployed. That is, this set of people are not in employment; they are actively searching and available to work but do not do anything at all, whether business or side hustles, as it is fondly called.
So, basically, if anybody is engaged in anything that pays or brings profit, such a person is not regarded as unemployed according to this new definition. The duration the person is engaged in such activity, unlike in the old methodology, does not count in the new methodology.
At worst, the person will just be regarded as underemployed, not unemployed.
Underemployment, according to the new methodology adopted, refers to those within the labour force who work less than 40 hours a week but are willing and available to work for more hours.
In the old methodology, the duration spanned between 20 and 39 hours in a week. That is, if someone worked between 20 and 39 hours in a week, the person was classified as underemployed. But with the new methodology, if you worked less than 40 hours a week, but there is that willingness for you to do more and availability, then it is regarded as being underemployed.
What are the other new things about the new methodology?
Another key thing to know about the new methodology is the expansion of the labour force age group.
In the old methodology that the NBS used for years, the labour force referred to those in the working age population who were aged between 15 to 64 years. That is, anybody who is aged 65 years and above was not counted as being in the labour force. However, with the new definition, there is no age limit. Everybody from 15 years old upwards is counted among the labour force.
In the new methodology, Nigeria now considers anyone who worked at least for one hour in the last 7 days for pay or profit as employed.
A person is considered to be at work, that is, employed, if he worked for 1 hour in the last 168 hours of her or his life.
Also worth highlighting in the new methodology is the sample size. The sample size that the NBS used in this new labour force survey was 35,520 households spread across 12 months. In the previous one, only 33,300 households were sampled, and it was done quarterly.
The sample size is basically the number of persons the NBS used from the over 200 million people in Nigeria to draw conclusions about the unemployment rate in the country.
Why did the NBS review its methodology?
As you would agree, change is one constant thing in the world today, and oftentimes, especially in social science research/issues, these changes are adopted to meet with new developments in an ever-changing world.
The NBS, in one of the videos posted on YouTube, stated that it reviewed its methodology to adopt the latest International Labour Organisation (ILO) guidelines for computing Labour Force Statistics, which was proposed at the 19th International Conference of Labour Statisticians. A key point of the ILO guidelines is to expand the definition of employment to capture all the ways that individuals in society engage with the economy and labour market.
This was what informed the change in the NBS methodology.
The NBS explained that it adopted this to have a deeper understanding of the labour market indicator and also reflect the unique nature of the Nigerian labour market. Hence, the review.
It is, however, important to state that the 19th International Conference of Labour Statisticians, which the NBS referred to, was held as far back as 2013.
While the NBS explained that it adopted this methodology to meet global best practices, some experts have expressed some reservations about the new methodology.
The founder and Chief executive officer of MyJobMag, Ogugua Belonwu, said that the methodology does not paint a true picture of what is happening in the country. Worst, it makes it difficult to assess the government’s performance in tackling the problem of unemployment in the country, especially when compared to the 33.3% unemployment rate in 2020.
Professor Uche Uwaleke also has faulted the NBS new methodology, stating that the new figure does not reflect the actual situation on the ground in the country.
Damilola Adewale, a Lagos-based economic analyst, shared a similar sentiment. According to him, the revised methodology may give the government the false impression that it has tackled the unemployment issue, whereas the reverse is the case.
The head of research at SBM Intelligence, Ikemesit Effiong, also shared his reservations about the new methodology.
He explained the NBS not defining what full employment is and also watering down its unemployment data to include those doing online vendors, social media influencers, and other people running their businesses, as well as those doing part-time gigs, makes it difficult to know exactly those adding to the economy which is key for sensible revenue planning and generation, resource allocation and service provision.