By Geoff Iyatse (Assistant Business Editor) and Femi Adekoya
28 October 2020 | 4:30 am•
Expert predicts 50% unemployment rate rise
• Manufacturers lament looted warehouses
• Expect longer recession, economist warns
Nigeria’s employment rate has continued to contract across manufacturing and non-manufacturing sectors as confidence in the economy continues to wane.
The figures have become increasingly gloomy, pointing to recession, which economists say can be deeper than the 2016 experience.
The Purchasing Managers’ Index (PMI) released by the Central Bank of Nigeria (CBN) yesterday showed employment had contracted across focal areas of manufacturing and non-manufacturing sectors in October.
In the manufacturing sector, the employment index stood at 46 points, indicating a contraction for the seventh consecutive month.
Of the 14 subsectors of manufacturing, only three recorded growth in employment level while nine recorded lower employment. Employment in the remaining two sectors has been static.
Paper products, printing and textile, apparel, leather, footwear categories recorded an increase in job creation while employment in the remaining subsectors either fell or remained unchanged.
Strategic areas, where employment declined in October, were food, beverage, tobacco, petroleum, coal and cement.
According to the report, employment also fell across all the 17 subsectors of non-manufacturing.
The subsectors include accommodation and food services, agriculture, arts, entertainment and recreation.
It includes finance, insurance, health care, social assistance, information, communication, real estate and leasing.
Others are transportation, warehousing, professional services and utilities.
THE non-manufacturing employment index hit its peak in December 2019 and took a detour, tumbling to its lowest level in May 2020.
The slow growth trend experienced from June retreated in September.
“The employment level Index for the non-manufacturing sector stood at 44.2 points, indicating contraction in employment level in October 2020. All 17 subsectors reported a decline in employment level (below 50 per cent threshold) in the review month,” CBN reported.
Dr. Olufemi Saibu, a development economist at the University of Lagos, warned that the days ahead could be grimier except the government urgently engaged private sector operators on its plan to restore normalcy.
He said the uncertainty in the economy would lead to massive capital flight and divestment, which would worsen the unemployment condition.
“With the new turn of events, employment can only get worse. There is so much uncertainty in the economy; hence no private sector player will engage anybody now.
The only source of employment currently is the public sector, and the number it can absorb is limited. So, the situation will continue to deteriorate until there is serious intervention,” Saibu noted.According to the economist, the government has an obligation to work with private sector operators to reduce the losses they have incurred as a result of recent unrest.
This, he said, was necessary to restore confidence in the economy and reduce the overwhelming uncertainty.
Saibu said the earliest time the country could recover from the current situation would be the end of the first quarter of 2021, adding that the country might have to prepare for a higher inflation rate that would be triggered by expectation.
The manufacturing PMI as released by the CBN shows a declining outlook across key thematic areas – production, new orders, supplier delivery time and raw material inventory, as well as employment level.
Overall, the manufacturing index pointed to deepening contraction.
AGAINST the depressing outlook, local manufacturers have continued to express concern over the persistent lootings across the country, noting that their unsold products in warehouses have become the new targets.
The local manufacturers are worried that sale of the looted palliatives in some states may weaken demand for such consumables and depress production.
The Manufacturers Association of Nigeria (MAN) stated that the safety of members’ warehouses had become a source of concern for the group, as looters targeted warehouses used by firms for the storage of goods in transit.
MAN added that the looting would also affect already weakened demand for local products, stating that the palliatives were meant for the vulnerable and not for the people selling them in open markets.
Acting Director-General of MAN, Ambrose Oruche, said spending power had continued to weaken, following the effects of the COVID-19 pandemic and present disruption caused by the protests against police brutality.
“The looting will affect demand. The products being looted were not meant for all Nigerians. They were only meant for the vulnerable. The products are being abused and sold in the open market. Looted palliatives meant for one state are being sold in other states.
“The tension in the environment is affecting people and deterring them from spending. People are saving for eventualities. Spending has slowed down as the funds are not in right now,” he added.
Oruche also raised concern about the ability of operators to sustain local production efforts, noting that the inability to access foreign exchange for importation of critical raw materials was largely responsible for low capacity utilisation.
Predicting an all-time unemployment rate that might rise as high as 50 per cent owing to the disruption caused by the COVID-19 pandemic, MAN had urged the government to initiate policies to strengthen the purchasing power of consumers to stimulate aggregate demand and deliberately support industries to reduce the production cost of products manufactured in the country.
But the Director-General of the Lagos Chamber of Commerce and Industry (LCCI), Dr. Muda Yusuf, stated that looting might not affect aggregate demand. He, however, said the impact of the actions on the manufacturing sector was enormous.
“Looting has become a threat to every business. There is a need for security agencies to put a stop to it because if there are no consequences, such action may not stop,” he added© 2020 Guardian Newspapers. All Rights Reserved.