Nigeria’s human capital remains largely untapped. The high population (currently estimated at 185 million) is often viewed as a double-edged sword, with the negative implications getting more of the attention. Given that rural jobs are predominantly in agriculture and are often seasonal, attention tends to focus on unemployment in urban areas. The latest labour force report from the National Bureau of Statistics shows a rise in the national unemployment rate to 18.8% in Q3 2017 from 16.2% one quarter earlier. Youth unemployment was 33.1% for the same period.
- There is a direct correlation between education and human capital development. For Nigeria, the human capital lacks training in relevant skills and a large proportion of the working population is poorly educated.
- In its maiden Human Capital Index (HCI) released last week, the World Bank ranked Nigeria 152 out of 157 countries, placing it firmly in the ‘red zone’. The FGN’s budget allocations to the education and health sectors have been low, which is a core reason for the underperformance in the index.
- Meanwhile, Singapore topped the HCI, while South Korea, Japan and Hong Kong came in at second, third and fourth positions respectively.
- In the FGN 2018 budget, education and healthcare account for just 7% and 4% respectively of the total allocation. Unless the government agencies in charge of these sectors are properly funded, a proper overhaul is unlikely. We understand that the education budget allocation ratio prescribed by UNESCO is 15%.
Transactions on the NSE, Sep 2014 – Apr 2015 (N bn)
Sources: Nigerian Stock Exchange (NSE); FBNQuest Capital Research
- The Chinese government has invested heavily in education to stimulate its economy and increase competitiveness. In China education is not heavily focused on formal white-collar disciplines; rather, training for informal jobs and skills acquisition have been the core focus.
- One direct benefit from this investment has been the increased generation of export earnings through its human capital. For instance, construction projects delivered overseas are predominantly handled by Chinese nationals. (This is not always welcome in the host country.)
- The Nigerian authorities could consider focusing on establishing fully functional vocational and technical institutions as these could assist with easing stress on the job market. Perhaps formal education should include courses that will equip individuals for career paths often cited as ‘blue collar’ (such as plumbing, auto mechanics and carpentry). These jobs may be regarded as inferior but can be well-paid in developed countries.
- Investing in Nigeria’s human capital will assist with shrinking the unemployment gap, particularly in the formal sector where job vacancies are sometimes linked to absence of skilled labour. Another benefit would be increased productivity.