POLICY STATEMENT 019 ISS
– ADDRESSING THE NEEDLESS ATTACKS ON NBS DATA
By Ayofe Adedeji
On Friday, 22 November, 2024, the National Bureau of Statistics (NBS) circulated data generated from its latest General Household Survey (GHS) Panel (Wave 5). The data paint a damning state of the national economy as encapsulated in the headline of a daily newspaper which gleefully declares: “Hardship: Nigerians now borrow, skip meals for days – NBS.”
The narration of the story highlighted how the NBS’ survey had shown that 65 percent of families and other residents across the country are unable to afford healthy meals because of lack of money.
We note with interest the equanimity with which the usual bohemian community of Federal Government’s critics adopted the GHS data and, thereafter, the amplification of the data as a true reflection of the state of the national economy by the critics.
Besides this, there had been hardly any question querying the basis of the publication of the country’s inflation figures since it returned to the incremental trajectory at 33.88 percent in October, 2024 from a high of 34.19 percent in June. The headline inflation had briefly declined to 33.40 percent and further down to 32.15 percent in July and August, respectively.
Typical of reactions to news or data indicating upward progression concerning the Nigerian economy from some quarters, the reduction in headline inflation figures as reflected in July and August, 2024 data were met with disbelief and suspicion of manipulation of the NBS supposedly by the unseen hands of the Federal Government, which according to pundits, desperately wanted to look good in the minds of Nigerians.
It is this same little veiled public expression of accusation of manipulation of data by government that greeted the release of the NBS’ Nigeria Labour Force Survey (NLFS) report for the second quarter of 2024 and Nigeria’s Gross Domestic Product (GDP) for the third quarter of 2024.
The NBS had reported a drop in the nation’s unemployment rate from 5.3 per cent in the first quarter of 2024 to 4.3 per cent in the second quarter of 2024. This figure suggests that only about four people out of every 100 Nigerians are currently unemployed, a positive indication of reduction in the nation’s unemployment data.
Nigeria’s Gross Domestic Product (GDP), in like spirit, shows a growth to 3.46 percent (year-on-year) in real terms in the third quarter of 2024. This growth rate is higher than the 2.54 percent recorded in the third quarter of 2023 and that of the second quarter of 2024 growth of 3.19 percent.
Apparently, these figures were too good to be true. The social media space and the community of critics became unrelenting in questioning the basis of the data, some dismissed them as “voodoo data” and “propaganda figures”
We find this growing culture of brazen repudiation of NBS issued data rather inappropriate, especially when, as often, the refutation are not grounded in facts and logic. One of the critics had dismissed the second quarter unemployment data on the ground that unemployment rate could not be decreasing while factories are closing, and businesses are reporting unsold inventories.Another criticised the methodology used to arrive at the figure as not been transparent.
We submit that this is the crux of the matter. Most critics and commentators lack an understanding of the methodology that foregrounds the Nigeria Labour Force Survey (NLFS) despite the fact that it had been adopted and deployed by the NBS since the first quarter of 2023.
In the first quarter of 2023, the NBS adopted the International Labour Organization (ILO) approved and recommended methodology to measure employment and unemployment rate per term. The updated method aims to conform with global standards by providing a more accurate picture of the labour market in the context of the nation’s socio-demographic profile.
In line with the ILO guidelines, the NBS defines employed persons as those in paid employment who have worked for at least one hour in the last seven days. This compares with the previous method where an employed person must have worked for a minimum of 20 hours within the reference period of seven days to qualify as being employed.
Meanwhile, in the new methodology, the labour force is defined as those 15 years and above, who are willing, available, and able to work while under the old method, the labour force only included those aged between 15 and 64 who were willing, available, and able to work.
This broader definition of the labour force implies that some people previously classified as outside the labour force are now included in the labour force particularly those engaged in informal or part-time work. Consequently, the methodology establishes a new threshold of unemployment as it does not necessarily reflect an increase in job losses but rather an expanded inclusion of individuals actively seeking work.
Additionally, the active search for employment now qualifies individuals as unemployed, encompassing various job-seeking activities such as submitting applications, attending job fairs, and networking.
However, the one hour in the last seven days labour engagement metric effectively enlarges the basis of measurement of employment to include, in this case, Nigerians who are working for themselves. This reflects in the 71.2 million Nigerians said to be working for themselves while just 12.96 million others work for wages out of the total 88.9million in the country’s labour force as data in the second quarter of NBS labour force survey show.
According to the data, most of the 12.96 million wage workers are in the private sector (9.64 million), while the rest work in the public sector (3.32 million). For some other analysts, the number of 71.2 million self-employed in the survey have continued to raise concern about the quality of jobs in which people are engaged with.
Obviously, the number of self-employed is the dominant data in the survey accounting for 85.6 per cent of total employment, an increase from 84 per cent in the previous quarter. The implication of the new methodology underscores the realization that the old methodology had shaved a huge percentage of the working population off the nominal labour force and made the wage earners categorization the total population of the labour force.
The old methodology which describes an employed individual as a person who must have worked for a minimum of 20 hours within the reference period of seven days, aligns with the methodology which is adopted in developed economies in which employment rate for any area is calculated by dividing the number of employed people by the total labor force and multiplying it by 100 while unemployment rate is calculated by taking the number of residents who are without a job and looking for work, and dividing that number by the total number of residents in the labor force, and multiplying by 100.
The labor force is, thus, the sum of everyone in an area who is employed in wage earning activity and everyone in an area who is unemployed but actively seeking work. The grand assumption with the old methodology is the emphasis on work time for payment or wages in exchange for labour.
As a result of this survey structure, the component of self-employment in the two methodologies are in reverse order, thus, labour markets in developing countries like Nigeria differ fundamentally from those of developed economies. In developing economies like Nigeria, a central distinguishing feature consists in the very low levels of wage employment, and high self-employment.
The argument, typically, is that productivity or wages in wage employment are low in developing countries, while self-employment is comparatively unregulated and easily accessible. As a consequence, many workers enter self-employment because of its easy access to sustenance.
In this regards, we reference Markus Poschke understanding of the relationship between wage labour and self-employed labour which notes that because developing countries have low wage employment, the ratio of unemployment to employment plus wage employment is much higher.
Therefore, self-employment increases with the ratio of unemployment to wage employment ratio. The extension to this is that in developing countries like Nigeria, many workers outside urban areas work in agriculture. The land distribution in these countries implies that this sector is dominated by self-employment on family farms and the main occupational choice is self-employment in farming versus non farming, with only a small role for wage employment.
This forms the basis of the NBS labour survey methodology, it justifies the inclusion of the vast number of self-employed Nigerians in the labour force and the segmentation of their labour engagements that were not included in the old survey methodology.
The labour data align with Nigeria’s Gross Domestic Product (GDP) performance data for the third quarter, 2024 which was also released by the NBS. According to the data, the economy expanded by 3.46 per cent overall. But the growth was mostly driven by the service sector.
Like the labour force survey data, the GDP performance, which outperformed projections by the International Monetary Fund (IMF), the World Bank and other research institutions, was contrary to market expectations.
Nigeria’s real GDP for the third quarter of 2024 was N20.1 trillion, which is a 3.46% increase from the same quarter in 2023. This was higher than the second quarter of 2024, which was N18.2 trillion.
This was higher than the second quarter of 2024, which was N18.2 trillion. However, a crowd of critics chorused that the increase in GDP figure was driven mainly by the service sector, which recorded a growth of 5.19 percent and contributed 53.58 percent at the expense of the agriculture sector which grew by 1.14 percent from the 1.30 percent in the third quarter of 2023 and the manufacturing and real estate sub sectors which recorded decelerations to 0.92 percent YoY and 0.68 percent YoY in Q3:2024, respectively, compared to 1.28 percent and 0.75 percent in Q2:2024.
A number of critics, however, dismissed the growth as non-inclusive and unhealthy. Some other insisted that it was time the nation’s faulty economic structure was reset by leveraging technology in favour of the productive sectors like industry and agriculture.
We do not agree with this dismissive assertion.
We are, indeed, delighted that the nation’s service sector has emerged the lead sector of the economy. The three-sector model in economics divides economies into three sectors of activity: extraction of raw materials (primary), manufacturing (secondary), and service industries which exist to facilitate the transport, distribution and sale of goods produced in the secondary sector (tertiary).
The primary sector involves extracting raw materials from the earth, such as through mining, forestry, or farming. The secondary sector involves manufacturing raw materials into goods, such as turning grains into pasta or trees into lumber, while the tertiary sector also known as the service sector includes areas such as ICT, trade, and financial services.
Though there had been much umbrage against the contributions of the service sector to the economy by some experts, nonetheless, historically, the sector had been the dominant segment of the Nigerian economy. Currently, it is the highest contributor to the national economy at 53.58 percent recorded in third quarter, 2024 a decline from the 58.76 percent recorded in second quarter 2024.
On the average, the sector contributes 50 percent to Nigeria’s GDP over the last four years. The reality is that the service sector is a key part of any economy’s development and its role is growing in importance. It is the largest part of the global economy’s business activity and a major driver of economic growth, especially in developing economies.
In 2019, services accounted for 55 percent of GDP in developing economies, and 75 percent in developed economies. Against some other postulations, it is also a major source of jobs, especially in developing economies. In 2019, services accounted for 45 percent of employment in developing economies and 50 percent of global trade in value-added terms.
When contrasted to other sectors like agriculture, though a traditional economic mainstay, its growth remained modest at 1.14 percent in third quarter 2024. Crop production, the primary driver of the agriculture sector, lacks the dynamism seen in ICT while industry, with a third quarter growth rate of 2.18 percent also lags behind it in both growth and GDP share, emphasising ICT’s importance as an engine of Nigeria’s economic activity.
The fact is that Nigeria’s ICT performance aligns with broader trends in sub-Saharan Africa where digitalisation is rapidly transforming economies. However, the country’s growth rates show that the government is deliberately driving this digital revolution by leveraging its large population and youthful demographics. Indeed, the ICT sector, particularly telecommunications, is the cornerstone of Nigeria’s economic performance in the first three quarters of 2024.
Despite challenges such as declining nominal growth rates and quarterly volatility, the sector demonstrates resilience and remains a critical contributor to GDP. When the performance of the sector is granularly analysed, the principal indication is that telecommunications dominates the ICT landscape, accounting for the largest share of the sector’s output. Its consistent contributions underscore its role as a foundational element in Nigeria’s GDP. In this context, it establishes for instance, that there is a correlational relationship between internet penetration and GDP growth.
Indeed, a 10 percent increase in mobile broadband penetration in Africa can increase GDP per capita by 2.5 percent while a 10 percentage point increase in internet penetration rate can increase real GDP per capita by 0.57 to 0.63 percentage points. When related to the actuals of the Nigerian economy, the third quarter’s real GDP growth of 6.78 percent in telecommunications was robust, driven by expanding mobile and broadband penetration indicating sustained demand for telecom services despite economic challenges.
Deriving from above, our submission is that with the right investments and policy frameworks, ICT has the potential to solidify its role as Nigeria’s economic growth engine which has the propensity to propel the country toward a more digital and connected future.
This is further evidenced by the N2.55trillion paid in taxes in the first half of this year by foreign digital companies operating in the country, including Google, Microsoft, and TikTok, among others.
On account of this, we encourage governments at all levels to focus spending and policy reinforcement in the service sector this is without prejudice to the agriculture and manufacturing sectors which are also pivots of the larger economy.
*Omoniyi M. Akinsiju, PhD*
*Chairman,*
*Independent Media and Policy Initiative (IMPI),*
*December 9 2024*
