Just a week ago, I was reading news online and i came across some unemployed teachers in Nigeria crying bitterly and holding a very serious prayer section. What sort of public prayer gathering is this? I felt very embarassed and disappointed in the economic system of my beloved country.
I see employment generation has been seen as a means of alleviating poverty, increasing the Level of economic activities which translate into economic growth. The situation of unemployment in Africa, Nigeria as a case study has been on the increase which has resulted in increase in social vices among other negativities. Although the Nigerian Government in previous times had put in place Policies and programmed which are meant to combat this menace, few of which are considered in this Study, but up till now these programmers have not made much impact. We therefore examine how unemployment can be reduced, by expanding the activities of the Informal sector. Although the informal sector has its challenges, which revolves round the Inaccessibility of credit to finance its activities but there is a glimmer of hope, considering the on-going Policy of the Federal Government through the Central Bank of Nigeria, on microfinance, which has Brought microfinance banking into the limelight making it a more realistic programme.
Unemployment is one of the developmental problems that face every developing economy in the 21stcentury. International statistics portray that industrial and service workers living in developing regions account for about two-thirds of the unemployed. (Patterson et al, 2006).
The Nigerian economy since the attainment of political independence in 1960 has undergone
Fundamental structural changes. The domestic structural shifts have however not resulted in any Significant and sustainable economic growth and development. Available data show that the Nigerian economy grew relatively in the greater parts of the 1970s, with respect to the oil boom of the 1970s; the outrageous profits from the oil boom encouraged wasteful expenditures in the public sector dislocation of the employment factor and also distorted the revenue bases for policy planning.
This among many other crises resulted in the introduction of the structural adjustment programme (SAP) in1986 and the current economic reforms. The core objective of the economic structural reform, is a total restructuring of the Nigerian economy in the face of population explosion (Douglaston et al, 2006).However, these economic and financial structural reforms put in place have not yielded significant results. In the light of this, this paper seeks to examine how a major macroeconomic variable, unemployment could be reduced through the informal sector which is a recent global issue Targeted at empowering people towards being self productive and independent(Akintoye, 2006).We shall consider the key concepts in our study, unemployment in Nigeria, in previous and recent times, role of the informal sector as a mitigating factor, the role of micro finance institutions, and other relevant stakeholders, in meeting the needs of the informal sector, while we also recommend how the informal sector can be activated in order reduce unemployment in Nigeria, which will invariably result in reduced poverty, improved standard of living, improved productivity, and an overall improvement in economic performance among other benefits
According to Briggs (1973) unemployment is the difference between the amount of lab our employed at current wage lends and working conditions, and the amount of labour not hired at these levels, however, Gbosi (1997) defined unemployment as a situation in which people who are willing to work at the prevailing wage rate are unable to find jobs. The implication of the definition by Gbosi is that anyone who is not be counted as part of the unemployed labour force, in order to avoid over estimation of the official rate of unemployment. In recent times, the definition of unemployment by the International Labour Organization (ILO) is said to be more encompassing, “the unemployed is a member of the economically active population, who are without work but available for and seeking for work, including people who have lost their jobs
And those who have voluntarily left work (World Bank, 1998). The application of this definition across countries has been faulted, especially for the purpose of comparison and policy formulation, as countries characteristics are not the same in their commitment to resolving unemployment problems, more so, the preponderance of housewives who possess the ability and willingness to work, The Definition of the age bracket all stand as limitations to the definition by ILO (Douglaston et al, 2006).According to the Central Bank of Nigeria (2003) the national unemployment rate, rose from 4.3 Percent in 1970 to 6.4 percent in 1980.
The high rate of unemployment observed in 1980 was attributed largely to depression in the Nigerian economy during the late 1970s. Specifically, the economic down turn led to the implementation of stabilization measures which included restriction on exports, which caused import dependency of most Nigerian manufacturing enterprises, which in turn resulted in Operation of many companies below their installed capacity. This development led to the close down of many industries while the survived few were forced to retrench a large proportion of their workforce, furthermore, the Nigerian Government also placed an embargo on employment. Specifically total disengagement from the Federal Civil Service rose from 2, 724 in 1980 to 6,294 in1984 (Odusola, 2001).
Owing to this, the national unemployment rate fluctuated around 6.0% until1987 when it rose to 7.1 percent. It is important to state here, that SAP adopted in 1986, had serious implications on employment in Nigeria, as unemployment rate declined from 7.1 percent in 1987, to as low as 1.8 percent in 1995, after which it rose to 3.4 percent in 1996, and hovered between 3.4 and 4.7percent between 1996 and 2000 (Douglaston et al, 2006).
The informal sector is unorganized, unregulated and mostly legal, but unregistered. As observed by Todaro (1997), the massive additions to the urban labour force by this sector do not show up in formal modern sector unemployment statistics. The buck of new entrants to the urban labour force creates their own employment or work for small scale family owned enterprises.
The concept of “informal sector” since its invention in the 1970s has attracted much interest,
Discussion and disagreement. There are currently two approaches to defining informal sector activities: the definitional and behavioral (Farrel, roman and Fleming, 2000).Farrel defines the informal sector as one which consists of economic activities which are not
Recorded in the grow domestic product (GDP) and or the national income accounts. The behavioral Which is a times referred to as the legalistic definition is based on whether or not an activity complies with the established judicial, regulatory, and institutional framework (Feige, 1990) however, Sethuraman (1981) defines the informal sector as consisting of small scale units engaged in production and distribution of goods and services with the primary objective of generating employment and income, notwithstanding the constraints on capital, both physical and human, and the technical-knowhow, Arimah (2001, opines that the informal sector does not appear to have a meaning independent of The formal sector, as it only derives its meaning when contrasted with the formal sector. Ademu (2006) also defines the formal sector.
Ademu (2006) also defines the formal sector as comprising those Employment generating activities of some urban residents, undertaken for survival in the absence of formal employment. These activities are characterized by the lack of regulations by institutions of society in a social and legal environment in which similar activities are regulated. Common features of operators in the informal sector include:
• Easier access to production factors which are derivable from social organization of family and
Friends.
• Involves entrepreneurs in virtually all branches of the economy ranging from productive
Activities general services and specialized services.
• Technology is determined more by the constraints of the social relations.
Studies on industrial development of different countries have shown that the informal sector constitutes an integral part in the overall industrial sector and play an active role in the growth and development of these countries. These enterprises contribute significantly to the employment generation and output growth of different developed and developing countries (Quarterly News letter of IYMC, 2005).In Nigeria, this sub-sector accounts for about 70% of the total industrial employment, generates about 6.2 percent of the aggregate employment in the United States, 22.3 percent in China, about 80 percent in India, as well as about 50 percent employment in Israel (Maryland, 2004). The foregoing therefore points to the fact that the informal sector given the needed support and regulatory framework could be a major player in the combat against unemployment saga in Nigeria, as well as in other developing countries.
However, the informal sector cannot operate effectively at this task without the support of other
key players, which is basically the availability of credit, as the best of ideas may never translate to reality without the wherewithal to make it happen
Micro Finance continues to assume increasing importance as a result of the foregoing. The emphasis on micro credit in this century is such that the Global conscience believes that if unemployment is reduced, the world would be a better place as there would be a reduction in poverty, an improved living condition, increased productivity, and an overall resultant effect of an enhanced economic performance. Khandker (1998) observes that the lack of savings and capital makes it difficult for many poor, people to become self-employed and to undertake productive employment generating activities. Furthermore, lack of capital makes it difficult for the disadvantaged to become self-employed. Consequently, the informal sector’s productive base and contributions remain s
mall due to inaccessibility to credit (Ademu, 2006).
In the light of the above, micro finance institutions in whatever social and economic climes can
Deliver credit to the informal sector which in turn makes use of the borrowed fund profitably, thereby reducing the level of unemployment in the country.
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