NIGERIA'S UNEMPLOYMENT: A SILENT EMERGENCY

C O N F I D E N T I A L SECTION 01 OF 04 LAGOS 000629

SIPDIS

E.O. 12958: DECL: 04/26/2015
TAGS: ECON SOCI PGOV NI
SUBJECT: NIGERIA'S UNEMPLOYMENT: A SILENT EMERGENCY

Classified By: Consul General Brian Browne for reasons 1.4 (b) and (d)


1. (C) Summary: According to the GON Federal Office of
Statistics (FOS),Nigeria's unemployment rate for 2003 was
14.8 percent. (Note: Statistics have not been released for

2004. End note.) The actual unemployment rate likely is
considerably higher than what FOS reports. Nigeria's
informal sector further masks chronic unemployment and
underemployment which contribute to the country's extremely
skewed income distribution and have harsh social, economic
and political effects. GON-sponsored employment programs are
anemic and have registered scant progress. Organized labor
has the potential to lobby for stronger employment policies
has confined its energies to preserving the prerogatives of
those already employed. If fully implemented, the
poverty-eradication themed National Economic Empowerment and
Development Strategy (NEEDS),drafted by the GON in 2004,
holds promise for a real impact on unemployment. End summary.

UNEMPLOYMENT STATISTICS DO NOT TELL THE FULL STORY
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2. (C) Unemployment figures for Nigeria are difficult to
obtain and, when acquired, almost wholly unreliable.
Estimates of Nigeria's labor force range from 35 to 66
million people (2000). The Federal Office of Statistics
(FOS) cites a 14.8 percent unemployment rate for 2003,
independent estimates vary from 20 to 40 percent. The public
sector (at all levels of government) is believed to account
for up to 50 percent of the formally employed. Further,
unemployment figures should be interpreted with caution
because of the magnitude of underemployment and the informal
sector. While some workers in the informal sector may be
doing well and working regularly, indications are that for
most laborers in this sector, work is erratic and low-paying.
What is clear: unemployment, underemployment, and low-paying
informal sector work are factors causing Nigeria's poverty,
estimated to be among the worst in sub-Saharan Africa.

HIGH DEPENDANCY RATES; WOMEN PARTICULARLY IMPACTED
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3. (U) Few jobs existed in Nigeria after four decades of
military rulers and government improprieties scared off
private sector employers. Today, ineffective government
programs leave the unemployed and underemployed without a
social safety net against poverty, while family and community
networks attempt to bridge the gap. Traditional family
culture obligates breadwinners to support those without
income. Large families, including parents, numerous brothers
and sisters, even aunts and uncles, often rely on one
breadwinner's income for payments of school fees, funeral
costs, medical emergencies and, in some cases, regular
monthly allowances. As a Yoruba tribe adage has it, "With
one rich person amidst nine paupers, you have ten paupers".
And as incomes grow, so do family demands.


4. (U) Unemployment and underemployment may impact women more
than men in Nigeria. According to FOS statistics, one-third
of Nigeria's unemployed are female. The United Nations
Development Programme (UNDP) figures show females make up of
56 percent of Nigeria's economically active population. Yet,
female annual earned income in Nigeria is estimated to be USD
562 compared to USD 1322 for males. The income disparity is
partly due to the differing types of work females and males
undertake in Nigeria. In rural areas, traditional gender
roles have women working in non-cash producing activities
such as caring for the family and home, and sustainable
agricultural activities. In urban areas, women are more
likely than men to work in the informal economy as cooks,
market traders, or hair dressers, for example, which allows
flexibility to take care of the family but generates less
income than if working in the formal sector. Women working
in the formal sector in Nigeria have less job mobility than
men. In the banking sector, for example, of 89 commercial
banks only three have female Managing Directors -- two of
those women have family connections to the banks' executives
or directors. Family demands on female income can be more
than that of their male counterparts. Perception is that
male family members provide for living expenses while female
family member income is disposable. Since female income is
not perceived to contribute to the sustainability of the
family, female income is more susceptible to the "family tax".

LOST RESOURCES - LOWER PRODUCTIVITY AND HIGHER CRIME
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5. (U) Each unemployed and underemployed Nigerian represents
lost productivity and missed economic development. In the
face of Nigeria's low manufacturing and agricultural output,
few exported products, and crumbling infrastructure, there
are latent employment opportunities. The magnitude of lost
take-home pay due to unemployment and underemployment has
depressed Nigeria's consumer market.


6. (U) Illegal businesses look attractive to Nigerians who
are at a loss for legitimate revenue-producing activities.
Nigeria cultivates international financial fraud ("advanced
fee fraud" or "419"),drug-ring, and illegal oil bunkering
criminals. 419 criminals, who use computer skills and the
Internet to scam unsuspecting recipients out of billions of
dollars each year, display Nigeria's lack of opportunities
for the skilled and technologically savvy. In 1999 alone, US
victims reported losses of several hundred million dollars to
advance fee frauds, according to US law enforcement. The
Secret Service has reported receiving approximately 100 calls

SIPDIS
and 300 to 500 pieces of correspondence per day from
potential victims. Though no recent statistics are available
on the magnitude of the drug trade through Nigeria, a 2001
U.S. Department of Justice report stated Nigerian drug
traffickers dominate the African drug trade, and that Nigeria
is a trafficking point for drugs to the U.S. Illegal oil
bunkering estimates are not entirely verifiable, but 60,000
to 100,000 barrels of oil is believed to be diverted from
official exports per day. Violent crime, usually blamed on
idle, poverty-stricken youth, ranks Lagos and Port Harcourt
two of the most dangerous cities in the world.

...AND POLITICAL INSTABILITY
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7. (C) In Nigeria the middle class is small, leaving most
income distributed between the masses of poor and unemployed,
and a handful of the wealthy elite. Nigeria's 2003 GDP per
capita is estimated at only USD 900, but this number hides
income disparity. According to UNDP, Nigeria's poorest 10
percent control less than two percent of income, and the
poorest 20 percent hold less than five percent of income.
Meanwhile, the richest 20 percent of Nigeria's population
control 56 percent of total income. Social inequality and
income distribution disparities are sources of resentment
that contribute to political instability.


8. (U) Already the Niger Delta region's ongoing struggle
between jobless local communities and wealthy oil companies
shows the effects of economic striation in stark terms. The
2.2 million barrels of oil pumped from the Delta region each
day make up about 90 percent of Nigeria's foreign income.
Yet the region is mired in poverty. Seven of the nine Delta
region states (Abia, Akwa Ibom, Bayelsa, Cross Rivers, Delta,
Imo, and Rivers) have unemployment levels among the nation's
top 10 states. Inter-communal violence is common and results
from impoverished communities vying for scarce, trickle-down
resources from the oil industry. The oil industry is an easy
target of violence, kidnapping, sabotage, seizure of
facilities, and disrupted production. Local communities also
suffer; from 2003 to 2005 estimated violent deaths in the
region totaled well over several hundred. Unemployment is a
destabilizing factor given the Delta's already poor social
conditions and intercommunal tensions.

GON UNEMPLOYMENT PROGRAMS SHOW MEAGER RESULTS
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9. (U) The National Directorate of Employment (NDE),a GON
agency with a modest budget of naira 566 million (USD 4.3
million) in 2004, spearheads GON efforts to combat
unemployment such as the Small Scale Enterprises Programme
and Rural Employment Promotion Programme. The National
Manpower Board, National Poverty Eradication Programme
(NAPEP),Poverty Reduction Strategy Programme (PRSP),
National Poverty Eradication Council (NAPEC),Agricultural
Development Projects (ADP),and Better Life Program for rural
women make up other GON unemployment programs. These
programs have had little impact on the Nigerian unemployment
problem.


10. (SBU) During a recent visit to the Lagos liaison office
of the NDE, the lone NDE representative had no information
regarding available employment-promotion programs or
unemployment rates. He claimed the office was gutted by fire
in early 2004; furniture and office supplies have yet to be
replaced. At a separate meeting with the Manpower Board
office in the same building, the director presented 1998
data, but only after receiving the approval of the head
office in Abuja.


11. (SBU) Lagos State NDE offices look more business-like,
though also dilapidated. Workers attend to clients inquiring
about programs. Though statistics were "not available," an
official said the Directorate has success stories, mostly
through its Small and Medium Scale Industry Development
program. Participants benefit from training in
candle-making, soap and detergent-making, foundry work and
metal fabrication, fashion design and tailoring, as well as
furniture and cabinetmaking. Under the GON's job creation
loan guarantee scheme, participants are encouraged to apply
for small loans ranging from 5,000 to 50,000 naira (USD 38.00
to USD 376.00),to be repaid over a five-year period at a
fixed interest rate.


12. (C) There are few figures on the results of the GON's
programs to combat unemployment. The NDE reported in January
2005 it had "engaged" 2 million youth since its inception in

1986. (Note: Youth under age 25 are estimated to be 32
percent of the unemployed. End note.) According to the
Federal Office of Statistics, the country's annual
unemployment rates remained fairly consistent from 1999 to
2003, fluctuating only by a few percentage points. (Comment:
The GON programs to alleviate unemployment are relatively
empty shells. The problem is enormous, but few resources are
allocated to it. The NDE, the cornerstone of the GON's
unemployment solution, has severely limited resources, and
appears to create jobs only for the people who work for the
Directorate itself. The scant funding programs do receive is
further reduced by corruption. Mismanagement, political
party and institutional rivalries, lack of long-term planning
for program sustainability, and inefficiency also create
implementation hurdles. End comment.)
LABOR UNIONS BUSY WITH OTHER (IMPORTANT) THINGS; SME AND
MICRO-CREDIT NGOS ACT
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13. (U) Nigeria's two influential labor umbrella
organizations, National Labor Congress (NLC) and Trade Union
Congress (TUC),and their combined 47 affiliated labor unions
have the potential to lobby for stronger employment policies
but they have not done so. The NLC acts more like a popular
movement on wider social matters than like a labor union.
For example, the NLC has successfully led strikes to reduce
fuel price hikes that result as fuel price subsidies are
reduced under President Obasanjo's economic and downstream
oil sector reform initiatives. While the NLC has a stated
ideology that unemployment should be low, they have
undertaken no activities to shape employment policies at the
national or state level.


14. (U) Small- and medium-sized enterprise (SME)
non-governmental organizations (NGOs) and micro-credit NGOs
in Nigeria are playing a positive role by creating jobs,
albeit on a small level compared to the potential impact of
GON activities. The Growing Businesses Foundation (GBF)
helps SMEs across twelve states by linking informal sector
producers with formal sector markets, networking
opportunities, grantmaking to microcredit organizations, and
training programs. One GBF program linked 30 women in rural
Kwara state with Nigeria's largest mobile telecom services
provider, MTN Nigeria. The previously unemployed women were
trained to operate MTN mobile phone kiosks in their
communities where no phone service existed. The Lift Above
Poverty Organization (LAPO) is another successful NGO
focusing on microcredit financing for small projects. In
2004 LAPO had about 30,000 clients across Nigeria. Typical
clients are poor farming women or tailors whom LAPO assists
with loans equivalent to as little as USD 50.


15. (U) The GON Small and Medium Industries Equity Investment
Scheme (SMEIS) was established to provide microcredit and
support. Part of the SMEIS plan is for Nigeria's banks to
set aside 10 percent of their profits before tax for
investment in SMEs. Thus far, the program has been held back
by accusations of misallocated funds. NGOs such as LAPO
remain cautiously optimistic that SMEIS and other programs
will eventually benefit Nigeria's unemployed.

COMMENT
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16. (U) Comment. President Obasanjo has attempted to address
unemployment systematically through his National Economic
Empowerment and Development Strategy (NEEDS) and State
Economic Epowerment and Development Strategy (SEEDS)
initiatives; and the National Assembly through budgetary
support of GON programs. Even in these policies, however,
urban unemployment tends to be overlooked as the GON supports
mostly agricultural development.


17. (C) Comment continued. NEEDS and SEEDS could put a dent
in the country's unemployment rate if only they maintain
momentum and muscle. Transparency & anti-corruption are the
first steps to successful implementation and the current
administration should be sure that is entrenched at the state
and national levels. Success may rest on how much of this
can be accomplished by the next GON administration, in the
case that the reforms lose clout with a new government. Both
NEEDS and SEEDS endorse support for SMEs, though support has
yet to translate into concrete results. The GON, on the
other hand, may best serve unemployed Nigerians by making the
Nigerian business environment an attractive one for foreign
and national businesses to invest, thereby creating jobs.
The NEEDS initiative also addresses this, stating a
commitment to privatization, liberalization, and
infrastructure development. While we are seeing some
progress towards NEEDS implementation, none has yet had a
serious effect on unemployment.


18. (C) Comment continued. In the city streets, where
unemployed youth loiter and congregate, employment rates
become more than numbers. Unemployment becomes the
flashpoint for crime, social tensions and all varieties of
extremism. Unemployed youth in the Delta region are more apt
to join or sympathize with militias there. Unemployed
Northerners are more prone to listen to militant clerics. In
the East, the secessionist organization MASSOB has the
empathy of the poor and unemployed in that densely populated
section of the country. When it climbs above a certain rate,
unemployment may become more a social and political problem
than a purely economic one. In most of the country's cities,
there is a strong undercurrent of dissatisfaction and much of
these come from the legions of unemployed and underemployed
persons who daily witness the gap between themselves and the
country's super-elite.

19. (C) Comment continued. Unemployment is not a primary
focus of discussions about Nigeria's security, but this is
one of the problems threatening Nigeria's core stability over
the long haul. Oil-rich Nigeria is one of the world's
poorest 20 countries per capita, with 70 percent of its
population living on less than one dollar per day. In paying
inadequate attention to employment and job creation, Nigeria
will stifle its growth and economic development, while
allowing an element of instability to fester. End comment.

(U) AmEmbassy Abuja contributed to and cleared this cable.
BROWNE