Introduction
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.
Conceptual and theoretical issues of
unemployment
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
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.
National Economic Employment and
Development Strategy (NEEDS)
The National Economic Employment and
Development Strategy (NEEDS) were introduced in March 2004, in order to
confront the various macroeconomic imbalances, social challenges and structural
problems in the Nigerian Economy. One of the principal goals is to build a
modern Nigerian that maximizes the potential of every citizen so as to become
the largest and strongest African economy, and a force to be reckoned with in
the world. To achieve this goal NEEDS, as a development strategy Anchored on
the private sector is to engineer wealth creation, employment generation and
poverty reduction, however, for NEEDS to achieve its objectives there’s need to
design many integrated Programmers that can generate employment for women and
youths to enhance growth and development(Adebayo, 2006). As it is a medium –
termed reform based development strategy, and action plan for the period
2003-2007, the impact of NEEDS is yet to be felt, in combating unemployment
problem and these further points to the need to seek help in the informal
sector in order to drastically reduce Unemployment.
Checking Unemployment through the
Informal Sector
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 – CREDIT, FUND; hence the
availability of
Roles of the Micro Finance Institutions
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 small 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.
Microfinance service providers are
expected to:
(i) Provide efficient and effective
financial services, such as credit, deposits, and commodity/inventory
Collateralization, leasing, and innovative transfer/payment services;
(ii) Undertake appropriate recruitment
and retention of qualified professionals through transparent and competitive
processes;
(iii) Adopt continuous training and
capacity building programmed to improve the skills of staff; and
(iv)Strictly observe their fiduciary
responsibility, remain transparent and accountable in protecting Savers’
deposits. Credit to finance the informal sector cannot be under placed.
Central Bank of Nigeria (CBN)
The roles of the CBN shall include the
following:
(i) Establishing a National Microfinance
Consultative Committee.
(ii) Evolving a clear micro-finance
policy that spells out eligibility and licensing criteria,
Provides operational/prudential standards
and guidelines to all stakeholders;
(iii) Evolving a microfinance sub-sector
and institutional policies aimed at providing
Regulatory harmony, promoting healthy
competition and mainstreaming micro financing
With formal intermediation;
(iv) Adopting an appropriate regulatory
and supervisory framework;
(v) Minimizing regulatory arbitrage
through periodic reviews of the policy and guidelines;
(vi) Promoting linkage programmed between
universal/development banks, specialized finance
Institutions and the microfinance banks;
(vii) Continuously advocating
market-determined interest rates for government-owned
Institutions and promote the channeling
of government microfinance funds through MFBs;
And
(viii)Implementing appropriate training
programmed for regulators, promoters and practitioners
In the sub-sector, in collaboration with
stakeholders.
Conclusion
From the study of 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.
References
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