IN an increasingly turbulent national economy that is hobbled by the crash in crude oil prices and corruption, Lagos State has made a bold move by establishing an employment scheme. Governor Akinwunmi Ambode has formalised a N25 billion proposal by signing the Employment Trust Fund Bill into law, with the unique focus on curbing unemployment. Capital is the oxygen of small business. This initiative, if well implemented, has a potential knock-on effect that will roll back the high rate of unemployment in Lagos. But the initiative should not be dampened by corruption, partisan politics, cronyism and bureaucratic red tape.
The ETF policy, whose Board of Trustees is headed by Ifueko Omoigui-Okaru, a former Federal Inland Revenue Service chairperson, will last for four years. “Each year, the government will inject N6.25 billion into the fund…” Ambode said. The ETF will grant soft loans of between N100,000 and N1 million (or more) to residents. The lack of access to funding has been a major impediment to start-ups and small-and-medium enterprises in Nigeria. The ETF reportedly has an interest rate of about 1 per cent. In an economy where the average lending rate is about 19 per cent and some banks lend even higher, small business outfits can now secure the much-valued lifeline to start and grow their holdings. In terms of economic outlook, Lagos, with the highest internally-generated revenue of N276.1 billion in 2014 (National Bureau of Statistics), is taking the bull by the horns.
More than all other states in the country, Lagos bears a high unemployment burden. Youths fleeing Islamist extremism in the North are trooping there. Lagos is still a magnet for millions of youths from the hinterland seeking better opportunities and jobs. Latest figures from the NBS are familiarly depressing for a country of 170 million people, out of which Lagos hosts over 21 million, according to Ambode. Nigeria had a labour force of 75.9 million in the third quarter of 2015, says the NBS. The NBS adds that 1.9 million people entered the labour market in the same quarter. It further says the country created 428,000 new jobs in Q3 2015 (compared to 83,000 new jobs in Q2 2015), but they were mostly in farming, which is seasonal in nature.
Even for those in jobs, there is also underemployment, while many states owe workers their monthly salaries. Bridging these gaps is the goal of every government, even in developed economies. Britain, the world’s fifth largest economy with a GDP of $2.86 trillion (IMF), is deploying innovation and incentives to create jobs. The UK Department for Business Innovation and Skills operates a government-funded scheme that makes it easier for new companies to start operations by providing access to low interest loans, a scheme to identify budding entrepreneurs, and regular advice to SMEs. The BIS gives employment allowance to companies, and, in 2014, abolished the compulsory employer National Insurance contributions for some companies. The last two measures are geared towards making the companies employ more people. Thus, the UK recorded 447,000 new companies in 2013, with a prediction of a further rise in 2014 and 2015.
Without boosting SMEs, the Nigerian economy will struggle to create jobs. That is a time bomb. Instructively, a study conducted in the United States by Kati Suominen, the CEO of TradeUp Capital Fund (an international business consultancy), in collaboration with Aseem Grover of the University of California, Los Angeles, confirms SMEs as the backbone of American economy. “SMEs make up 99 per cent of all firms, employ over 50 per cent of private sector employees, and generate 65 per cent of net new private sector jobs. SMEs account for over half of US non-farm GDP, and represent 98 per cent of all US exporters and 34 per cent of US export revenue,” the report said. Similar strategy can be worked out here.
A local approach to economic development requires a system that can effectively build the supply of skills. Therefore, the Lagos ETF initiative is a wake-up call to the other states in Nigeria. State governments should align their policies and programmes to local economic development by adding value through skills, investing in sectors of local importance and quality jobs and promoting inclusive economic growth. They should identify and enable the types of economic activities that are peculiar to their domains to create jobs and reduce poverty.
Agriculture is a ready option for all. Developing SMEs in Information and Communication Technology is another. For instance, Nigeria is supposed to be self-sufficient in tomato production. But because of lack of good storage facilities and processing, about 50 per cent of the crop wastes, forcing the country to import tomato paste with about N16 billion per year, according to former Central Bank of Nigeria Governor, Lamido Sanusi. State governments, through novel schemes, should empower entrepreneurs to grow crops all the year round and process for domestic consumption. This will generate year-round jobs, reduce poverty and save foreign exchange.
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