The Nigerian economy as it is today suffers widespread underutilisation of resources. A very large indigenous human resource base has remained largely disengaged from economic processes through unemployment. Likewise, there has been a flimsy and lopsided effort to exploit and convert the country’s vast natural resources into national income. It would not be out of reason therefore to say that the economy remains stuck in the doldrums. And in such an unhealthy economic state, any attempt toward full employment of resources would entail a frustrating uphill battle.
Full employment is an economic indication that all factors of production –land, labour, capital, entrepreneurship, and technology– are fully and properly utilised. It implies that the economy is operating at its highest levels and with optimum efficiency. And the practical implications, for instance, are that all the land available for cultivation get fully utilised, everyone who wants a job can get one, production plants and equipment are fully employed, and everyone who owns a business is able to make profit. Full employment, in summary, does not allow for idle resources in the economy.
The full employment of factors of production is an economic concept; not a physical one. It is often not physically or practically possible to have everyone employed, because people are always in between jobs. It is also difficult, for instance, to fully employ capital stock. Also, farm machinery and medical equipment cannot be used every day of the week. The full employment of factors of production can also be called potential output.
Full Employment Output and Real Output
Full employment output (measured as Gross Domestic Product, GDP) is an indicative that all factors of production are fully employed. Real output is not always at the same level as full employment output. Rather, real output fluctuates around full employment output. During a period of significant economic expansion, there is extensive use of resources resulting in increased production. In such situations, real output can rise above full employment GDP, as resources can be over utilised during an economic boom. Conversely, during periods of recession, unemployment of resources increases so that production falls.
In the above diagram, a positive shift in demand causes price increase (inflation), and even at the higher Y2, the economy may still not be operating at full employment output. In practice, it is difficult to know precisely what counts as full employment and potential output. In the case of the Nigerian economy, full employment GDP appears a farfetched idea primarily due to structural problems that inhibit a sustained progress toward optimal employment of available human and natural resources.
Agriculture is the largest sector of the Nigerian economy with a GDP share of 43%. According to the Central Intelligence Agency (CIA) World Fact Book, the agricultural sector employs at least one third of Nigeria’s total labour force. Farming is mainly subsistent and although food production is substantial, challenges remain in the areas of production infrastructure, supply of farming input, storage facilities, and agricultural manufacturing, amongst others.
Prospects for the agricultural sector is very bright because of growing (domestic and foreign) demand for food driven by a large population and growing incomes (particularly in Africa and Asia) as well as higher prices due to demand in the international market. There are areas that need significant investment for the Nigerian agricultural sector to grow. They include: the provision of storage facilities, fertilizer, credit, research and development, as well as value added service like packaging and other farming inputs to serve a growing urban population.
At 3.53% of GDP, the manufacturing sector contribution to the economy is really underweight and far below average even by developing countries standards. Yet, manufacturing opportunities abound from agriculture to textile to pharmaceutical and electronics goods production. Through a dedicated expansionary policy, the tens of millions of unemployed or underemployed Nigerian youth can be converted into a forceful manufacturing army. And such a policy must tackle the country’s endemic frequent power outage, which remains a major impediment to the growth of the manufacturing sector in Nigeria.
Prospects are very bright for this sector due to a growing and buoyant consumer class, plus recent government commitment to deregulate the power sector.
Finance sector contribution to GDP is about 2.92%. Despite the crisis in the banking sector in late 2008, and the lull in economic activity due to the credit crunch that followed, the finance sector still has very bright forecast. The better supervision, enhanced transparency, and smarter risk management, that emanated from the post-crisis cleanup process has set the stage for increased growth in the future. Empirically, economic growth directly correlates with growth in financial activity. For instance, banks have to give loans to businesses for resources to be employed and output created in order for the economy to grow.
According to the United Nations and the African Development Bank 2011 estimates, at least 80% of the Nigerian population of 160 million remains unbanked. This means that a lot of capital from the Nigerian population still needs to be pulled into banks to finance businesses. Financial institutions need to come up with innovative ways to reach the unbanked and effectively convert these unbanked monies into investment generating savings. Significant investment is needed for this sector to fulfill its potential.
Statistics confirm that Nigeria is endowed with more than 33 commercially viable solid minerals which could be harnessed. In spite of this, the sector contributes less than one per cent to Nigeria’s GDP, as against its erstwhile 10% contribution prior to crude oil exploration.
Therefore, long term prospects are very bright for this sector. The government has put policies in place to attract foreign investment and has been successful in attracting few mining companies. Moreover, uncertainties surrounding the future of the dollar and the euro would likely increase demand for precious metals. Industrial expansion in Asia has also continued to fuel exploration and mining of mineral metals. Analysts have predicted that the demand for mineral metals will continue to rise even as more South American and African countries initiate more robust attempt on industrialisation.
Real Estate Sector
The Nigerian real estate sector has a GDP share of 1.73%. It is obviously small and quite below average, but prospect for this sector is very bright due to a historical high demand over supply for homes and office spaces. The average Nigerian has to pay two years lump sum rent in advance to get an apartment. This is largely due to unsatisfactory supply of rental units.
Mortgage institutions are already active in Nigeria but more investment is needed in the sector to close the supply gap. Mortgage ownership is still very low, and expanding credit to this sector is the key to unlocking latent demand. The World Bank has estimated that the cost of bridging Nigeria’s 17 million housing deficit is about ₦59.5 trillion. This underlines the vast and untapped investment potential of the country’s real estate sector.
The telecommunication sector is one of the major drivers of growth in the Nigerian economy. With a highly competitive market backed by intensive marketing strategies and value added services by operators, the sector has continued to add more services to its activities and has performed impressively with its 6.73% contribution to total GDP in the third quarter 2012. Demand for telecommunication services, while still rising, grew at a lower rate compared to the corresponding level in 2011. The sector recorded a real GDP growth of 31.57% in the third quarter of 2012 compared to the 35% recorded in the corresponding period of 2011.
Today, Nigeria has established itself as the largest telecommunication market in Africa. The country’s telecommunication sector is undergoing speedy transformation on account of massive growth and rapid infrastructure developments. The reform of the sector along with increased competition among players, have brought substantial benefits to the consumers in terms of lower subscription rates and better alternatives.
Recent research carried out by Business Monitor International, a research firm, reveals that Nigerian Mobile market possesses tremendous growth potential given the fact that penetration rate was 58.50% in 2011 as against 57.40% at the end of 2010. With the rapidly improving mobile infrastructure and intense competition among mobile operators, it is expected that the penetration rate may exceed 88% by 2014 end.
Mobile Number Portability (MNP) along with issuance of 3G and 4G licenses will also play an important role in driving the growth of telecom sector in the country. Competition among various telecom operators is increasing as they are looking for new business expansion and customer retention strategies to sustain and gain higher chunk of the market. Thus, operators are aggressively pushing the deployment of network infrastructure, which is driving investments in the telecom sector.
Full Employment In The Nigerian Economic Context
Solid minerals, finance, real estate and manufacturing are underweight in their contributions to the GDP. However, the Oil & Gas and the agricultural sectors are significant contributors to the Nigerian economy, but their growth rates are very poor. The share of the telecommunication sector is about average but on a constant rise. This combination of very underweight sectors and sectors with large but anemic growth rates is the reason for a widespread case of idle resources and therefore mass unemployment in the Nigerian economy.
The Right Perspective Regarding Full Employment of Resources
According to the latest International Monetary Fund (IMF) report, Nigeria’s real GDP is $450 billion. Considering the country’s immense natural and human resources, Nigeria’s GDP is estimated at $1.5 trillion if the economy operates at full employment potentials.
An unemployed individual (if the environment is conducive) could be a farmer, an inventor or a business owner. If unemployed individuals are unable to fulfill their potential, society is poorer. For instance, if Nigeria should have an optimum quantity of ten farmers, and due to unemployment, ends up with just two farmers. The implication will be that a good number of Nigerians will either go hungry or not be able to get enough. Extend this scenario to other occupations and sectors of the economy, and it is easy to see that the consequences of unemployment of resources have been devastating for the Nigerian economy. It is important that policy makers in Nigeria begin to view unemployment of resources in this light.
Effectively Pursuing Full Employment
To unlock the full potential of every sector of the economy, the Nigerian government must aggressively pursue a policy of economic liberalisation. This policy has been carried out successfully in the telecommunication sector. The sector is one of the few sectors experiencing double digit growth and steadily increasing in its contribution to GDP. It is currently the most efficient sector of the economy and one that has increased the use of Nigerian resources in recent years. The success recorded in the sector is a good model to follow, and will bring the Nigerian economy closer to experiencing full employment.
Why Countries Pursue Full Employment Policy
Achieving full employment should be every government's priority. Governments use fiscal policy to ensure that their economies attain full employment, generates massive labour participation, productivity and high wages. A full employment economy delivers great individuals and social benefits. An economy running at full employment provides everyone with an opportunity and as well maximises income creation. This leads to more buoyant markets, investments and businesses. Unemployment and underemployment act as a form of social exclusion that violets basic concept of membership and citizenship, thus prohibiting inclusive growth. It has direct economic cost that is synonymous with waste, inefficiency, despair, poverty, conflicts and social injustice. Developed countries where full employment is a possibility are productive and prosperous.
Stark Dichotomy Of Wealth And Poverty
Nigeria has one of the fastest growing economies in the world. It possesses a stark dichotomy of wealth and poverty even when petroleum and oil resources are the main stay of the economy. Although the country is rich in natural resources, but the economy cannot yet meet the basic needs of the people. Such disparity between GDP growth and the increasing poverty is indicative of a skewed distribution of Nigeria’s wealth. Due to underutilisation of resources and poor productivity, there is an inadequate supply of goods and services across all sectors of the economy. Economic liberalisation as well as strategic increase in investment will be instrumental to lifting the economy and refocusing it in the direction of full employment. Current high-volume industries would need to get better policy support through strategic internal and foreign regulations and infrastructural enhancements that provide growth advantage.