Addressing the Needless Attacks on NBS Data-
By IMPI
POLICY STATEMENT 019 ISSUED BY THE INDEPENDENT MEDIA AND POLICY INITIATIVE (IMPI)
On Friday, November 22, 2024, the National Bureau of Statistics (NBS) circulated data generated from its latest General Household Survey (GHS) Panel (Wave 5).
The data painted a damning state of the national economy as encapsulated in the headline of a daily newspaper which gleefully declares: “Hardship: Nigerians now borrow, skip meals for days – NBS.”
The narration highlighted the NBS survey’s finding that 65 per cent of families and other residents across the country cannot afford healthy meals due to a lack of money.
We note with interest the calmness with which the usual bohemian community of federal government critics adopted the GHS data and, after that, the amplification of the data as a true reflection of the state of the national economy by the critics.
Besides this, there has been hardly any question about the basis for publishing the country’s inflation figures since they returned to the incremental trajectory at 33.88 per cent in October 2024 from a high of 34.19 per cent in June. The headline inflation briefly declined to 33.40 per cent and further down to 32.15 per cent in July and August, respectively.
Typical of reactions to news or data indicating upward progression concerning the Nigerian economy from some quarters, the reduction in headline inflation figures as reflected in July and August 2024 data was met with disbelief and suspicion of manipulation of the NBS supposedly by the unseen hands of the Federal Government, which according to the same set of pundits who celebrated the GHS data of November 22, in a desperate bid to look good amongst Nigerians.
A similar thinly veiled public accusation of government data manipulation greeted the release of the NBS’ Nigeria Labour Force Survey (NLFS) report for the second quarter of 2024 and Nigeria’s Gross Domestic Product (GDP) for the third quarter of 2024.
The NBS reported a drop in the nation’s unemployment rate from 5.3 per cent in the first quarter of 2024 to 4.3 per cent in the second quarter of 2024. This figure suggests that only about four people out of every 100 Nigerians are currently unemployed, a positive indication of a reduction in the nation’s unemployment data.
Also, Nigeria’s Gross Domestic Product (GDP) increased to 3.46 percent (year-on-year) in real terms in the third quarter of 2024. This growth rate is higher than the 2.54 per cent recorded in the third quarter of 2023 and the 3.19 per cent growth in the second quarter of 2024.
Apparently, to the doubters, these figures were too good to be true. The social media space and the community of critics became unrelenting in questioning the basis of the data; some dismissed them as “voodoo data” and “propaganda figures.”
We find this growing culture of brazen repudiation of NBS data rather inappropriate, especially when, as often, the refutation is not grounded in facts and logic. One critic dismissed the second quarter unemployment data because, in his logic, the unemployment rate could not decrease while factories closed and businesses reported unsold inventories. Another criticized the methodology used to arrive at the figure on the ground that it lacks transparency.
We submit that this is the crux of the matter. Most critics and commentators lack an understanding of the methodology that foregrounds the Nigeria Labour Force Survey (NLFS), even though the NBS has adopted and deployed it since the first quarter of 2023.
In the first quarter of 2023, the NBS adopted the International Labour Organization (ILO) approved and recommended methodology to measure employment and unemployment per term. The updated method aims to conform with global standards by providing a more accurate picture of the labour market in the context of the nation’s socio-demographic profile.
In line with the ILO guidelines, the NBS defines employed persons as those in paid employment who have worked for at least one hour in the last seven days. This measurement contrasts the previous method, where an employed person must have worked for at least 20 hours within seven days to qualify as employed.
Meanwhile, in the new methodology, the labour force is defined as those 15 years and above who are willing, available, and able to work, while under the old method, the labour force only included those aged between 15 and 64 who were willing, available, and able to work.
This broader definition of the labour force implies that some people previously classified as outside are now included, particularly those engaged in informal or part-time work. Consequently, the methodology establishes a new unemployment threshold as it does not necessarily reflect an increase in job losses but rather an expanded inclusion of individuals actively seeking work.
Additionally, the active search for employment now qualifies individuals as unemployed, encompassing various job-seeking activities such as submitting applications, attending job fairs, and networking.
However, the one hour in the last seven days labour engagement metric effectively enlarges the basis of employment measurement to include, in this case, Nigerians who are working for themselves. This expansion reflects the 71.2 million Nigerians said to be working for themselves. In contrast, just 12.96 million others work for wages out of 88.9 million in the country’s labour force, as data in the second quarter of the NBS labour force survey show.
According to the data, most of the 12.96 million wage workers are in the private sector (9.64 million), while the rest work in the public sector (3.32 million). For some other analysts, 71.2 million self-employed in the survey have continued to raise concerns about the quality of jobs in which people are engaged.
The survey’s dominant data point is the number of self-employed, accounting for 85.6 per cent of total employment, an increase from 84 per cent in the previous quarter. The implications of the new methodology underscore the realization that the old method had shaved a considerable percentage of the working population off the nominal labour force and made the wage earners a categorization of the total labour force.
The old framework, which describes an employed individual as a person who must have worked for a minimum of 20 hours within seven days, aligns with the methodology which is adopted in developed economies in which employment rate for any area is calculated by dividing the number of employed people by the total labour force and multiplying it by 100 while unemployment rate is calculated by taking the number of residents who are without a job and looking for work, and dividing that number by the total number of residents in the labour force, and multiplying by 100.
Thus, the labour force is the sum of everyone in an area employed in wage-earning activity and everyone in an area unemployed but actively seeking work. The grand assumption with the old methodology is the emphasis on work time for payment or wages in exchange for labour.
This survey structure reverses the components of self-employment in the two methodologies. Thus, labour markets in developing countries like Nigeria differ fundamentally from those of developed economies. In developing economies like Nigeria’s, a central distinguishing feature is the very low levels of wage employment and high self-employment.
Typically, the argument is that productivity or wages in wage employment are low in developing countries, while self-employment is comparatively unregulated and easily accessible. Consequently, many workers enter self-employment because of its easy access to sustenance.
In this regard, we reference Markus Poschke’s understanding of the relationship between wage labour and self-employed labour, which notes that because developing countries have low-wage employment, the ratio of unemployment to employment plus wage employment is much higher.
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Therefore, self-employment increases with the ratio of unemployment to wage employment ratio. In developing countries like Nigeria, many workers outside urban areas work in agriculture, retail finance – Point of Sales (POS), and Transportation/logistics (commercial vehicle operators, artisans, etc.). All these have one form of formal affiliation or the other with the Ministry of Labour and Employment through their registered unions and trade groups. The land distribution in these countries implies that the agricultural sector is dominated by self-employment on family farms, and the leading occupational choice is self-employment in farming versus non-farming, with only a tiny role for wage employment.
This forms the basis of the NBS labour survey methodology and justifies the inclusion of the vast number of self-employed Nigerians in the labour force and the segmentation of their labour engagements, which were not included in the old survey methodology.
The labour data aligns with Nigeria’s Gross Domestic Product (GDP) performance data for the third quarter of 2024, which the NBS also released. According to the data, the economy expanded by 3.46 percent overall, but the service sector mostly drove the growth.
Like the labour force survey data, the GDP performance, which outperformed projections by the International Monetary Fund (IMF), the World Bank and other research institutions, was contrary to market expectations.
Nigeria’s nominal GDP for the third quarter of 2024 was N20.1 trillion, a 3.46% increase from the same quarter in 2023. The figure was higher than that for the second quarter of 2024, which was N18.2 trillion.
However, a crowd of critics chorused that the increase in GDP figure was driven mainly by the service sector, which recorded a growth of 5.19 percent and contributed 53.58 percent at the expense of the agriculture sector, which grew by 1.14 per cent from 1.30 per cent in the third quarter of 2023 and the manufacturing and real estate sub-sectors which recorded decelerations to 0.92 per cent YoY and 0.68 per cent YoY in Q3 2024, respectively, compared to 1.28 per cent and 0.75 per cent in Q2 2024.
Several critics, however, dismissed the growth as non-inclusive and unhealthy. Others insisted that it was time to reset the nation’s faulty economic structure by leveraging technology in favour of productive sectors like industry and agriculture.
We disagree with this dismissive assertion.
We are delighted that the nation’s service sector has emerged as the lead sector of the economy. The three-sector model in economics divides economies into three sectors of activity: extraction of raw materials (primary), manufacturing (secondary), and service industries, which facilitate the transport, distribution, and sale of goods produced in the secondary sector (tertiary).
The primary sector involves extracting raw materials from the earth, such as mining, forestry, or farming. The secondary sector involves manufacturing raw materials into goods, such as turning grains into pasta or trees into lumber. The tertiary sector, or the service sector, includes ICT, trade, and financial services.
Though some experts have criticized the service sector’s contributions to the economy, historically, it has been the dominant segment of the Nigerian economy. It was the highest contributor to the national economy, at 53.58 per cent, in the third quarter of 2024, a decline from the 58.76 per cent recorded in the second quarter of 2024.
On average, the sector has contributed 50 percent to Nigeria’s GDP over the last four years.
The service sector is a key part of any economy’s development, and its role is growing. It is the most significant part of the global economy’s business activity and a major driver of economic growth, especially in developing economies.
In 2019, services accounted for 55% of GDP in developing countries and 75% in developed countries. Compared to other postulations, services are also a significant source of jobs, especially in developing economies. In 2019, services accounted for 45% of employment in developing economies and 50% of global trade in value-added terms.
Compared to other sectors like agriculture, though a traditional economic mainstay, its growth remains modest at 1.14 per cent in the third quarter of 2024. Crop production, the primary driver of the agriculture sector, lacks the dynamism seen in ICT. At the same time, the manufacturing sector, with a third-quarter growth rate of 2.18 percent, also lags behind it in both growth and GDP share, emphasizing ICT’s importance as an engine of Nigeria’s economic activity.
Nigeria’s ICT performance aligns with broader trends in sub-Saharan Africa, where digitalization rapidly transforms economies. However, the country’s growth rates show that the government is deliberately driving this digital revolution by leveraging its large population and youthful demographics. Indeed, the ICT sector, particularly telecommunications, is the cornerstone of Nigeria’s economic performance in the first three quarters of 2024.
Despite declining nominal growth rates and quarterly volatility, the sector demonstrates resilience and remains a critical contributor to GDP. When the sector’s performance is deeply analyzed, the principal indication is that telecommunications dominates the ICT landscape, accounting for the largest share of the sector’s output. Its consistent contributions underscore its role as a foundational element in Nigeria’s GDP. In this context, it establishes, for instance, a correlation between internet penetration and GDP growth.
Indeed, a 10 per cent increase in mobile broadband penetration in Africa can increase GDP per capita by 2.5 per cent. A 10 per cent increase in internet penetration rate can increase real GDP per capita by 0.57 to 0.63 percentage points. Regarding the Nigerian economy’s actuals, the third quarter’s GDP growth of 6.78 per cent in telecommunications was robust, driven by expanding mobile and broadband penetration, indicating sustained demand for telecom services despite economic challenges.
With the right investments and policy frameworks, ICT has the potential to solidify its role as Nigeria’s economic growth engine, which has the propensity to propel the country toward a more digital and connected future.
The importance of ICT in GDP growth is further evidenced by the N2.55 trillion paid in taxes in the first half of this year by foreign digital companies operating in the country, including Google, Microsoft, and TikTok.
We encourage governments at all levels to focus spending and policy reinforcements on the service sector.
They must do this without neglecting the agriculture and manufacturing sectors, pivots of the larger economy.
In conclusion, our analysis shows in multidimensional ways that perennial critics’ selective justification of NBS data only serves to water down sentiments which have no basis in empirical studies of Nigeria’s socioeconomic realities.
Omoniyi M. Akinsiju, PhD
Chairman,
Independent Media and Policy Initiative (IMPI),
December 11 2024
POLICY STATEMENT 019 ISSUED BY THE INDEPENDENT MEDIA AND POLICY INITIATIVE (IMPI)
