US embassy cable - 05LAGOS629

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 
--------------------------------------------- ----- 
 
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 
--------------------------------------------- ----- 
 
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 
--------------------------------------------- ------- 
 
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 
---------------------------- 
 
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 
--------------------------------------------- 
 
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 
--------------------------------------------- --------------- 
 
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 
------- 
 
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