World Bank Urges Nigerian Government to Prioritize Youth Employment Amid Critical Economic Reforms

The World Bank has urged Nigeria’s Federal Government to prioritize job creation for its youth as the country grapples with surging inflation and rising living costs. Ndiame Diop, the World Bank’s Country Director for Nigeria, emphasized this need, stating that youth employment would serve as a crucial buffer for Nigeria’s younger generation amid the economic strain triggered by recent reforms under President Bola Tinubu’s administration.

Following the elimination of fuel subsidies in May 2023, fuel prices soared from N175 per liter to an official rate of N1,025 per liter in Lagos, marking a sharp increase in the cost of living. In the face of these pressures, the World Bank’s latest report, titled ‘Nigeria Development Update: Staying the Course: Progress Amid Pressing Challenges,’ highlighted the importance of government reforms but cautioned that they have compounded Nigeria’s already fragile economic situation.

“Nigeria took the bold and courageous move to undertake difficult but critical reforms,” stated the report. “This against the backdrop of an already fragile economic position, high food and transport inflation, and other heightened uncertainties. If these reforms were not done, Nigeria would have fallen into a serious fiscal crisis that would have made it difficult for government to meet its obligations to citizens.”

Beyond just creating jobs, the World Bank highlighted the importance of adequate wages to meet current economic demands. The report urged the government to focus on expanding opportunities for youth to access adequately paying jobs, which would enable them to cope with the high cost of living.

“It will be important to consolidate the improving fiscal outlook and scale up the support for the poorest households to cope with purchasing power losses and hardships,” the report stated, adding that “expanding opportunities for growth and productive jobs, especially for young Nigerians is most urgent and crucial.”

Youth Employment Initiatives Are Falling Short

President Tinubu has launched several initiatives aimed at empowering youth and addressing the nation’s employment needs, including:

1. 3 Million Tech Talents (3MTT) Initiative: Led by the Ministry of Communications and Digital Economy, this initiative is designed to equip young Nigerians with digital skills to meet the demands of a growing tech sector.
2. National Skills Business Development Initiative (NSBDI) by SMEDAN: Targeted at small businesses, NSBDI promotes skill development in entrepreneurship and business management.
3. Nigerian Youth Academy (NiYA): This academy focuses on training youth in various skill sets to meet workforce needs across different sectors.
4. Industrial Training Fund’s (ITF) Skill Up Artisans Program: This program is designed to empower young Nigerians with skills in artisanal trades, including construction and craftsmanship.
5. National Automotive Design and Development Council (NADDC) Mechatronics Training: The initiative focuses on advancing Nigeria’s automotive sector by providing training in mechatronics and automotive maintenance.

However, the World Bank and local economists assert that these programs are insufficient to meet Nigeria’s vast employment needs. Economists argue that, while the initiatives offer specialized skills and some employment opportunities, they fall short of the real demand for adequately paying jobs that can sustain Nigeria’s economy. Many of these initiatives focus on entry-level or mid-level skills, which may not necessarily lead to sustainable employment.

Nigerian economists agree that simply offering employment programs isn’t enough to address the underlying economic hardship; rather, the creation of jobs that offer sufficient income is essential. Adequately paying jobs that match the rising cost of living would boost household income, helping to stabilize the economy and enhancing fiscal flexibility. Many warn that, without meaningful income growth, particularly through better-paying jobs, the country’s consumer spending power will continue to decline, ultimately harming the broader economy.

In agreement, the World Bank’s report notes that higher-paying jobs would empower households with stronger purchasing power, which could lead to an increase in consumer spending and drive economic growth.

Economists propose creating adequately paying jobs in industries like technology, manufacturing, and agriculture, which could boost production, reduce import dependency, and promote a more resilient domestic economy.

While government-led programs provide a foundation, the World Bank notes the need for private-sector growth and foreign investment. Economists suggest that incentives to support private-sector expansion could create more employment opportunities with competitive wages. Foreign investment, especially directed toward high-growth sectors with substantial employment potential, could also significantly enhance Nigeria’s job market, has been advocated.

World Bank’s Advice to Halt Ad-Hoc FX Auctions

In a separate recommendation, the World Bank advised Nigeria’s Central Bank (CBN) to avoid unscheduled foreign exchange (FX) auctions, advocating for a transparent and consistent FX framework.

In August 2024, the CBN held an FX auction, selling $876.26 million to end-users in one of the most substantial interventions seen in recent years. The CBN said the auction was aimed at boosting foreign exchange liquidity, reducing demand pressures, and supporting price stability.

However, the World Bank’s report cautioned against such ad-hoc measures, noting that “exchange rate policy should continue to be geared towards maintaining a unified, market reflective exchange rate, whilst deepening the FX market.”

The report further recommended that the CBN should allow more flexibility for FX trading and aim to maintain a transparent, market-driven exchange rate system.

“Allowing market participants to trade FX with more flexibility across time would also contribute to deepening the FX market,” the report added.