Blog Details

Stand at the Oshodi bus stop in Lagos for ten minutes, and you will count, without trying, at least eighty-five people who are technically working.

Among others, you see the woman selling cold shelled groundnuts from a tray balanced on her head, the man hawking phone chargers so new they are still in Chinese-language packaging, the teenage boy weaving through traffic with a tower of chin-chin that defies both gravity and NAFDAC regulations, and a graduate in a faded foreign university hoodie, conducting an informal survey of which danfo will leave first.

Everyone is doing something.

The street hums with the controlled chaos of a nation that has never had the luxury of sitting still. And yet, for several years running, the National Bureau of Statistics (NBS) told us that one in three Nigerians of working age could not find a job. How?!

Nigeria presents one of the most striking labour market paradoxes in the developing world: a country of visible, relentless economic activity in which, by official count, one in three working-age Nigerians was unemployed as recently as 2020.

The paradox is not an accident. It is the product of how employment is defined, measured, and reported, and understanding it is essential for anyone seeking to diagnose Nigeria’s economic challenges honestly.

This article distils the core argument for policymakers, economists, and development practitioners who need the key points rapidly and without the groundnut seller anecdotes, however entertaining those anecdotes might be.

In the fourth quarter of 2020, Nigeria’s National Bureau of Statistics (NBS), according to its Q4 2020 Unemployment Report, recorded an unemployment rate of 33.3%, equivalent to 23.18 million people.

This represented a sharp increase from 27.1% in the second quarter of the same year, largely driven by the economic disruptions caused by the COVID-19 pandemic, and marked the highest unemployment level in at least 13 years.

The combined unemployment and underemployment rate (a measurement of the proportion of people in the labour force who are employed but not fully utilized in terms of their skills, time, or earning capacity) reached 56.1%, meaning more than half the labour force was in acute labour market distress.

However, in 2023, the NBS adopted the standard methodology of International Labour Organisation (ILO), and Nigeria’s headline unemployment rate fell to approximately 4.1%. This dramatic change was not the result of a sudden economic transformation.

It was the result of a definitional shift in which, under the ILO framework, any person who worked for at least one hour in the survey reference week is classified as employed.

Curiously, Nigeria seemingly only adopted the ILO framework, formally established in 1982 at the 13th International Conference of Labour Statisticians (ICLS), to “manage” the unemployment numbers going forward. Under Nigeria’s old framework, the threshold was 20 hours per week, capturing the inadequacy of work rather than merely its presence. Both definitions are internally consistent.

They answer different questions about the labour market, and conflating them produces confusion about the scale of the problem.

The ILO one-hour work threshold for “pay, profit, or family gain”, which Nigeria now applies, means that the following categories of workers are classified as employed: subsistence farmers who worked during the survey reference week’s growing season; informal traders who sold goods or services for any amount of time during the week; casual labourers who performed one-off tasks; and the vast unpaid family workers who assisted in household enterprises.

Nigeria has approximately 37 million smallholder farm households (families that operate small-scale agricultural holdings, primarily relying on family labour to produce food and income) and an informal sector that accounts for roughly 65% of GDP.

These structural features of the economy ensure that much of the working-age population will always meet the ILO employment threshold, producing very low headline unemployment rates even in periods of acute labour market distress.

The headline rate only measures work but does not measure whether that work generates a living income, whether it is secure, or whether it matches the skills and expectations of those performing it.

The more policy-relevant measure is the vulnerable employment rate: the share of workers in informal, precarious arrangements without social protection, job security, or assured income.

World Bank estimates place Nigeria’s vulnerable employment rate at between 80% and 85% of those classified as employed. Applied to the 77 million Nigerians counted as employed in recent surveys, this implies that between 61 and 65 million workers are in economically precarious positions.