Youth unemployment poses a major socioeconomic hurdle in Nigeria and globally, presenting enduring challenges. Extended periods of joblessness can lead to enduring consequences such as diminished income and social marginalization for individuals. In Nigeria, the prevalence of youth unemployment has remained substantial, persisting even during periods of economic stability such as the oil boom of the 1970s (6.2%), 1980s (9.8%), and 1990s (11.5%), escalating to 21.1% in 2010 and 24% in 2011.
Research suggests that a single year of youth unemployment can slash annual earnings at age 42 by as much as 21%, with an additional three months of unemployment before age 23 correlating with an average of two extra months of unemployment between ages 28 and 33. Prolonged unemployment exacerbates these issues, raising the likelihood of intergenerational transmission of disadvantage to offspring.
Beyond these individual repercussions, the unemployed constitute a significant reserve of untapped economic potential, constraining output and impeding economic expansion. Nigeria, like many other African nations, grapples with a severe unemployment crisis alongside declining living standards, widening urban-rural disparities, and insufficient social and physical infrastructure to accommodate its rapidly growing population.
As per the National Bureau of Statistics, Nigeria is home to over 67 million unemployed youths as of 2011, within a total population of approximately 167 million. This situation poses a significant risk of crisis if not promptly addressed, as the higher the number of unemployed youths, the greater the likelihood of potential turmoil. Urgent action is required to move young people from idleness to employment, essential for fostering peace and driving economic progress in the nation. Unemployment and poverty, particularly among the youth, persist as critical obstacles to Nigeria’s economic advancement.
Generally, a small enterprise can be defined as one with fewer than 20 employees. This sector encompasses a variety of businesses, including self-employed individuals, informal enterprises, and small-scale operations within the formal business sector. These enterprises engage in diverse activities such as trade, transportation, construction, agriculture, manufacturing, and service provision. The promotion of small enterprises is crucial given the trend towards their increasing contribution to employment, accounting for around 60% of the labor force in Africa.
Job Growth Prospects and New Firm Creation
Historically, a prevalent strategy for addressing the issue of unemployment involved establishing large industrial complexes with the expectation of generating numerous job opportunities and improving the local economy. However, this approach has largely failed due to its reliance on limited capital resources. In reality, it resulted in minimal job creation and widened the gap between the affluent and the impoverished. Consequently, contemporary development efforts now focus on supporting small enterprises within the informal sector, typically run by self-employed individuals.
Although small enterprises in the informal sector hold potential for job growth in developing countries, their overall impact may be restricted for several reasons. Firstly, much of the expansion in this sector in Nigeria has been spontaneous rather than stemming from intentional governmental policies. Secondly, while a large number of small enterprises may emerge, their potential for evolving into medium-sized enterprises is constrained. This limitation is attributed to factors such as market saturation, inadequate management and technical expertise, insufficient capital, and subpar product quality. Moreover, many of these enterprises are owned by first-time entrepreneurs with limited experience who are hesitant to take the risks necessary for business expansion. Thirdly, while technology plays a pivotal role in economic development, its influence on the growth of small enterprises is restricted due to their limited technological capabilities and the presence of weak technological infrastructures.
An effective strategy for fostering entrepreneurial activity and promoting enterprise growth in developing nations involves establishing an entrepreneurial ecosystem within the country. This approach, focusing on youth during their educational years, offers a potential long-term solution to the challenge of job creation. To instill a pervasive “enterprise culture,” educational and training programs in Nigeria need to incorporate entrepreneurship principles and skills from an early stage.
The Federal Government endorsed this initiative, notably through the National Board for Technical Education (NBTE) in 2003, which recently advocated for the integration of entrepreneurship training across all technical training institutions. This initiative aligns with Nigeria’s historical emphasis on technical and occupational training.
In response to the pressing need for livelihoods, many unemployed individuals have turned to the informal sector, establishing small enterprises ranging from simple trading activities to moderately successful production, manufacturing, and construction ventures.
Generally defined as enterprises with fewer than 20 employees, the small enterprise sector includes various entities, including self-employed artisans, microenterprises, and cottage industries, both within and outside the formal business sector. These enterprises engage in diverse activities such as trade, transportation, construction, agriculture, manufacturing, and service provision. The proliferation of small enterprises has contributed to the expansion of the informal sector, which now encompasses approximately 60% of the labor force in Africa.
Entrepreneurship Education and Technical Skills
Entrepreneurs are pivotal figures in the private sector, characterized by their ability to survey the landscape, pinpoint areas for enhancement, mobilize resources, and take action to capitalize on those opportunities. They serve as role models within communities, providers of employment opportunities, stabilizing forces in society, and primary drivers of national resource development. Entrepreneurial endeavors contribute fresh perspectives and play a constructive role in a country’s economic progress. Entrepreneurs, driven by a willingness to take risks, foster innovation, conceive new business concepts, and invest resources to establish ventures with growth potential.
There’s a consensus that many individuals possess entrepreneurial traits to varying degrees. Despite formal skill training received by a large segment of Nigerians, employment prospects for graduates remain limited. A thriving economy can broaden avenues for introducing new products and services into the market. However, individuals must be equipped with both technical expertise and entrepreneurial acumen to seize these opportunities, launch new ventures, and pursue self-employment. Through collaborative efforts involving the government, the National Board for Technical Education (NBTE), and Yaba College, an entrepreneurship education center was established, aimed at fostering an “enterprise culture” nationwide.
In a later development, the establishment of the Ministry of Trade and Investment, along with the National Board for Technological Incubation (NBTI), sought to harness and cultivate entrepreneurial initiatives across the country.
What Barriers do Young People Face When Starting a Business?
Nigeria is ranked 133rd in the World Bank’s Doing Business indicator, marking a notably poor performance. Consequently, it appears that youth encounter various obstacles hindering their ability to transform ideas into viable projects. These barriers arise in several areas, including social attitudes, skill deficiencies, inadequate entrepreneurship education, lack of work experience, undercapitalization, absence of networks, and market constraints. It’s important to recognize that these barriers are interconnected, necessitating a comprehensive array of policy measures rather than a singular solution.
- Young people are influenced by their families, educators, and society as a whole. Significant role models like parents and teachers often lack awareness of entrepreneurship’s requirements and opportunities. This lack of awareness translates into insufficient encouragement for entrepreneurial pursuits or even negative social attitudes that impede youth entrepreneurship.
- Despite some recent improvements, it’s widely argued that education and training programs inadequately foster entrepreneurial attitudes and skills, instead focusing on preparing students for traditional employment.
- Previous work and entrepreneurship experience significantly influence business startup and entrepreneurial performance. Youth typically lack the human, financial, and social capital necessary for establishing and managing a new business. Compared to older individuals, young people are less likely to possess sector-specific, managerial, or prior business experience and are more prone to unemployment, thus lacking the necessary skills for entrepreneurship.
- Entrepreneurs with greater initial financial resources are more likely to succeed. Youth face a disadvantage as they typically have lower personal savings and encounter greater difficulty accessing external finance, including debt financing, due to factors like limited credit history and collateral.
- Youth often have limited business networks and social capital relevant to entrepreneurship, impacting their ability to establish and operate businesses and gain credibility with key stakeholders.
- Market barriers also hinder youth entrepreneurship, with financial markets often favoring established businesses over youth-owned ventures. Youth-owned businesses may encounter skepticism from customers regarding product or service reliability, and they may be compelled to enter industries with low barriers to entry but high competition due to limited resources.
The youth population includes diverse groups with varying potentials for entrepreneurship and unique barriers. Ethnic minorities, individuals from deprived areas, those from low-income families, and those with low education levels face particularly strong labor market challenges. Tailored policy interventions are necessary to address the distinct barriers faced by different youth groups, with a focus on providing support to disadvantaged youth while also seizing opportunities to enhance entrepreneurship participation among others.
