Skills Mismatch In Nigerias Labour Market: What Are The Drivers And How Can Government Bridge The Gap?

By Eustace Uzor and Odiche Nwabuikwu

Given changing labour market demands, the Nigerian government, especially the Federal Ministry of Education, needs to facilitate the alignment of the training of future labour market entrants to the emerging skill requirements of the labour market. This is especially important given the rise of new technologies and their rapid diffusion in Nigeria[1] as well as the structural transformation of Nigerias economy from a predominantly agrarian economy to a service-dominated economy[2]. Undoubtedly, these processes have significantly altered labour market dynamics, particularly the jobs and skills demanded. Recent evidence from National Bureau of Statistics (NBS) employment surveys clearly show that job vacancies are growing more in knowledge and technology intensive sectors. As an example, the 2016Q1 Employment Report[3] revealed that job vacancies were concentrated in three sectors, in the following order: Trade and Services; Consulting; and Information and Communications Technology(ICT)/Telecommunications.

The above-mentioned sectors accounted for 79%, 4.7%, and 2.5% of the total number of job vacancies advertised, respectively. In comparison, primary sectors such as Agriculture and Oil and Gas/Mining accounted for only 0.1% and 0.7% of the vacancies available. Yet, an analysis of the number of job applications per vacancy in each sector show that Trade/Services received the least number of job applications (16), while the Oil and Gas/Mining sector received the most, with 177 applications.

Misalignments in the supply of skills and the demand for skills, which in the present scenario is an undersupply, is largely driven by the rising demand for cognitive skills often required in new-economy sectors such as ICT and consulting. Although the use of cognitive skills in Nigeria is growing, available evidence however suggests that the production process is still dominated by the employment of manual skills[4]. One plausible explanation to this phenomenon is perhaps the huge size of Nigerias informal economy.

Various surveys on labour market skills demand and employer assessment of the performance of graduate employees across private and public organizations in Nigeria, points to the prevalence of a mismatch between the job skills acquired by employees from academic institutions and the actual skills set needed to execute tasks in the labour market. In 2012, a study that examined skills mismatch among university students in Nigeria[5] found that a significant negative relationship exists between skills demand and supply, with an estimated skills mismatch of 60.6%. In particular, the study showed that the least supplied skill relative to demand was communication (67.7%), followed by ICT (66.3%), and decision-making (65.7%). These findings are similar to the conclusion of a 2010 study which examined labour market prospects of graduates in Nigeria[6]. Matching the skills supplied by employed science and technology graduates drawn from across different sectors of the economy, the authors noted that employers considered employed graduates poorly trained and largely unproductive on the job. Notable areas of skills deficiency highlighted by employers include the lack of applied technical skills, especially in ICT, as well as gaps in analytical, oral and commication skills. Considering Nigerias shift to a service-dominated economy, it is important to keep in mind that these job skills, which are largely absent, are the ones demanded by the labour market.

Indeed, it is clear from the forgoing analysis that there is an unmet demand for new skills in the labour market, and as such, even the most rudimentary knowledge of these skills requirement would be an asset for any labour market entrant. In light of these labour market realities, one critical questions to ask is, to what extent has targeted government policy interventions (e.g., reforms in academic curricula, technical and vocational education) equipped new labour market entrants with the skills demanded in the contemporary labour market. While there is evidence of increased government policy effort to tackle unemployment, especially youth unemployment, through programmes such as SURE-P and the more recent N-Power, there seems to be no corresponding policy framework to resolve issues of skills mismatch in the labour market. Evidently, this is well demonstrated in the continual non-responsiveness of the supply-side of the labour market to skills demand.

In general, the role of education in improving labour market outcomes cannot be overemphasized. This, however, depends on the quality of education and the extent of linkage between the education system and the labour market. As noted by a recent study[7], while poor quality basic education which fails to provide students with basic skills often leads to skills gap, a dysfunctional post-basic education, with little focus on job-related skills in sectors such as engineering and ICT, largely results to a mismatch in the skills supplied by the labour force and the skills demanded by employers. Although skills gap is beyond the scope of this analysis, we nonetheless discuss key issues in Nigerias basic education, considering its implication for the quality of post-basic education.

Educational outcomes in Nigeria are poor by any measure, and are unlikely to improve in the near term, given financing constraints. At the basic level, a slew of issues still remains unresolved, with the most alarming being the high number of Out-Of-School-Children (OOSC), low school enrollment and attendance rates, especially in Northern Nigeria. Even with current low enrolment levels, available data shows that more than 80 per cent of the primary school population failed to transit to junior secondary school in 2014[8]. Terrorist insurgency in the North-Eastern part of Nigeria has also exacerbated the challenges, as schools have become soft targets for attacks[9]. The abduction of 276 girls by the Boko Haram terrorist group in Borno State in 2014 is a case in point. These mutually reinforcing factors eventually contribute to a labour force that lacks the basic skills to improve Nigerias productive capacity.

A similar situation exists in post-basic education. Tertiary institutions are in need of massive improvements in teaching curricula, staff expertise, as well as infrastructure. Considering these structural issues, tertiary institutions seem to lack the capacity to equip students with the job skills demanded by the labour market. Thus, enrolled students in tertiary education are also likely to fall short of the skills requirement of the labour market. This is particularly evident in specialty areas such as Engineering and ICT where substantial investments are required to make even modest improvements. With a significant proportion of students graduating with archaic and theoretical knowledge that is of little or no relevance to labour market skills demand, employers of labour are forced to re-train new employees at prohibitive costs[10].

Tertiary institutions in Nigeria also lack the capacity to admit a significant share of college students seeking admission each year. In 2015 alone, the Joint Admissions and Matriculation Board (JAMB), which conducts entrance examinations for entry into Nigerian tertiary institutions, reported over 1.4 million candidates seeking admission, but only 281,993 students were admitted, representing less than 20 percent of the total applicant pool[11]. Similar trends are also apparent in Polytechnics, Monotechnics, as well as Technical and Vocational Education and Training (TVET) institutes. While these statistics reflect space limitations in higher education, the implication is that the majority of applicants are forced to reapply the following year, with a significant proportion of unsuccessful applicants joining the labour market too early. As evidence shows[12], this early entry limits the ability of the labour participants to transit into productive employment, creating the likelihood of future shortages in skilled labour supply.

Technological proficiency, and by extension labour productivity, is primarily determined by the quality of education. Even at the most basic level (e.g., early childhood development), the foundational skills acquired make possible a lifetime of learning, especially the development of cognitive skills which are essentially for effective participating in fast growing sectors such as Consulting and ICT. As such, the Nigerian government has a central role to play in equipping its citizens with the skills required to contribute towards economic growth, by supporting the provision of high-quality education at all levels of learning.

Of course, some progress has been made in increasing the size of fiscal resources available to step up investments in the education sector. Thanks to the UBE Bill that was passed in 2004, UBEC is guaranteed an annual grant that is provided from the Federal Governments Consolidated Revenue Fund (CRF). With these grants, UBEC has established over 400 schools and libraries, and recruited over 1 million teachers since 2006[13]. Similarly, efforts aimed at improving public tertiary education have been carried out by TETFUND, which is funded by a 2 per cent education tax on the profits of registered companies in Nigeria. Since 2009, TETFUND has allocated over 257 billion naira to various projects, including infrastructural development, research development and staff training, in Universities, Polytechnics and Colleges of Education. Notwithstanding these efforts, it is worth noting that the quality of education in the country has not markedly improved.

A systems approach to improving education service delivery in Nigeria that is responsive to labour market demands will be key to increasing labour productivity, and thus enhance economic growth in the long-run. Beginning from the basic education level, policy efforts should be directed at increasing school enrollment, as well as reducing OOSCs and the high dropout rates. This initial step will equip new labour market entrants with the basic skills to participate actively in a changing skills market. At the tertiary education level, much more emphasis should be placed on re-branding TVET, which is a critical source of skills in any growing economy. More importantly, the selection of specialty areas at the tertiary institutions should be based more on the current and future skills needs of the labour market. In this regard, the Nigerian government should articulate a workforce planning framework that matches the supply of workers and skills to the jobs available at both the federal, state, and local government levels. Such proactive steps will ensure that the supply of skills meets the labour market demand for skills.

The government therefore has to play a leading role in intentionally strengthening the link between industry and academic institutions, through incentive structures such as providing tax rebates for medical technology companies that collaborate with researchers in tertiary institutions in the country. This relationship will facilitate the exchange of information, which will keep academic institutions more informed about current trends across industries. With the huge cost of training and retraining, given skills mismatch, firms are likely to intensify the outsourcing of technical roles to employees from other countries, especially given increased globalization.

Endnotes

[1]Favara, M., & Appasamy, I. (2015). Nigeria: Skills for competitiveness and Employability. World Bank, Washington D.C. http://doi.org/Report No. 96420-NG