Trade creates jobs, though influenced by myriads of factors. Since time immemorial, countries have combined domestic with international trade, either by signing bilateral agreements with other countries, removing trade barriers or creating free trade areas that will improve inter-state, regional and continental trade, and promote economic growth and development.
The major takeaways are that the act of buying, selling and exchange of goods and services has spillover effects on demand expansion, supply chain, return on investment, production, labour market, wage fixing and employment–through import or export. Premised on this, many countries and regions have found different ways of liberalising their trade.
Renowned economist, Eamonn Butler opined that China, South East Asia, Japan, Korea, Singapore, Hong Kong or India could not have made the progress they have made without trade and neither would the lives of people living within the poverty line be transformed, if not for trade. The lessons learned from these countries is that they prioritised free trade and improved their business environment and policies to attract investments which had more positive spillover effects than negative on their overall growth and development.
Free Trade and Business Environment in Nigeria
Free trade as an economic approach that removes restrictions and barriers from imports and exports has proven to be a game-changer for economic growth and development. Countries have signed free trade agreements (FTAs) to trade in goods and services without tariffs, quotas on imports, subsidies, and regulations that hinder trade.
In 1992, Nigeria adopted the free trade zone model, following the enactment of Nigeria Export Processing Zones Act 63 in 1989. It was modeled after China’s own to achieve rapid, inclusive and sustainable industrialisation, job creation, and diversified export earnings on the back of Special Economic Zones.
Asides from that, the country has signed free trade agreements as members of regional and continental trade integration initiatives including the Economic Community of West African States (ECOWAS), the African Continental Free Trade Area (AfCFTA), and international free trade treaties with the World Trade Organization (WTO), amongst others. Despite all these, economic growth and development in Nigeria is either lukewarm or fluctuating, at best with dwindling foreign direct investments (FDIs) to show for it.
As stated earlier, trade is influenced by myriads of factors, including the business environment within a particular country. Business environment encompasses the social, political, cultural and economic factors or conditions that are capable of affecting the life, growth and development of a business outfit or venture. For instance, an unfavourable tax policy will negatively impact business turnovers, profit, and other benefits of trade like job creation.
Enterprises in Nigeria have to deal with a business environment that is worsened by current realities such as poor power supply and fuel scarcity. The current rise in fuel prices is pushing businesses to shutdown operations, hence making the unemployment situation more problematic.
Job Creation Challenges in Nigeria
Nigeria’s statistics agency revealed that the economically active or working-age population (15 – 64 years of age) increased from 111.1 million in 2017 to 115.5 million in 2018. But, the total number of people in employment increased from 69.09 million in 2017 to 69.54 million in 2018. Only 450,000 jobs were created within a year increasing the unemployment rate to 23.1 percent from 18.8 percent.
As of the fourth quarter of 2020 when the world was in the throes of the COVID-19 pandemic, NBS reported that unemployment rate had increased to 33.3 percent due to massive layoffs caused by coronavirus and the ensuing total lockdown. The International Monetary Fund, IMF projects that Nigeria needs 5 million jobs annually within a ten-year period to close the current unemployment gap, but it must embrace more open trade and good policies to rejuvenate growth while citing the AfCFTA as a pivotal force to achieve this.
Like other nations, Nigeria launched an economic sustainability cum recovery plan to rebuild after the pandemic which includes a clear-cut strategy to keep existing jobs and create opportunities for new ones but the huge national question remains how the government can use free trade and better business environment to promote job creation.
To bridge the gap in job creation using trade and business-friendly policies, the government and stakeholders need to implement the following recommendations.
Protect the Micro, Small & Medium Enterprises (MSMEs)
The biggest employer of labour in Nigeria remains MSMEs. As of June 2020, a PWC survey revealed that MSMEs account for 96 percent of the total number of businesses in the country and contribute about 50 percent to the national GDP. Government policies such as VAT increment, border closures, as well as erratic power supply, inadequate security and lack of access to financing must be fixed to help businesses grow and create employment.
Invest in Digital Technology
Research has shown that the absence of information is a huge disadvantage to free trade, especially within the continent and AfCFTA is still unable to address this. Victor Asemota, a tech investor explained that Africans have little information about each other and their comparative cost advantage.
Hence, there is a need for AfCFTA to invest in digital technology that prioritises sharing real-time information, this will create more jobs for new techies; expand the market with new job roles when new products, goods, and services are brought into the Nigerian market.
Promote Trade Liberalisation
When countries participate in free trade, it opens up new trade opportunities within the market, especially for new income earners. For instance, Nigerians living in border communities were majorly affected by the border closure in 2019, but when there is a business environment that respects trade liberalisation and opens up the market like the AfCFTA, it will naturally create more jobs that will raise average incomes and pull more people out of the poverty line.
Streamline Ease of Doing Business
To drive economic growth, Nigeria needs to follow the latest trends in international trade practices. This includes streamlining import and export procedures, business registrations, trade permits, and other important documents that promote free trade. Nigeria has recorded success with signing the Companies and Allied Matters Act (CAMA) 2020 but when it comes to port operations and other trade logistics, it negates an open market.
When there is the ease of doing business, companies and firms will not struggle to survive but will seek to expand and create more jobs within the country. For Nigeria to leverage free trade for job creation, it must create and implement policies that make it easier for businesses to trade within and outside the country, and to freely enter and exit the Nigerian market