Business Reforms Key to Macroeconomic Stability – PwC

• Business Reforms Key to Macroeconomic Stability – PwC

PwC Nigeria has said investment in business environment reforms is critical to sustaining macroeconomic stability in the country.

The professional services firm said in a report that structural reforms would pave the way and lay the foundation for long-term sustainable growth in the broader economy.

The report, titled ‘Structural transformation and jobless growth in Nigeria’, noted that although the country had recorded considerable growth in major sectors such as agriculture and manufacturing, employment generation by these sectors was poor.

The services sector, according to the report, has the highest employment elasticity, and the capability to deliver high-productivity jobs with great potential for income generation and poverty reduction.

A Partner and Chief Economist at PwC Nigeria, Dr Andrew Nevin, said the nation’s services sector was critical to solving the country’s unemployment challenge.

He added that unlocking the potential in the services sector would require keen investment in business reforms, which he described as necessary to improve the ease of doing business, sustain macroeconomic stability, and attract investments.

According to him, the improvement of human capital development, provision of enabling infrastructure and intellectual property rights are necessary to drive growth and productivity in the services sector.

Nevin said, “High unemployment rate has remained a huge socio-economic challenge for Nigeria in the last decade, despite economic growth. Our findings show that between 2010 and 2017, average job growth was 1.6 per cent, weaker than labour force growth of 3.9 per cent.

“To reduce the unemployment rate, we estimate that the employment growth of at least four to five per cent will be required. This would translate to at least three million new jobs annually. Achieving this will require implementing policies that will deliver inclusive growth and engender a productive labour force.”

The report noted that while industrialisation in most advanced countries followed a three-stage process of agriculture, industry, and services, Nigeria tended to develop along the line of India, where structural changes boosted growth and employment through the expansion of high productivity activities within the services sector.

It said the responsiveness of employment to economic growth in Nigeria had not been large enough to reduce unemployment.

Nevin stated that employment growth in the services sector had been less than proportionate to its average annual real Gross Domestic Product growth of 7.8 per cent recorded between 2010 and 2014.

“Our analysis shows that a one per cent increase in services growth led to 0.5 per cent increase in employment. This is, perhaps, due to the dominance of the less productive traditional services sub-sectors, such as transport and trade, where the scope to increase productivity is low,” he added.

He said higher productivity sectors, such as financial services, real estate and professional services were crucial to increasing employment, given the relatively higher employment elasticity.