JOINT PROFESSIONAL TRAINING & SUPPORT (JPTS)

OROZO - ABUJA

DEPARTMENT OF BUSINESS ADMINISTRATION

DANGERS OF OVERFLOWING SUPPLY SIDE OF THE NIGERIAN

LABOUR MARKET AND POSSIBLE SOLUTIONS

BY

ADUWU CHRISTIAN UKO

REGISTRATION NUMBER: 133301

SALIHU HALILU
REGISTRATION NUMBER: 159746

IJASINI MULDA
ACCOUNTING
REGISTRATION NUMBER: 187092

AISHA THOMAS
REGISTRATION NUMBER: 166327

JOHN ADIKWU

300 LEVEL

2ND SEMESTER

A RESEARCH PROJECT SUBMITTED IN PARTIAL

FULFILLMENT TERM PAPERWORK

APRIL, 2024
 ABSTRACT
This research work tries to investigate the impact of the labour market crisis in
developing economies using Nigeria as a case study. Using Nigeria as a case study.
Using ordinary least squares the study shows that there is a negative relationship
between labour market crisis and economic growth; Also inflation was found to
reduce production output and economic growth. Based on these findings this
study recommends that the government should apply a reconciliation technique
with labour unions so that production output would not be affected Also policies
such as unemployment benefits and reduction in wage inequality should be
applied.

This abstract discusses the challenges posed by an overflowing supply in the

Nigerian labour market and explores potential solutions to address this issue. The
oversupply of labour in Nigeria has led to various social and economic
ramifications, including unemployment, underemployment, and downward
pressure on wages. Factors contributing to this oversupply include population
growth, inadequate educational infrastructure, and mismatch between skills
demanded by employers and those possessed by job seekers. Traditional
approaches such as creating more job opportunities have not been able to
adequately absorb the surplus labour force. Therefore, innovative solutions are
needed. This abstract proposes a multi-faceted approach, including enhancing
vocational and technical education, promoting entrepreneurship and self-
employment, fostering industry-academia collaboration to align education with
industry needs, and implementing targeted workforce development programs.
Additionally, policies to encourage investment and stimulate economic growth are
crucial to absorb the surplus labour force effectively. By implementing these
strategies, Nigeria can mitigate the dangers of an overflowing labour market and
harness its demographic dividend to drive inclusive economic development.
 CHAPTER ONE

1.1 BACKGROUND OF THE STUDY

The Nigeria labour market in recent years has experienced

problems such as Strikes, unemployment, and reduction in
productivity. Labour conflict is a phenomenon that most often
takes the form of strikes [Where they are permitted] or, as in the
public sector in the United States.
The arbitration procedures. In the United States arbitration is
frequently used in the public sector when strikes are forbidden.
The arbitrators are generally experts picked by the employers and
unions following a procedure set out by the government.
Unemployment is one of the developmental problems that face
developed and mostly developing economics of which Nigeria
constitute 2/3 [two Third] of the population of developing
countries. During the last 30 years,
The industrialized countries have evolved in different directions
with respect
To unemployment. The minimum wage legislation exists in 22
[OECD] organization for economic Cooperation and development.
Such legislation has generally been framed with the intent to
compress wage inequality. But the Effectiveness of the minimum
wage as an income redistribution tool is often criticized, since by
raising the cost of labour it can have negative effects on output
and employment .Economic analysis suggests that the effects of
the minimum wage on employment actually depend on the initial
level of minimum wage.
The minimum wage can be set on an hourly, daily or monthly
basis. Everywhere the public authorities govern the mode of its
calculation but it can also be bargained over between employers
and employees.
The effect of the minimum wage depend on the characteristics of
the labour Market to which it applies. However, other theoretical
framework s like the Monopsony model or the matching model
with endogenous labour market Participation or job search effort
highlight situations which arises in the Minimum wage and leads to
an increase in hiring.
An active and functioning labour market is important for economic
stability the
Nigerian labour market has been experiencing a lot of crisis over
the years. Loss of manpower which policy makers fear will
adversely affect the national output. The impact of labour market
crisis in developing economies using Nigeria as a Case study
generates welfare loss in terms of lower output thereby leading to
Lower GDP, lower income.

1.2 STATEMENT OF THE PROBLEM.

The voluminous literature on the source s of economic growth

identified awide
Range of natural and government-imposed stimulants and
impediments to
Growth.
In particular, a huge level of educational attainment, an open –
trading regime, a low level of government consumption and
political stability are generally
Seen as having a significant on internal growth is its interest in the
effect of
Institutions on economic growth and the vital role played by the
labour market
Institution is in economic growth. The high rate of labour
unionization has been a notable characteristic of a number of
economic s with different growth
Performance s, though probable link between labour unionization
and growth
Has been frequently noted.
This paper attempts to look at the effects of labour market crisis
on developing economics using Nigeria as a case study .Strike
volume has been studied from a number of viewpoints. One view
point attribute strike propensity to such economic factors as
unemployment, inflation and real wage change [Faber 1978]. The
other view point is the organizational perspective which states that
strikes are related to such structural factor as the extent of
unionization and the degree of centralization and
institutionalization in collective bargaining [BRITTE AND GALLE
1972; SYNDER 1975].
Most of developing economics are faced with numerous labour
market crisis and the Nigeria economy is not an exception,
especially after the [SAP] Structural Adjustment Program. The
Nigeria labour market problem could be seen as one of the chronic
labour crisis with high wage inequality and unemployment. Since
independence, there has been series of distortions in the labour
market. The market is highly distorted and characterized by
insignificant imbalances and industrial actions embarked upon by
the Nigeria Labour Congress [NLC] pressing for improved working
conditions for workers. These actions are in the form of strikes.
The academic and non-academic union of the Nigerian tertiary
institution are not left out as they embark on several actions to
either Press for improved working condition, redressing the wage
inequality problem and in some cases to register their
disagreements with government development program. All these
lead to loss of man-hour which policymakers fear will adversely
affect the national output.
During the military era, it was not news for workers to embark on
strike as it was a potent weapon at the disposal of the workers to
drive home their demands.
What then have been the effect of these myriad of the labour crisis
on the productivity and the growth of the Nigeria economy? The
above questions have not adequately received attention
empirically.
Hence, this research work tends to investigate the effect of these
labour market crisis on Nigeria economy growth and productivity
using Man-hour lost will be proxy to the labour market crisis.
1.3 RESEARCH QUESTIONS
1. What is the effect of labour market crisis on Nigeria economic
growth?

1.4 OBJECTIVE OF THE STUDY.

The broad objective of these research is to investigate the effect of
labour market crisis on developing economic s using Nigeria as a
case.

1.7SIGNIFICANCE OF THE STUDY

The crisis that has for a long time beclouded the Nigeria labour
market has
Been a source of worry to policy makers. This worry comes from
the fact
That industrial actions does not affect only the sector concerned
but also affect the general economy because of its multiplier
effect.
The study, which is aimed at assessing to what extent the labour
market crisis affects the economy, will be of tremendous
importance not only to the Nigerian economy , but also to the
global economy since globalization and liberalization have brought
global systems together. The findings of this research will also help
to improve the current economic reforms that have to do with
labour market institutions.
Finally, this research will serve as material for researchers carrying
out studies on related area study. Specifically this research work is
set out to achieve the following objectives.
1. To investigate the effect of labour market crisis on economic
growth of Nigeria.

1.5 RESEARCH HYPOTHESIS

The following hypothesis was formulated in line with objective of
the study. 1. There is no relationship between labour market crisis
and economic growth.

1.6 SCOPE OF THE STUDY

This research is designed to investigate labour market crisis
on developing economics using Nigeria as a case study.
This research work covers the period 1980-2010 at which Nigeria
economy witnessed liberalization and globalization. This time
period witnessed labour unions resistance to new global world
thereby leading to series of industrial actions.
 CHAPTER TWO
LITERATURE REVIEW

2.1 REVIEW OF THEORITICAL LITERATURE

Labour markets in the Pacific Island countries are characterized by
under employment, high levels of informality, gender disparities in
employment outcomes, and a large and growing share of young
people not in education, employment or training. Considering that
formal sector job creation remains limited, the objective of
creating decent and productive employment for all, as outlined by
Sustainable Development Goal (SDG) 8 (“to promote sustained,
inclusive and sustainable economic growth, full and productive
employment and decent work for all”) poses a serious challenge to
countries in the Pacific. Furthermore, the global mega trends, such
as climate change and technological innovation, add further
complexities to the circumstances surrounding the Pacific Island
countries.
In 2012, the President of the Asian Development Bank (ADB) and
the
Director-General of the International Labour Organization (ILO)
reiterated their pledge to strengthen their partnership to create
decent work and address poverty, vulnerability, and informality
and gender disparities in Asia and the Pacific. In light of the labour
market challenges in the Pacific, the ADB and the ILO worked
together to prepare labour market action plans for three member
countries – Fiji, Palau and Papua New Guinea – with a view to
making policies more evidence-based, collaboratively determined
and gender focused. This report is a synthesis of the analytical and
research work that was carried out under this ADB-funded project
in the Pacific.
This report shows how size and remoteness have hindered
economic growth and limited positive labour market outcomes
throughout the Pacific Island countries. Development in the
industrial sector has been uneven, but there are promising signs in
the region’s growing tourism industry and niche agriculture and
fishing sectors. A young and growing population is both an
opportunity and a concern: Pacific Island countries stand to benefit
from a demographic dividend, but labour markets are simply not
producing enough jobs for all the young women and men entering
the workforce each year. This report takes an in-depth look at
public employment services and proposes measures to target
disadvantaged jobseekers and meet the needs of employers.
Persistent labour market challenges have pushed Pacific Islanders
to migrate in high numbers. Enacting migration policies that lead
to positive labour market outcomes requires a careful balance.
While migration can contribute to positive development in sending
countries, there is also a real risk of skills shortages as educated
workers leave. The challenge in building good migration policy,
then, is aiming for a "triple-win" scenario that benefits the
receiving country, the sending country and the migrants
themselves.
This report concludes with policy guidelines to improve labour
market outcomes in the Pacific. Several countries in the Pacific
have expressed interest in building National Employment Policies
aimed at achieving SDG8 – we hope this publication contributes to
this effort. Lastly, we believe that this collaboration between the
ADB and the ILO lays a solid foundation for further engagement
between the two institutions.
However, these workers earning just above the minimum wage are
highly substitutable for those who would otherwise earn below the
minimum wage; this is because there is skill differential between
them though the job is still relatively unskilled .The impact of
minimum wage on total employment may be disproportionately
high.
In explaining the impact of strike action on employment [Rao
2000] outlined several effect of strike on employment statistics. He
affirmed that strike affects current statistics in the sense that if
persons on strike were included in the current employment
statistics [CES] estimates of the aggregate earning data will be
inflated.
Strikes are costly to both parties. The firm profits decline and lose
customers permanently. Also a highly publicized strike may
diminish the long run value of the brand name, workers lose
income and perhaps even their jobs. When the parties have
reasonably good information about the cost and likely outcome of
the strike it is irrational to strike.
Adegbola [1990] has it that trade union have become a political
instrument for channeling the protest of relatively less privilege
wage earners against the distribution of national wealth between
themselves and the distribution pyramid .
Another aspect of labour market crisis is caused by income
inequality Ginding and Trayos [2003] find a number of other
factors that can also help in explaining rising earning and
inequality including change in the supply of education.
The idea of new technologies which have accelerated the pace of
sector change in employment from manufacturing to services as
well as a shift from un skilled labour to skilled labour within sectors
appear to show a direct link with the structural problems of
contemporary labour market .

2.2 OVERVIEW OF THE NIGERIA LABOUR MARKET

THE LABOR FORCE

In 2005, Nigeria had a labour force of 57.2 million. In 2003, the
unemployment rate was 10.8 percent overall; urban
unemployment of 12.3 percent exceeded rural unemployment of
7.4 percent. According to the latest available information from
1999, labour force employment by sector was as follows; 70
percent in agriculture 20 percent in services, 10 percent in
industry. The labour force, total in Nigeria was last reported at
50280306 .59in 2010 according to a World Bank report published
in 2012.
The political crisis of1987 triggered a large emigration of both
skilled and unskilled labour. The growth in labour force contracted
to around 0.8 percent in 1988. During the early 1990s growth in
the labour force recovered to an average around 3.0 percent per
annum as emigration numbers dropped.
Labour unions, which have undergone periods of militancy and
quiescence, reemerge as a force in 1998 when they regained
independence from the government. Since, 1999, the Nigeria
Labour Congress [NLC] as a union umbrella organization, has
called six general strikes to protest domestic fuel price increases.
However, in March 2005 the government introduced legislation
ending the NLCs monopoly over union organizing. In December
2005 the NLC was lobbying on the minimum wage for federal
workers. The existing minimum wage which was introduced six
years earlier but has not been whittled away by inflation to only US
42.80 per month. As established the
Nigeria labour force is 48.53 million in 2011 and 53.83 million in
2012.
UNEMPLOYMENT
As defined by the international Labour Organization, unemployed
workers are those who are currently not working but are willing
and able to work for pay, currently available to work and have
actively searched for work.
In the 1980s to mid-1990s unemployment fell to moderate levels
as the economy recovered through a series of measures
implemented by the authorities to promote economic growth.
Among such measures was the devaluation of the naira, export
promotion policies etc.
However, subdued public and private investment s in employment
creation relative to the growth in the number of job seekers
contributed to high unemployment in the late 1990s.
The World Bank recently published that unemployment in Nigeria
presently stands at 56 percent. The Nigeria unemployment rate is
spiraling upwards, growing at 16 percent per year. The youth of
the nation are the most impacted with youth unemployment rate
over 50 percent? Nigeria spiraling youth unemployment has been
a significant contributor in social un rest and crime example Niger
Delta militancy, Boko – Haram, Jos crisis etc.
WAGES
Nigeria wage growth has been very uneven over the past three
and half decades. Wage growth picked up sharply in the mid-
1970s reaching a peak of 30 percent in 1976. However, wage
growth declined through much of the late 1980s and by mid 1990s
wages were growing very slowly .In the late wages fell, while
growth was rapid in the late 1990s, averaging a little over 74
percent per year following the unprecedented upward review of
salaries in the formal sector beginning late 1990s.
A variety of wage regulations have underpinned the evaluation of
wages since the 1970s. Regulated wage policies were introduced
in Nigeria after an agreement was signed in 1977 between the
government, Nigeria Labour Congress [NLC], and the Nigeria
Employers Association to establish the tripartite forum .During the
early 2000, wages outcomes have been heavily impacted by
centralized policy decisions following the lifting of wage freeze
imposed in the 1980s, new wage setting guidelines were
introduced in 1986. Wages were adjusted according to a weighted
average of movements in the terms of trade, productivity, and the
CPI.
2.3 EMPIRICAL LITERATURE

Onwuioduokit et al [2005] carried out a research to investigate the

determinant of labour market in Nigeria arising from the economic
transformation in recent years and how it affect affects labour
market outcome in particular . The research involved data from
1980- 2007, using the seemingly unrelated Regression [SUR] .A
two equation model for Nigeria labour demand and supply was
estimated. They found out that, on the supply side, labour force
participation is largely determined by its own backward looking
expectation and demand elasticity while real minimum wage and
population growth were insignificant but positively related to
labour force participation. The result also showed that demand
was negatively related to labour supply and the level of the
working age population, while capacity utilization and real
minimum wage though not significant had positive relationships
with demand for labour. It is evident from the results that to fix the
disequilibrium in the Nigeria labour market, macroeconomic
stability is needed to sustain prices at levels that will drive
labour market activities to optimal levels.

Haas and Stack [1983] tested the relationship between strike

volume or activity and economic development with analysis from
71 countries .He used data ranging from 1976-1978 using the
latest square regression .
They tested the effect of strike activities from three perspectives.
From the economic perspective, the authors used the degree of
prosperity and the rate of inflation as two factors that affect a
nation strike activity. They found out increasing prosperity reduce
strike volume and that strike activity is positively affected by price
changes.
From the organizational perspective, the authors used a measure
of union strength as a control variable. The degree of unionization
is calculated as a percentage of the number of union members in
the labour force .Union strength has been shown to affect strike
activity and this is in line with earlier study by Britte and Galle
[1972]. This is because union promotes workers solidarity and
provide resources such as strike funds that encourage workers to
press their demands more forcefully and found and this was found
to be positively significant.
Lastly from the social perspective, the rates or rural- urban
migration was seen as having a bearing on strike behavior
because rural migrants were seen as having the inclination to
express pro-union sentiments. The degree of the development of
mass media was also studied since an awareness of one’s
standard of living relative to someone else , might affect ones
desire to strike.This was found to be positively insignificant. Lewis
[2000] in his work on minimum wage and unemployment finds
that, if wages are held at minimum, then labour supply exceeds
labour demand and therefore unemployment results.
Ogwunike et al [2005] showed that the structure of the labour
market have a significant consequences on employment status
and it served as an important determinant of household income
and welfare. The research also analyzed the distribution and
structure of man job earnings and income inequality in the Nigeria
labour market using Ginicoefficient, Theils Entropy Index, Tobit
Analytical Technique, and Ordinary Least Square
Technique and Heckman two – stage electivity bias correction
procedure. He found that inequality was evident in paid
employment than in self – employed segment of the labour
force .It is generally higher in the areas than in the urban areas.
Valentine [1975], Rosendale [1975], Holmes [1979] and others in
their researches and found that labour market institutions and
regulations significantly affect employment decisions by firms and
by extension affect unemployment.

2.4 LIMITATIONS OF WORK RESEARCHED.

The research on labour market crisis in Nigeria is constrained as a
result of limited available data on labour market in Nigeria. Man-
hour loss is proxy to Man- day of labour market crisis.Agbenor
[1995] and onwiodouket [2008] stated that publisahed data on
unemployment in developing countries are often incomplete also
ogwuinike and Agbo [2002] showed that those in paid jobs with
adequate skills are the most vulnerable when a shock occurs in the
labour market.

CHAPTER THREE
SUMMARY, POLICY IMPLEMENTATION AND
CONCLUSION

3.1 SUMMARY
This research work analysis the impact of labour market crisis on
developing economics using Nigeria experience from 1980- 2010
[a span of thirty years]. The ordinary least square [OlS] technique
is was used to achieve the objective of the study.
The number of man- day loss proxy to the labour market crisis
while gross domestic product is use as proxy for economic growth.
The result of the study employed secondary data. The result
shows that man- day loss has a negative relationship with the
gross domestic product. Thus we reject the null hypothesis, and
conclude that there is a relationship between labour market crisis
and economic growth in Nigeria. Inflation was found to have an
insignificant impact on the gross domestic product while industrial
output was the only significant parameter in the model.

The overflowing supply side of the Nigerian labour market poses significant
dangers such as high levels of unemployment, underemployment, low wages,
competition among job seekers, and skills-job mismatch. This can result in
economic instability, social unrest, and decreased productivity.

Possible solutions include implementing policies to promote job creation, skills

development, and entrepreneurship. This could involve investing in education and
vocational training, supporting small businesses, creating a conducive business
environment, diversifying the economy, and encouraging investment in key
sectors.

By addressing these challenges holistically, Nigeria can mitigate the negative

impacts of the overflowing labour market supply and create a more sustainable
and inclusive economy for its citizens.

3.2 POLICY RECOMMENDATION

Based on the above findings, the following recommendation is

made. -The finding that a unit change in man – day loss [MDL] will
bring about a decrease in the gross domestic product by
0.00000000180 unit conforms to the existing theory, meaning that
labour market decreases economic growth. Therefore,
government, should ensure that labour market crisis be reduced to
the nearest minimum through the formulation and implementation
of policies that will help to reduce this crisis.
Policies such as unemployment benefit, creation of job
opportunities, reduction in wage inequality, increase in minimum
wage, improved working condition of workers in order to avoid
strike actions should be implemented. Inflation having a coefficient
of -0.0130395 shows that a unit change in inflation will decrease
the economic growth by 0.0130395 units. According to Iyoha
[2004], fiscal policy would be the most effective tool for closing
the inflationary gap.
The policy recommendation is to reduce government spending and
/ or raise taxes. Also monetary Policy which is in line the
postulation that high inflation rate is a monetary phenomenon.
Industrial output was found to increase the gross domestic product
[GDP]. Therefore government should improve the industrial sector
in order to increase the economic growth.

Addressing the challenges of an overflowing supply side in the Nigerian labor

market requires a multi-faceted approach. Here are some policy recommendations
and possible solutions:

1. **Skills Development Programs**: Implement comprehensive skills

development programs to align the workforce with the demands of the
labor market. This can include vocational training, apprenticeships, and
retraining programs for workers in declining industries.

2. **Education Reform**: Improve the quality and relevance of education to

equip students with the skills needed in the modern job market. This could
involve updating curricula, investing in STEM education, and promoting
entrepreneurship and innovation.

3. **Promotion of Entrepreneurship**: Encourage entrepreneurship and self-

employment by providing support for startups, access to finance, and
creating a conducive business environment with fewer bureaucratic hurdles.

4. **Industry Diversification**: Diversify the economy away from over-reliance

on sectors such as oil and gas. This can be achieved through targeted
investments in sectors with high growth potential, such as agriculture,
manufacturing, technology, and renewable energy.

5. **Labor Market Information Systems (LMIS)**: Establish robust LMIS to

provide real-time data on labor market trends, job vacancies, and skill
requirements. This will enable policymakers to make informed decisions and
facilitate better matching between job seekers and employers.

6. **Flexible Labor Laws**: Reform labor laws to strike a balance between

protecting workers’ rights and creating a flexible environment for businesses
to hire and innovate. This could include measures such as introducing part-
time work arrangements and reducing barriers to hiring and firing.
 7. **Public-Private Partnerships (PPP)**: Foster collaboration between the
government, private sector, and educational institutions to design and
implement effective workforce development programs tailored to the needs
of industries.

8. **Regional Development Initiatives**: Promote balanced regional

development to reduce migration to urban centers in search of employment
opportunities. This could involve investing in infrastructure, healthcare, and
education in rural areas to create jobs and improve living standards.

9. **Social Safety Nets**: Implement social safety nets to protect vulnerable

groups, including unemployed youth and informal workers, through
initiatives such as cash transfers, unemployment benefits, and skills training
programs.

10.**Monitoring and Evaluation**: Regularly monitor and evaluate the

effectiveness of policies and interventions to address labor market
challenges, and adjust strategies as needed based on evidence and feedback
from stakeholders.

Implementing these recommendations requires strong political will, coordination

among government agencies, and active engagement with the private sector and
civil society to achieve sustainable and inclusive economic growth.
3.3 CONCLUSION

Labour market crisis is a problem in developing economics

especially in Nigeria; unemployment, wage inequality, strike
actions, Problem of minimum wage etc. and this affects the growth
of an economy. Government should look into these problems for
the betterment of the economy and society as a whole.

In conclusion, the overflowing supply side of the Nigerian labour market presents a
number of dangers to both the economy and the workforce. It can lead to high
levels of unemployment, underemployment, and low wages, as well as increased
competition among job seekers and a mismatch between skills and available jobs.
This can result in economic instability, social unrest, and a decrease in overall
productivity and growth.

To address these challenges, the government and other stakeholders must work
together to implement policies and programs that promote job creation, skills
development, and entrepreneurship. This may include investing in education and
vocational training, supporting small and medium-sized enterprises, and
promoting a conducive business environment that encourages investment and
innovation. Additionally, efforts should be made to diversify the economy and
create more opportunities in key sectors such as agriculture, manufacturing, and
technology.

By taking a comprehensive approach to addressing the overflowing supply side of

the Nigerian labour market, we can mitigate its negative effects and create a more
sustainable and inclusive economy that benefits all citizens.
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