Report No. 51564-NG Public Disclosure Authorized NIGERIA Employment and Growth Study November 13, 2009 Public Disclosure Authorized Poverty Reduction and Economic Management 3 Finance and Private Sector Development Department Country Department 12 Africa Region Public Disclosure Authorized Public Disclosure Authorized Document of the World Bank _____________________________________ Fiscal Year of Budget (January 1- December 31) Currency Equivalents Currency Unit: Nigeria Naira US$1 = 151 Naira (Exchange rate effective November 3, 2009) Weight and Measures Metric system Abbreviations and Acronyms AfDB African Development Bank AGOA African Growth and Opportunities Act BOI Bank of Industry CAC Corporate Affairs Commission CAD Competitive Advantage Defying CAF Comparative Advantage Following CCI Clean Certificate of Inspection CET Common External Tariff COMTRADE United Nations Commodity Trade Statistics Database CRI Clean Report of Inspection DFID Department for International Development EBA Everything But Arms ECA Excess Crude Account ECOWAS Economic Community of West African States EEG Export Expansion Grant EME Emerging Market Economy EPA Economic Partnership Agreement EPZ Export Processing Zone FCT Federal Capital Territory FDI Foreign Direct Investment FIAS Foreign Investment Advisory Service (World Bank) FIRS Federal Inland Revenue Service FMCIT Federal Ministry of Commerce, Industry, and Trade FMOF Federal Ministry of Finance FPSRP Federal Public Service Program FSS Financial Sector Strategy FTZ Free Trade Zone GDP Gross Domestic Product GHS General Household Survey HND Higher National Diploma ICA Investment Climate Assessment ICT Information and Communications Technology IDG Industrial Development Group IDR Industrial Development Report IEI Innovation Enterprise Institution IMF International Monetary Fund IRC Import Requirement Certificate ISI Import Substitution Industrialization ITF Industrial Training Fund JICA Japan International Cooperation Agency LADOL Lagos Deep Offshore Logistics Support Services LIC Lower-Income Country LWIL Lekki Worldwide Investment Ltd. MAN Manufacturing Association of Nigeria MDA Ministries, Departments, and Agencies MFB Micro-Finance Bank MFN Most Favored Nation MIBS Manufacture-in-Bond Scheme MSME Micro, Small, and Medium Enterprises NASSI Nigerian Association of Small-Scale Industries NACRDB Nigeria Agricultural Cooperative and Rural Development Bank NAFDAC National Agency for Food and Drug Administration and Control NBCI National Bank for Commerce and Industry NBS National Bureau of Statistics NBTE National Board of Technical Education NCC Nigerian Communications Commission NCS Nigerian Customs Service ND National Diploma NDE National Directorate of Employment NEEDS National Economic Empowerment and Development Strategy 2004-2009 NEPC Nigerian Export Promotion Council NEPZA Nigerian Export Processing Zone Authority NERFUND National Economic Reconstruction Fund NEXIM Nigerian Export-Import Bank NGO Non-Government Organization NID National Innovative Diploma NIDB Nigerian Industrial Development Bank NIPC Nigerian Investment Promotion Commission NISER Nigerian Institute for Social and Economic Research NLSS National Living Standards Survey NPA Nigerian Ports Authority NVC National Vocational Certificate NVQF National Vocational Qualifications Framework NYS National Youth Service OILSS Oil Integrated Logistics Support Services OLFTZ Oshogbo Living Spring Free Trade Zone PPP Public Private Partnership R&D Research and Development RAR Risk Assessment Report SABI State Accelerated Broadband Initiative SEZ Special Economic Zone SGD Single Good Declaration SITC Standard International Trade Classification SIWES Student Industrial Work Experience Scheme SME Small and Medium-Sized Enterprise SMEDAN Small and Medium Enterprises Development Agency SMIEIS Small and Medium Enterprises Equity Investment Scheme SON Standards Organization of Nigeria SSI Small-Scale Industry TFP Total Factor Productivity TEU Twenty Foot Equivalent Unit TVE Technical and Vocational Education UK United Kingdom UNDP United Nations Development Program UNESCO United Nations Educational, Scientific and Cultural Organization UNIDO United Nations Industrial Development Organization VAT Value-Added Tax VEI Vocational Enterprise Institutions WARDA West African Rice Development Association WDI World Development Indicators WEC Weighted Eligibility Criteria WTO World Trade Organization Vice President = Obiageli Katryn Ezekwesili Country Director = Onno Ruhl Sector Director = Sudhir Shetty Sector Manager = Jan Walliser Task Team Leader = Volker Treichel Team Members = Peter Mousley, Gaël Raballand, Jorgen Billetoft, Markus Eberhardt, Luke Haywood, Edmond Mjekiqi, Francis Teal Table of Contents ACKNOWLEGEMENTS ............................................................................................................. ii EXECUTIVE SUMMARY .......................................................................................................... iii CHAPTER 1: EMPLOYMENT AND GROWTH IN NIGERIA .......................................... 1 1.1 Overview .......................................................................................................................... 1 1.2 Nigeria’s Growth Performance ........................................................................................ 3 1.3 Development of the Labor Market ................................................................................... 8 1.4 Nigeria’s Growth Strategy Going Forward .....................................................................14 1.5 Skills Development in the Technical and Vocational Education System .......................30 1.6 Reforming Trade: Import Bans and the Economic Partnership Agreement ...................33 CHAPTER 2: EMPLOYMENT, UNEMPLOYMENT, JOBLESSNESS, AND INCOMES IN NIGERIA 1999-2006 .................................................................................. 38 2.1 Overview .........................................................................................................................38 2.2 Employment, Unemployment, and Joblessness ..............................................................38 2.3 Types of Employment .....................................................................................................44 2.4 Incomes ...........................................................................................................................53 2.5 Non-participation in the Nigerian Labor Market ............................................................60 CHAPTER 3: GROWTH, EMPLOYMENT, AND INDUSTRY IN NIGERIA ............... 66 3.1 Overview .........................................................................................................................66 3.2 Job Creation, Wages, and Firm Size ...............................................................................66 3.3 Nigeria’s Production and Exports in a Comparative Context .........................................68 3.4 Growth in Domestic and Export Sectors .........................................................................78 3.5 Which Sectors for Jobs? ..................................................................................................82 CHAPTER 4: BUILDING THE ENTERPRISE SECTOR FOR EMPLOYMENT AND GROWTH: SOME POLICY OPTIONS ...................................................... 85 4.1 Overview .........................................................................................................................85 4.2 The Current Enterprise Policy and Program Environment .............................................85 4.3 Review of Investment Climate Assessment Data on Economic Zones and Industrial Policy ..............................................................................................................................96 4.4 Industrial Policy – Current Challenges and Successes ..................................................101 4.5 Enterprise and Industry Diagnostics and Policy Selection ............................................106 4.6 Conclusions ...................................................................................................................115 CHAPTER 5: LABOR MARKET TRENDS AND SKILLS DEVELOPMENT ............. 117 5.1 Overview .......................................................................................................................117 5.2 Methodology .................................................................................................................118 5.3 The Nigerian Skills Development and Training Landscape .........................................119 5.4 Skills Acquisition in the Informal Sector ......................................................................128 5.5 Concluding Remarks and Ways Forward .....................................................................139 CHAPTER 6: NIGERIA’S TRADE POLICY FACILITATES UNOFFICIAL TRADE BUT NOT MANUFACTURING .................................................................. 144 6.1 Overview .......................................................................................................................144 6.2 Nigeria’s Current Trade Policy .....................................................................................146 6.3 Impact of Trade Policy on Nigerian Manufacturing: Limited Results .........................148 6.4 Impact on Trade Flows: A High Likelihood of Unofficial Trade ................................150 6.5 Channels of Unofficial Trade to Nigeria .......................................................................153