NBS changes its model for unemployment, now in single digits

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TGIF.

Communication is critical, not only to personal relationships, but also between the government and citizens. In 2020, the National Bureau of Statistics showed unemployment as 33%. Yesterday, it said it was 4.1% in Q 2023 after catastrophic and devastating Covid – 19 pandemic that we have not recovered.

What changed? There is dramatic difference in the way measures of unemployment are now calculated but the NBS did not communicate those changes adequately yesterday.

I provide my thoughts below.

Please, also share so we can continue to build a community of “business thinkers”.

Markets

• The benchmark NGX All-Share Index (ASI) pared 91.10 (-0.14%) points to close at 65,401.82, representing a week gain of 1.48%, 4-week loss of 0.12%, but an overall year-to-date gain of 27.61%. FTN Cocoa Processors shares declined by 9.95% at NGN 1.81 per share, followed by Red Star Express (-9.93%), Learn Africa (-9.88%) and Northern Nigeria Flour Mills (-8.3%).

• Oil prices largely remained flat Thursday, reeling from weak data from China and signals from US Fed. Brent crude increased slightly by 0.3% to US $83.46 a barrel and U.S. West Texas Intermediate crude rose by 0.21%, to US $79.10 a barrel.

• Naira was mixed at both the I&E exchange and on the streets. On the I&E exchange, Naira appreciated by 0.23%, closing at a rate of N771.69 to the US dollar. On the streets, Naira was down by 2.12%, reaching a value of N903.75 against the US dollar.

• US natural gas futures rose more than 2% to $2.55/MMBtu from a 10-week low of $2.42 boosted by a smaller-than-expected storage build last week when power generators burned lots of gas to keep air conditioners humming during an extreme heat wave.

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National Headlines

• CBN faults JP Morgan’s analysis of Nigeria’s foreign Reserves – The Central Bank of Nigeria has faulted the recent estimation of the country’s foreign reserves by JP Morgan saying it was presented “out of context” and misleading. The Bank stated that the country’s reserves account is a flow, and therefore misleading to characterize liabilities due on a future date without noting revenues on a future date. JP Morgan had rattled the market when it estimated that the CBN’s net FX reserves fell to US $3.7 billion at the end of 2022, compared to $14 billion in 2021. What is clear and has not changed is that Nigeria is in dire straits and needs urgent foreign currency injection.

• NBS changes its model for unemployment, now in single digits – Before the latest report on Nigeria’s unemployment released yesterday, the country’s unemployment rate was 33% for 2020. Since then, the National Bureau of Statistics (NBS) has made changes to its methodology in line with international labor organization’s (ILO) guidelines. Two major changes:

  • It made changes to the number of hours worked per week. Previously, it was 40 hours, now it’s one hour per week.

  • Second, it made changes to the characterization of underemployment. In the previous model, underemployed are those that work less than 40 hours per week. Now, underemployed (counted as employed) are those, though employed for at least 20 hours, are looking for more work.

Given this enhanced model, Nigeria’s unemployment is 4.1% in Q1 2023, compared to 5.3% in 2022. For those that are dismayed about these numbers, unemployment measures only those actively seeking for work, and it does not measure income. So, there is a tenuous relationship between jobs (activities) and income growth.

Global Headlines

• BRICS expanded, have six new members – At the conclusion of its 15^th summit yesterday in South Africa, the BRICS group of emerging market economies announced expansion that will take effect from January 2024. The six new members are Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and United Arab Emirates (UAE). Now 11 members, it is not clear yet what the new name will be, especially because BRICS was taken from the names of the countries – Brazil, Russia, India, China, and South Africa. The new group has four large oil producing economies – Russia, Iran, Saudi Arabia, and UAE, the two largest economies in South America – Brazil and Argentina, and three large economies on the continent of Africa – South Africa, Egypt, and Ethiopia. The group was last expanded in 2011 when South Africa joined.

• China suspends all aquatic imports from Japan – Following the dumping of treated radioactive water into the ocean, China has banned all aquatic imports from Japan. The suspension took immediate effect. Honk Kong and Macao, special administrative regions under China also instituted their own changes to aquatic trade with Japan. Earlier this week, Japan released treated radioactive water from the stricken Fukushima nuclear power plant into the Ocean. China is Japan’s largest importer of fish in the value of about US $493.4 million in 2022, including red sea bream, scallops, and mackerel.

• US Job market remains tight – The number of Americans filing new claims for unemployment benefits fell for a second straight week. Those collecting unemployment benefits fell to 230,000 for the week ended August 19^th . This reflects continued tight labour market conditions in the US. Later today, the US Fed Chairman Jeremy Powell will make a speech at Jackson Hole, Wyoming and markets will watch out for clues about the direction of monetary policy in the coming months. It looks increasingly clear that the US may avoid recession and have a soft landing. Also, the Fed still has an opportunity for one rate hike this year.

• Turkey interest rate up again – Turkey’s central bank on Thursday hiked interest rates by more than expected to 25%, from 17.5%, continuing its recent orthodoxy monetary stance and determination to combat inflation. Following the announcement, Turkish lira gained ground against the U.S. dollar and euro. The greenback was roughly 5.3% lower against the lira and the euro was 5.9% lower against the lira.

This Week

• Later today Friday 25^th August 2023, the NBS is expected to release the Nigeria’s Gross Domestic Product by Output Report (Q2 2023). The latest statistics shows that Nigeria's Gross Domestic Product (GDP) grew by 2.31% (year-on-year) in real terms in the first quarter of 2023. This growth rate declined from 3.11% recorded in the first quarter of 2022, and 3.52% in the fourth quarter of 2022.