Nigeria's unemployment rate rose to 5% in the third quarter amid a cost-of-living crisis after the government scrapped a popular but costly petrol subsidy.

President Bola Tinubu has defended his two biggest reforms — the scrapping of the subsidy and foreign exchange controls — saying although this would lead to hardship in the short term, they are necessary to attract investment and boost government finances.

The unemployment rate rose from 4.2% in the previous quarter, according to data released by the National Bureau of Statistics late on Monday.

The jobless rate among young people aged 15-24 rose to 8.6% from 7.2%. Unemployment in the urban areas also rose marginally to 6% from 5.9% in the previous quarter.

Nigeria, Africa's most populous nation of more than 200 million people, has been dogged by high unemployment for decades due to a rapid population rise that has outpaced economic growth.

But the jobless rate has crashed from a record 33% in the fourth quarter of 2020 after the government revised the methodology for computing the data in early 2023.

Still, underemployment persists with 87% self-employed. Only 12.7% were in wage employment during the period.

The informal employment rate, which measures the proportion of workers in the grey economy, was little changed at 92.3%, according to the NBS, while the workforce participation also fell slightly to 79.5% from 80.4% in the second quarter.

Reuters