By Nasiru Ibrahim
“The introduction of AI and automation is a double-edged sword: it holds immense potential for efficiency, but its consequences on job markets, especially in developing economies like Nigeria, need to be addressed through strategic workforce planning and skills development” (Bessen, 2019).
This article examines the positive and negative impacts of AI on the workforce, supported by economic theory and real-life examples from Nigeria.
Artificial intelligence is the direct opposite of human intelligence. It showcases the ability of machines, such as computers, to carry out tasks that require human intelligence. AI performs tasks such as writing, problem-solving, analyzing data trends, driving self-driving cars, harvesting fruits on farms, and other tasks traditionally performed by humans.
AI automation involves the use of artificial intelligence and technology to automate repetitive tasks that humans traditionally carry out in their daily lives. It enhances productivity, efficiency, and scalability, reduces production costs, and ensures round-the-clock availability for services such as banking.
AI depends on data to perform tasks and learns from humans through data annotation or labelling. This indicates that it cannot recognise images, interpret voices, or understand statements unless trained by humans. Generative AI like GPT–4 is transforming the labour market while influencing the demand and supply of labour in the overall economy. The automation of repetitive tasks in both skilled and unskilled jobs by companies has raised concerns about whether AI will harm or benefit the workforce. This debate has led to the application of traditional economic theory to explore and explain the economic effects of AI.
Economic Theory on AI
Austrian Economist Joseph Schumpeter’s theory of creative destruction explains how new technology and innovation reshape economies by replacing old jobs and technologies with new ones. This theory supports the argument that AI can create new industries, jobs, and opportunities, as seen in Nigeria’s growing tech sector, which includes Fintech, E-learning, E-commerce, and Agritech. Below, we explain these theories with examples from across Nigeria.
Firstly, in Fintech in Lagos, companies like Flutterwave and Paystack now employ AI engineers and data scientists to develop fraud detection systems and personalised banking tools.
Secondly, in E-learning in Abuja, platforms like Ulesson use AI for tailored learning experiences, creating roles like app developers and AI trainers.
Thirdly, in E-commerce in cities like Lagos and Kano, Jumia and Konga use AI for supply chain optimisation and chatbots, fostering jobs in logistics tech and digital marketing.
Fourthly, in Agritech in Kaduna, Thrive Agric employs AI for farm monitoring and analytics, generating demand for data analysts and field specialists.
Human Capital Theory
Human Capital Theory, developed by Gary Becker and Theodore Schultz, emphasises the importance of education and skills in economic productivity. In Nigeria, the demand for human capital has increased in sectors such as machine learning, data annotation, and AI development. The rise of AI has fostered a need for expertise in areas like data science and machine learning. Initiatives like Data Science Nigeria are aiding individuals in acquiring these skills, enhancing their employability and contributing to the nation’s economy. This aligns with Human Capital Theory, which asserts that investing in education and skills enhances productivity.
Pareto Optimality
AI has the potential to increase productivity and efficiency in Nigeria’s economy without worsening the condition of any particular group, achieving Pareto optimality. AI in Nigerian healthcare, such as AI tools for diagnosing diseases, is helping both patients and doctors. These tools make diagnoses faster and more accurate, improving care without harming anyone. This is an example of Pareto Optimality, where everyone benefits without undermining the benefit of anyone.
Dr. G. Yoganandham (2024), Professor & Head of the Department of Economics, in his paper titled Impact of Artificial Intelligence (AI) on the Economy, Politics, Ecosystem, Innovation, and Promoting Inclusive Workforce Frameworks (2024), stated:
“The global economy could benefit by $13 trillion from artificial intelligence by 2030, although 375 million jobs may be displaced. The workplace is one of many areas where AI will bring a revolutionary impact. It can streamline processes, reduce costs, and enhance decision-making. AI can also improve customer satisfaction by analysing data for predictive analytics, reducing accidents in construction and manufacturing, and creating new employment opportunities in data science, machine learning, and AI education.
However, workplace AI raises ethical concerns about racial bias, privacy, security, and democracy. While some argue it may lead to robotic employment, there is ongoing debate about its potential to foster innovative work, create new career paths, and improve judgment.”
From the above theories, it can be deduced that on the one hand, AI, ceteris paribus, could have a positive effect on the expanding workforce in Nigeria, in terms of:
Firstly, AI fosters the creation of new jobs and opportunities. It fosters the emergence of new industries and job roles, particularly in data science, big data technology, AI engineering, and cybersecurity. Companies like Data Science Nigeria (DSN) are equipping Nigerians with skills in data analytics and machine learning, creating employment opportunities in the tech industry.
Secondly, AI enhances productivity and efficiency. It reduces production costs and streamlines processes, enabling businesses to operate more efficiently. In agriculture, Hello Tractor uses AI to connect smallholder farmers with tractor owners, increasing farming efficiency and reducing costs.
Thirdly, improving demand forecasting and profitability. AI tools optimise supply chain management and demand forecasting, leading to increased profitability for businesses. Jumia, Nigeria’s leading e-commerce platform, employs AI algorithms to predict customer preferences, enhance inventory management, and boost sales.
Fourthly, upskilling the workforce. AI encourages the development of skills that align with technological advancements, offering workers better career prospects.
On the other hand, AI could have a negative impact on the workforce in Nigeria, in terms of:
Firstly, job displacement due to the automation of repetitive tasks can affect low-skilled workers, particularly in the manufacturing and service sectors. In Nigeria’s financial sector, banks such as GTBank have adopted AI-powered chatbots (e.g., Habari), thereby decreasing the need for human customer service representatives.
Secondly, bias in hiring and decision-making. AI systems trained on biased data can create discrimination, particularly in hiring processes.
Thirdly, ethical and privacy concerns. AI-driven technologies often raise privacy, security, and data misuse issues.
Fourthly, there is limited access to AI resources. Many Nigerians, particularly in rural areas, lack access to the infrastructure and education required to benefit from AI advancements. For example, I live in Gwiwa Local Government Area, Jigawa State, but the entire local government lacks basic ICT facilities, let alone advanced technological resources that would help people understand artificial intelligence.
While AI promises to increase efficiency and productivity in various sectors in Nigeria, such as agriculture, the question remains: Will the benefits outweigh the job losses, particularly in a country with high unemployment and underemployment?
In Northern Nigeria, where more than 50% of the population is engaged in agriculture, a phased approach is urgently needed. Before AI can be widely adopted, attention should be directed towards improving mechanised farming techniques to enhance food security and tackle inflation.
Given the shortage of skilled labour prepared to use AI in agriculture, it is essential to prioritise education and training, followed by the mechanisation of farming practices. This would ensure that the workforce is adequately prepared to embrace AI when it is introduced. AI has the potential to boost agricultural productivity by facilitating the timely harvest of crops and minimising the risk of poor yields.
The lack of education in Northern Nigeria exacerbates these challenges. According to the World Bank, the literacy rate in Nigeria stands at approximately 31%, with the Northern region experiencing a significantly higher illiteracy rate. This deficit in educational access has fostered a profound sense of frustration, as many individuals find it difficult to survive amid escalating economic hardships.
People in these regions often face unmet needs, yet politicians offer solutions that don’t address the core issues. This disconnect between the people’s needs and the actions of those in power further deepens the divide and hinders progress. Many feel that immediate economic policies, such as harsh taxation and subsidy removals, are prioritised over long-term, sustainable solutions. There is an urgent need for more inclusive and sustainable economic policies that address the technological transformation driven by AI and tackle the underlying social inequalities.
While AI adoption in agriculture has the potential to boost productivity and reduce costs, the key to its successful integration lies in addressing the fundamental issues of illiteracy, poor governance, and lack of infrastructure, particularly in the Northern regions. Only through a concerted effort to improve education, promote mechanised farming, and gradually introduce AI can Nigeria hope to mitigate the potential displacement of jobs while reaping the benefits of technology.
Ibrahim is a graduate of the Department of Economics from Bayero University, Kano, and writes from Jigawa.