The Impact of Fiscal and Monetary Policy in Controlling Unemployment in Nigeria.
CHAPTER ONE
OBJECTIVE OF THE STUDY
The objectives of the study are
- To ascertain the impact of fiscal and monetary policy in controlling unemployment in Nigeria
- To ascertain the effect of fiscal policy on Nigeria economy
- To ascertain the relationship between monetary policy and unemployment control
- To ascertain the effect of fiscal policy on unemployment
CHAPTER TWO
REVIEW OF RELATED LITERATURE
INTRODUCTION
Fiscal policy is best described as taxation and spending policies that the government pursues in an effort to influence the overall state of the economy. Reem (2009) defined fiscal policy as the means by which a government adjusts its level of spending in order to monitor and influence a nation’s economy. According to him, fiscal policy is based on the theories of a British economist John Maynard Keynes whose theory basically states that governments can influence macroeconomic productivity levels by increasing or decreasing tax levels and public spending. This influence in turn, curbs inflation, increase employment and maintains a healthy value of money. Taxation is one of the primary fiscal policy tools the government has at its disposal to reduce unemployment. High taxes mean consumers have less disposable income, which results in less consumption. When consumers buy less, less revenue accrues to businesses making them less likely to hire new workers or may even result to laying off workers to reduce cost. Cutting taxes is a common practice which the government uses to induce economic growth and reduce unemployment. Tax cuts put more money into the hands of consumers, which can lead to increased revenue for business and expansion and hiring. Spending on government programmes is another way government can use to influence unemployment. For example, if the government funds new public works programmes, such as building infrastructure like roads or rail ways, it can create jobs that serve to reduce unemployment and increase disposable income and spending. If such programmes encourage overall economic growth, employment will be enhanced after the projects are completed. Empirical studies carried out by researchers on the impact of fiscal policy on unemployment abound, some of which are examined below. Anthanasios (2013) investigates the unemployment effects of fiscal policy in Greece based on the SVAR methodology. He found evidence that the unemployment and growth effects can be quite sizeable in case of cuts in government purchases and in particular government consumption and to a lesser extent government investment. Tax hikes reduce output and increase unemployment, in particular those leading to higher implicit direct and indirect tax rates. The impact effects of fiscal policy on output and unemployment are more sizeable when considering recent year developments. Both output and unemployment respond in a more persistent manner, compared to pre-crisis years. Bassani and Duval (2006) explored the impact of fiscal policies and institutions on unemployment in the past decades.
CHAPTER THREE
RESEARCH METHODOLOGY
Research design
The researcher used descriptive research survey design in building up this project work the choice of this research design was considered appropriate because of its advantages of identifying attributes of a large population from a group of individuals. The design was suitable for the study as the study sought to the impact of fiscal and monetary policy in controlling unemployment in Nigeria
CHAPTER FOUR
PRESENTATION ANALYSIS INTERPRETATION OF DATA
Introduction
Efforts will be made at this stage to present, analyze and interpret the data collected during the field survey. This presentation will be based on the responses from the completed questionnaires. The result of this exercise will be summarized in tabular forms for easy references and analysis. It will also show answers to questions relating to the research questions for this research study. The researcher employed simple percentage in the analysis.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
Introduction
It is important to ascertain that the objective of this study was to ascertain the impact of fiscal and monetary policy in controlling unemployment in Nigeria
In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of fiscal and monetary policy in controlling unemployment in Nigeria
Summary
This study was on the impact of fiscal and monetary policy in controlling unemployment in Nigeria. Four objectives were raised which included: To ascertain the impact of fiscal and monetary policy in controlling unemployment in Nigeria, to ascertain the effect of fiscal policy on Nigeria economy, to ascertain the relationship between monetary policy and unemployment control, to ascertain the effect of fiscal policy on unemployment. In line with these objectives, two research hypotheses were formulated and two null hypotheses were posited. The total population for the study is 200 staff of national directorate of employment. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. A total of 133 respondents made up human resource managers, administrators, senior staff and junior staff was used for the study. The data collected were presented in tables and analyzed using simple percentages and frequencies
Conclusion
The study has investigated the role and influence of fiscal policy on unemployment reduction and inflation control in Nigeria. The outcome of this study has shown the ineffectiveness of fiscal policy in urgently addressing relevant macroeconomic variables over the years which has contributed greatly to economic instability and heightening poverty situation reflected by high unemployment rate in Nigeria. The finding of the study also presupposes low federal government capital expenditure in consideration of the large population of the country and as such could not reduce unemployment rate timely and adequately. The aggregate capital expenditure and gross domestic product of Nigeria is low in view of the population and this is due to ineffectiveness of fiscal policy application. This is in line with Agu et al (2015) who posit that government investment expenditure is far below recurrent expenditure. The high remuneration of government official, especially the National House of Assembly usurps a large aspect of the total federal government expenditure, hence paltry sum allocated to capital and productive expenditure. A positive change is needed to improve the economy for better.
Recommendation
The following recommendations were made:
- There is the need for massive capital expenditure in productive ventures in Nigeria, especially on agriculture. Nigeria is still agrarians economy as at the moment. Efforts should be focused on establishing integrated agriculture in virtually the entire local government in the country. This requires the federal government collaboration with state, local and multinational agents. This will quickly create employment as articulated by Keynes so as to tackle unemployment, promote economic growth and poverty reduction.
- Fiscal policy lags need to be sufficiently addressed and it is also essential to adequately monitor the implementation and execution of fiscal policy. In other words, budgetary allocation and actual spending of allocated revenue should co-opt morally upright individuals who may be government official and/or private individual to ensure that any capital expenditure is channeled strictly to the sector intended. This is to guard against fund diversion and corruption. Proper forecast of the economy at all time is necessary in view of lags in fiscal policy..
- Taxes should not be restricted to registered companies. The self employed, drivers and trycylists/motorcyclists among others scattered here and there should not be exempted from taxation. Effective tax design is imperative so as to capture every individual in Nigeria as it is obtainable in advance countries like United States of America where virtually tax is charged on everything without any delay. Such a broad based tax will help to impact on people’s disposable income when the need arises so as to ensure inflation control and economic stability.
- It is also needful to diversify the economy by developing other sectors such as solid mineral, agriculture and manufacturing so as to reduce excessive importation and have more goods available in order to counteract inflation at all time. Besides, adequate environment is needed to encourage both domestic and foreign investment in Nigeria.
REFERENCES
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- Ajayi, S.I. (1974). An Econometric Case Study of the Relative Importance of Monetary and Fiscal Policy in Nigeria. The Bangladesh Economic Review, 2(2): 559-576.
- Ajisafe, R.A and Folorunsho, B.A (2002). The Relative Effectiveness of Fiscal and Monetary Policy in Macroeconomic Management in Nigeria. The African Economic and Business Review, 3(1). Spring
- Anyanwu, J. C. (1993). Monetary Economics: Theory, Policy and Institutions. Onitsha: Hybrid Publishers.
- Aregbeyen, O. (2007). Public Expenditure and Economic Growth in Africa. African Journal of Economic Policy, 14(1): 1-25.
