The Impact of Unemployment, Inflation, and Climate Change on Nigeria’s Economy (2015 – 2022)
Chapter One
Objective of the study
The objective of the study is to find out the impact of unemployment, inflation and climate change on Nigeria economy. The specific objectives are;
- To find out the impact of unemployment on Nigeria economy
- To find out the impact of inflation on Nigeria economy
- To find out impacts of climate change on Nigeria economy.
CHAPTER TWO
LITERATURE REVIEW
Conceptual frame work
Unemployment in Nigeria
There are many types of unemployment in Nigeria: structural unemployment, cyclical unemployment, frictional unemployment and classical unemployment. Structural unemployment occurs due to globalization and technological advancement which replace the workers with the machinery that causes the layoffs in the economy. It is also caused by mismatch of skills of workers from the underlying jobs. Cyclical unemployment is also known as Keynesian unemployment; it occurs when the aggregate demand of the economy is not sufficient to give the jobs to everyone who wants to work, because aggregate supply of goods and services exceed from the aggregate demand that can discourage the production and consequently it reduces the workers. Frictional unemployment occurs when the skills of the workers are mismatched with the underlying jobs, it is like a structural unemployment but it is short run in nature while structural unemployment has long lasting effect. Classical unemployment arises when government set the wage rates above the equilibrium prices that cause labour to rush for the jobs in the labour market which exceeds from the existing vacancies. Analysis of employment data for the past years shows that the rate of new entrants into the labour market has not been uniform. The rate was on the increase from 2007 to 2009, but declined significantly from 2009 to 2010, and increased again from 2010 to 2011. “Within the five-year period, there has been an average of about 1.8 million new entrants into the active labour market per year” (NBS, 2011). Nigeria’s unemployment rate increased to 23.9 percent in 2011 compared with 21.1 percent in 2010 and 19.7 percent in 2009, as revealed by the National Bureau of Statistics (NBS). The “Nigerian unemployment report 2011” prepared by the NBS shows that the rate is higher in the rural areas (25.6 percent) than in the urban areas (17.1 percent). The rise in the unemployment rate was largely attributed to the increased number of school graduates with no matching job opportunities, a freeze on employment in many public and private sector institutions as well as the slow disbursement of the capital budget by the Federal Government. The result of the survey by International Labour Organisation (ILO) in Nigeria shows that persons aged 0 to14 years constituted 39.6 percent, those aged between 15 and 64 (the economically active population), constituted 56.3 percent, while those aged 65 years and above constituted 4.2 percent. Before now, not a few economic watchers have queried the recorded Gross Domestic Product, GDP, growth rates in Nigeria, which over time are contrary to the growing rate of unemployment. For instance, GDP report for third-quarter of last year showed that the Nigerian economy, when measured by the real GDP on an aggregate basis, grew by 7.4 percent in the third-quarter of 2011 as against 7.9 percent in the corresponding quarter of 2010. Amid this high rate of unemployment, the economic watchers have noticed that there is an increasing trend of disinterest by the emerging younger generation in highly labour-intensive works such as agriculture and factory work in preference for white collar jobs, resulting in many preferring to remain in the labour market rather than take up such jobs. Unemployment has been a major problem for most countries across the world. The USA for example has increased from 5 percent in 2007 to 9 percent so far in 2011. Spain increased from 8.6 percent to 21.5 percent; UK from 5.3 percent to 8.1 percent. Ireland currently stands at 14.3 percent from 4.8 percent, Latvia from 5.4 percent to 16.5 percent, Greece from 8.1 percent to 18.4 percent, and Italy from 6.7 percent to 8.3 percent. The average for the Euro area is 10.7 percent. Even within the African continent, unemployment has risen with South Africa, Africa’s largest economy having a higher rate than Nigeria at 25 percent, Angola at 25 percent, Botswana at 17.5 percent, Egypt at 11.8 percent, Kenya at 11.7 percent, and Namibia at 51 percent
Causes of Unemployment
The yearbook of labour statistics (1984, 1985, 1986) reports that unemployment rate was generally rising due to the worldwide recession of the1980s and 1990s. Fajana (1987) argued that the presence of expatriates in Nigerian labour market did not cause unemployment, adding that the specific causes of unemployment in Nigeria were: – techniques of production used which was capital intensive, automation, rising cost of labour, poor and inadequate planning, high growth of the population, immobility of labour, rural urban migration, monoculture nature of the economy which led to the neglect of agriculture, low labour productivity and mergers of industries. Garba (2010) argues that the increasing rate of unemployment and graduate unemployment in Nigeria was as a result of the lack of collaboration between the entrepreneurs and the institutions (universities, polytechnic and any other academic institutions community).
CHAPTER THREE
DATA AND METHODS
Introduction
This paper used causal research design to capture the impact of unemployment, inflation and climate change on Nigeria economy. Causal research design is a type in which there is a dependent variable and independent variables, whereby the dependent variable responses to changes in the independent variables.
Date Sources and Variables Measurement
This study used Annual data from 2015 to 2022. The data used in this study are mainly secondary data and sourced from CBN bulletins, NBS, Atan (2013) and Abdullahi and Abdulsalam (2016). Real gross domestic product (GDP): This refers to national GDP that has been adjusted for inflation or deflation, that is, GDP divided by the price deflator (price of the base year). Real GDP is used as a proxy for economic growth, percentage change in the consumer price index is used as inflation rate and unemployment (Une) and climate change as a percentage of unemployment to working population. This paper used the old formula where people working less than forty hours in a week are considered unemployed and forex as the official foreign exchange rate of Naira to US dollar.
Model Specification
This paper used Philip’s curve as a theoretical basis to explain the relationship between economic growth, inflation, unemployment and climate change. According to this theory, increase in aggregate demand given the aggregate supply, leads to an increase in price and output, increase in output leads to a reduction in unemployment rate. The paper adopts Yelwa, David and Omoniyi (2015) type model, which is shown below:
CHAPTER FOUR
RESULTS AND DISCUSSION
Table 4.1: Augmented Dickey-fuller min-t
CHAPTER FIVE
CONCLUSION AND RECOMMENDATIONS
This study analysed the impact of unemployment, inflation and climate change on Nigeria economy from 2015 to 2022. The unit root properties of the series were tested using the Augmented Dickey fuller test in the present of structural break. The unit root result shows that inflation and the climate change rate are stationary at level while unemployment and GDP were stationary at first difference. The study employed Auto Regressive Distributive Lag (ARDL) model and Error Correction Mechanism (ECM) to test long and short run relationship among inflation, unemployment, climate change and Nigeria economy. The long run result shows that inflation has a positive and insignificant impact on Nigeria economy while the unemployment rate has a negative and an insignificant impact. The climate change rate has a positive and significant impact on Nigeria economy in the long run. In the short run, inflation has no impact on it. The unemployment rate has a positive and significant impact on Nigeria economy but at lag, the impact of the unemployment rate on Nigeria economy became negative and statistically insignificant. Climate change shows a negative and statistically significant impact on Nigeria economy in the short run. This study recommends the harmonization of monetary and fiscal policy, vocational education and low or the absence of interest on loans to young graduates, the diversification of the economy and the provision of key economic infrastructure.
The government should also embark on creation of more job opportunities to the people through construction and setting up more industries in order to mobilise and create more jobs for the people.
The government should also sensitise the people through holding seminars and different classes for the people about entrepreneurship and how to become risk takers in order to reduce the rate of unemployment in the country. Furthermore, the government and policy makers can also focus on providing financial support to the youth thus creating more jobs.
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