The Impact of Unemployment on Economic Growth in Nigeria (1970-2010)
Chapter One
OBJECTIVE OF THE STUDY
The objectives that will guide this study are as follows;
- To determine the relationship between unemployment and economic growth in Nigeria.
- To ascertain the magnitude of this relationship.
- To make policy recommendations based on the findings.
CHAPTER TWO
THEORETICAL LITERATURE
Keynesian Economist see unemployment as a situation in which the number of people able and are willing to work at prevailing wage exceeds the number of job available and at the same time, firms are unable to sell all the goods they would like to sell(bannock et al 1998).
When carefully analysed, the Keynesian unemployment largely applies to situations in Nigeria (Bello 2003) Here, unemployment can result to a situation where many Nigeria consumers including the government prefers foreign goods than domestic goods, thereby causing the domestic producers to face with the problems of low demand that naturally forces them to lower output and of cause reduces work force. This experience continues in some firm especially the small scale ones till they are pushed out of the market resulting in the loss of more jobs, the long- term unemployment remains in the market for too long and thereby reducing his cause of job finding.
Virtually, all countries exhibit negative direction dependence that is if one takes two unemployed people at random, one would expect that one with shorter unemployment duration to leave unemployment more quickly (Machine and manning 1998). According to olueye (2006) classical economist argued that unemployment exist when unions maintain wages above their equilibrium level. When this happens, we have a situation of involuntary unemployment.
Keynesian unemployment is the part of total unemployment could help mop up by using fiscal and monetary policy to boost aggregate demand (Olueye2006). Cyclical unemployment differs from structure and frictional (lindbeek et al1999). It is an unemployment result from lack of aggregate demand in a down swing in the business cycle (Bannock et al 1998)
For instance in Nigeria, since the collapse of oil boom in the late seventies, the economic has generally remained in a passive state even though some other period of oil price surge were later experienced (Bello 2003).
What sound like cyclical unemployment in the most sub- Saharan Africa economist is the seasonal unemployment that is inherent in the agricultural sector then it may be best described as the very long Kondratieff cycle which lasts for over a period of fifty years (Bello 2003).
This implies that to solve unemployment problem, it is simply to remove the artificial critical ceiling placed by the union. In case of Keynesian unemployment it is demand that involuntary unemployment, is coursed by sluggish labour market adjustment beyond the control of individual w 1994).
The demand deficit or cyclical unemployment is the disequilibrium level of involuntary unemployment caused by the combination of low aggregate demand and sluggish wage adjustment.
The classical case of unemployment is premised on the inflexibility of wages. Unemployment result because labour, due to organize activities do not allow wage to decline for the accommodation of excess labour when there is incidence of unemployment.
Given-wage-price flexibility, there are automatic forces in the economic system that tends to draw the economy into equilibrium state. (Jhingan 2000).
CHAPTER THREE
METHODOLOGY
The research work is conducted employing an econometric methodology of multiple regression statistical and econometric tools shall be used in analysing and presenting data. The ordinary least square (OLS) techniques of estimation will be used in estimating the model. This is because of its interesting BLUE (best linear unbiased estimator) properties and its intrinsic assumptions. The OLS estimator has both numerical and statistical properties. Gujarati (1995) quoting Davidson and Mackinnon (1993) put the numerical properties as ‟ those properties that hold as a consequence of the use of ordinary least squares, regardless of how the data were generated‟. Similarly the statistical properties are those that hold under the certain assumptions about the way data were generated.
MODEL SPECIFICATION
The essence of economic modelling is to represent the phenomenon under investigation in such a way to enable the researcher to attribute numerical values to the concept.
To determine the relationship between unemployment and output we specify the model as:
CHAPTER FOUR.
PRESENTATION AND ANALYSIS OF RESULT.
Presentation and Interpretation of Result:
CHAPTER FIVE
SUMMARY , CONCLUSION AND RECOMMENDATION.
SUMMARY
Unemployment is generally agreed to be symptom of macroeconomic illness, which could be “voluntary”“involuntar.
Voluntary unemployment is a condition whereby one chooses not to work because he or she has means support other than employment. On the other hand, involuntary unemployment exist when persons are willing to work at the prevailing rate of pay but unable to find work.
Base on this, unemployment has different types such as frictional, seasonal, cyclical, and technological unemployment.
In Nigeria, Unemployment is regarded as one of the most challenging economic problem. A situation whereby the population of a country grows faster than the job opportunities, that is birth rate is rising while death rate is falling and unemployment is bound to exist.
There had been also a total neglect of the agricultural sector and consequently mass exodus of able bodied youths moving from the rural to urban areas in search of non –existing white collar jobs.
CONCLUSION
From the research carried out on the impact of unemployment on economic growth in Nigeria from 1970 – 2010 using atrivariate ordinary least square, data shows that unemployment is negatively related to the economic growth.
The economic analysis of the findings in table 2shows that the variables under consideration confirm to apriority expectation of the economics theory. The statistical evaluation equally shows a higher level of statistical significant (table 2).
The evidence stems from the fact that the T- statistics on the variables shows that GEXP is insignificant while LM2 and UNEMP are significant as shown in table 3.
Based on this, the R², which had a value of 95% indicate that the entire regression had a good fit and also explain that 95% fluctuation in the dependent variable is expended by fluctuation in the regression.
More so the F-test showed that the entire regression was adequate. More so, the summary of the whole regression as shown that overall regression is statistically significant implying a good fit.
The econometric finding shows that from then Durbin Watson test (DW)that all the variables under consideration were stationary at order. That is, the absolute values of DW statistics are greater than various critical values at 5%.
The normality test shows the residual is normally distributed at 5% level of significance. And the test for autocorrelation shows that there is no serial autocorrelation present in the model.
The test for multicolinearity , in table 4 shows that there is multicolinearity between the regressors. But has noted by Blanchard quoted by Guajarati (2004) a good model cannot be discarded due to multicolinearity. As well as test for heteroscedasticity conclude that the error term has a constant variance and that in the test specification errors is not wrongly specified.
From the evaluation of the forcasting performance of the model, it shows that the predictive power of the model is fairly robust and reliable.
Finally GDP growth does not cause unemployment but rather unemployment causes GDP growth.
RECOMMENDATION
In the light of the above empirical findings the analysis carried out so far, the following recommendations are proposed to the government in the issue of unemployment in Nigeria would be minimized.
- There is need for the government to revitalize the agricultural sector, modern equipment in agricultural facilities is likelyto entice the youths into that sector, since the sector have been left in the hands of the old men.
- Government should formulate policy that will aim at discouraging gender discrimination in the labour market since this will provide more opportunities for the females in the labour market participation final.
- Government should embark on provision of social amenities in the rural areas so as to reduce the urban –rural drift which have consequences of reducing the rate of unemployment.
- There is need for government to restructure the educational system in a way it will lead to the youths with capability of self-reliance and self-employment.
- Government should formulate monitoring policy to check the channel of increase government spending to find out why the huge spending has not transmitted into a viable economics growth.
- The government should embark on social security program that would help in elevating the unemployment condition of the people in Nigeria.
- There is equally an urgent need for more infrastructure facilities like expanding the telecommunication network to the rural pat of the country, good roads and electrification projects which can create employment for the jobless citizens.
- A conducive environment for foreign direct investment should ecetdt nueNgrasf business opportunities that would create job for the teeming population.
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