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Volume 15 Issue 8 Version 1.0 Year 2015
Type: Double Blind Peer Reviewed International Research Journal
Publisher: Global Journals Inc. (USA)
Online ISSN: 2249-460x & Print ISSN: 0975-587X
DoesUnemploymentSignificantlyImpactonEconomicGrowthinNigeria?
© 2015. Onwachukwu Chinedu Increase. This is a research/review paper, distributed under the terms of the Creative Commons
Attribution-Noncommercial 3.0 Unported License http://creativecommons.org/licenses/by-nc/3.0/), permitting all non-commercial
use, distribution, and reproduction in any medium, provided the original work is properly cited.
Does Unemployment Significantly Impact on
Economic Growth in Nigeria?
Onwachukwu Chinedu Increase
2015
variable (Real GDP growth rate) and two explanatory variables is the problem of unemployment. In fact, unemployment
(inflation and unemployment). It was found that unemployment in Nigeria has assumed an upward trend over the years.
Year
does not have a significant impact on the economic growth of According to Bello (2003), the problem of
Nigeria. Inflation, however, was found to significantly impact unemployment has always been an issue of great
on the economic growth of Nigeria. Recommendations are concern to the economists, policy makers and 23
also made to help accelerate the rate of growth. economic managers alike; given the devastating effect
Keywords: economic growth, unemployment, inflation. on individuals, the society and the economy at large. A
A
chieving the macroeconomic goals of any country growth.
involves maintaining price stability, achieving full The government, however, has employed
employment, and attaining the highest level of different policy measures to combat unemployment in
growth and development. The second goal, which is order to encourage growth. They range from increases
achieving full employment means maintaining a zero in government expenditure, giving industrialists tax
unemployment level. This is because full employment is holiday to encourage industrialization and even the use
the absence of unemployment of any kind. But it is a of monetary policy instrument such as reducing
clear fact that zero unemployment cannot be achieved commercial bank lending rate to encourage investment
by any country, because there is always a level of through borrowing.
voluntary unemployment (that is, people who are able to Recently, the idea of self-employment
work but decide to be unemployed). (Entrepreneurship) is gaining popularity. This, the
Unemployment is an important determinant of government encourages by giving young entrepreneurs
the level of growth and development which a country funds to start up their own business. Despite all these
can attain. According to Seer (1969), a country cannot efforts, unemployment continues to be on the increase
claim to be developing and yet experience a high level and hinders growth. It is against this background that
of poverty, unemployment, and inequality. This shows this paper seeks to investigate how unemployment
the important role unemployment plays in the process of impacts on economic growth, in order to offer solutions
-
economic growth. as to how to accelerate the rate of growth of the
Seer’s assertion is exactly what is obtained in Nigerian economy.
Nigeria today. It is said that Nigeria is the ‘Giant of
Africa’. Nigeria is well endowed with natural resources. III. Literature Review
These resources if well harnessed could make Nigeria Selective authors are reviewed here to see what
the most developed country in the world. But high level they have said concerning unemployment and
of unemployment, poverty and economic inequality economic growth.
continues to mar actions of the government to develop Ogunrinola and Sodipe (2011) estimated a
the country. simple regression model using the Ordinary Least
Every year, over 90 universities in Nigeria Square (OLS) method. The result showed that a positive
produce thousands of graduates. This is a good thing to and statistically significant relationship exists between
hear, except that they linger in the labour market without employment level and GDP growth in Nigeria.
jobs. Employers chalk it up to them not being qualified Freeman (2001) used new developments in
for the available jobs. Out of frustration, most of them trend cycle decomposition to test Okun’s Law for a
end up engaging in various social vices such as panel of ten industrial countries, that Okun’s original
robbery, kidnapping, drug trafficking, etc just to earn a estimate for the U.S. of three points for each one
living. percent reduction in the unemployment rate now
Author: Economics Department, Nnamdi Azikiwe University, Awka, averages at just under two points or real GDP growth for
Nigeria. e-mail: Increasechinedu@gmail.com the sample countries. Pooled estimates for Europe are
© 20 15 Global Journals Inc. (US)
Does Unemployment Significantly Impact on Economic Growth in Nigeria?
smaller than estimates for the rest of the sample. He IV. Research Methodology
concluded that the law is still capable of proving
estimates of the effects of unemployment on GDP. This work effectively captures the effect of
unemployment on economic growth of Nigeria using the
Khan, Khattak and Hussain (2012) investigated OLS method together with the ADF test for unit root.
the inter-relationship of GDP growth and unemployment The framework of this study is based on the
in Pakistan. They used time series data from 1960 to unbalanced growth theory of economic growth. The
2005. They initially used the Augmented Dickey-Fuller theory attributes underdevelopment to factors such as
(ADF) test and the results were stationary at first widespread poverty, low levels of productivity,
difference. Then they used the Johansen Co-integration unemployment, backward industrial structure, great
test. Their results showed that 1% increase in GDP dependence on agriculture, a high proportion of
reduced unemployment by 0.63% on the one hand, and consumption and low savings, high rates of population
that 1% decrease in unemployment increased GDP by growth and the existence of dualism in the economy.
2015
7.25% on the other hand. Their results also showed that This study models Real GDP Growth Rate
GDP in the long run had a negative relationship with
Year
2015
C 5.275398 0.741156 7.117800 0.0000
INF -0.166416 0.020706 -8.037043 0.0000
Year
UNEMP -0.191311 0.111410 -1.717177 0.0994
The R2 shows that inflation and unemployment set up organizations all over the country and charge
explain only 46.33% of the variations in growth rate in them with the responsibility of fishing out the people that
Nigeria for the period under study. Inflation has a bring about the issue of ghost workers. Those that have
significant negative impact on growth given that it is reached the retirement age and yet don’t want to retire
negatively signed with a probability value of 0.0000. should be forced to leave office to give way for the
Unemployment on the other hand is correctly signed but unemployed youths.
it does not have significant impact on economic growth
in Nigeria given a probability value of 0.0994. The References Références Referencias
F-statistic of 9.9292 shows the overall significant of the 1. Bello, T. (2003). Attacking unemployment hurdles in
model. The Durbin-Watson of 3.108294 shows the the fragile economies of the Sub-Saharan Africa: the
presence of negative autocorrelation. However, this was experience of Nigeria. A paper presented at the –
corrected by estimating the model with the Newey-West Economics for the Future- Conference; on the
HAC standard errors. Occasion of the Celebration of 100 years of
The fact that unemployment does not impact Cambridge Economics; Cambridge, United
-
significantly on economic growth could be because Kingdom September.
though efforts have been made to reduce
2. Chang-Shuai, L. and L. ZI-Juan, (2012) Study of the
unemployment, the employed work force do not
Relationship among Chinese Unemployment rate,
contribute enough to the GDP growth. This could be
Economic Growth and Finance, Vol. 1, No. 1 World
because of lack of the necessary skills and training.
Science Publishers. United States.
Again, there is high incidence of ghost workers in the
economy. Though they are counted among the 3. Freeman D. G. (2001), Panel Tests of Okun’s Law
employed citizens, they end up not adding a single for Ten Industrial Countries 1958-98, Western
quota to the output of Nigeria, because they are ‘ghosts’ Economic Association International, 39(4).
that work. 4. Hussain, T., Siddiqi, M. W., & Iqbal, A. (2010). A
Again, in Nigeria, we see people who have Coherent Rellationship between Economic Growth
reached the retirement age, but they don’t want to pave and Unemployment: An Empirical Evidence from
way for younger population to get employed. Given that Pakistan. International Journal of Human and Social
they are already old, they don’t contribute anything Sciences, 5(5), 332-339.
reasonable towards the GDP of Nigeria. 5. Jaradat, M. A. (2013). Impact of Inflation and
Unemployment on Jordanian GDP. Retrieved from
VIII. Conclusion http://journal-archives28.webs.com/317-334.pdf.
Given the findings of this study, the following 6. Khan, A. Q. K., Khattak, N. U. R. K., & Hussain, A.
recommendations are made. The government should H. (2008). Inter-dependences and causality in the
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