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THE IMPACT OF UNEMPLOYMENT ON THE NIGERIA ECONOMY BETWEEN 1982 AND 2017


Project topic for Economics department

ABSTRACT

 The study, empirically investigates the impact of unemployment on the Nigerian economy between 1982 and 2017. With the use of econometric analysis we specify a structural model that examines the determinants of unemployment. We test our model specification, using econometric view (E-view 8.0) software. The study indicated that there exist negative relationship between unemployment and the Nigeria economy. The result also shows that unemployment has no significant impact on Nigeria economy. There is unidirectional causality relationship between economic growth and unemployment. The study therefore recommends that: Nigerian government needs to lay more emphasis on diversification of the economy with the objective of creating self-employment.

CHAPTER ONE

INTRODUCTION

1.1 Background to the study

Nigeria is a nation that is endowed with multifarious resources both human and material. However, due to gross mismanagement, excess spending, uncontrollable obsession and adverse policies of various government of Nigeria, these resources have not been optimally utilized, these resource have not been adequately channeled to profitable investments to bring about maximum economic benefits. As a result of the foregoing, Nigeria has been bedeviled with poverty and unemployment (Jokunbo, 2005). The issue of poverty and unemployment has for several decades, become fundamental global phenomena which have militated against the human development. Okafor ( 2004) posits that the duo (poverty and unemployment) are as old as the society itself. They are epidemic affecting majority of the people in the world. They are regarded as one of the critical symptoms and manifestations of underdevelopment within the global circle (World Bank, 2005, Onah, 2006) Moreover, the spate of unemployment with poverty as its end product in Nigeria has become a matter of national concern in the last two decades. Nigeria that claims to be the giant of Africa is among the world poorest class of nation in terms of gross national product (GNP) and access to social and political life. This is in spite of the fact that Nigeria is the sixth oil producing nation in the world, yet the poor and unemployed constitute about 70% of her population (Dike, 2006, Onobun and Obadan, 2002, and Onah, 2006). This reflects the poor management of the economy, irrespective of huge resources injected towards its eradication ( Joseph, 2006 ; Onah, 2006; and world Bank, 1996). Incidentally, the national poverty and unemployment rate has over the years, continued to rank upward unabated. According to national bureau of statistics (2009, 2010), the national unemployment rates for Nigeria between 2005 and 2011 showed that the number of unemployed persons constituted 11.9 % in 2005, 13.7% in 2006; 14.6% in 2007; 14.9% in 2008; 19.7% in 2009; 21.4% in 2010 and 23.9% in 2011 and poverty rate moved from 54.4% in 2004 to 69% in 2010 and increased to 71.5% in 2011. In addition, the weak economy of Nigeria has exacerbated. In 2010, data provided by the national bureau of statistics (2010) further showed that primary school leavers accounted for 14.8% unemployment, secondary school leavers 23.8% and that of tertiary institutions constituted 21.3%. The report put Nigerians poverty level at 71.5% and went on to buttress the fact that about 163 million Nigerians live on less than US$ 1 per day. Nigerian’s National Bureau of Statistics (2010). Again, the above scenario was further identified by national population commission (2006), that “over 70% of Nigerians in 2010 were classified as poor. This is alarming as two-thirds of the population is poor and a greater percentage unemployed which invariably poses a greater threat to Nigerian socio-economic and political development (Onah, 2006). Moreover, the structural imbalance of the economy, inappropriate development agenda, and debt burden are visible measures of poverty in Nigeria (Nigeria Human Development Report, 2001). The alarming rate of environmental degradation and its effects on unemployment and food production is also traceable to poverty in Nigeria. High unemployment rate on the other hand, unaffordable basic education, inequality, insecurity, deprivation of fundamental human rights freedom and basic needs for human survival and crises arising from instant agitation for the resources control are all evidence of unemployment which culminates into poverty in Nigeria (Jonathan, 2004, UNDP 1998 cited in Onah 2006). Unfortunately, the Nigerian youths which are the most vulnerable group affected by this social anomaly, are facing a myriad of challenges, but the government does not seem to pay adequate attention to their plights. They lack the skills to compete in the weak economy.  Therefore, they loiter around from dawn to dust while battling with crushing unemployment and poverty. However, in attempts to reduce the high rate of poverty and unemployment, the government had at different times, undertaken diverse measures aimed at ameliorating or eradicating completely the situation. This started in 1972 with the initiation of National Accelerated Food Programme to National Poverty Eradication Programme in 2000. NEEDS (2004) reports that the response of various administrations to the poverty and unemployment problem appears to have been adhoc and uncoordinated. It further chronicled 28 federal projects and programmes with poverty and unemployment reduction thrust (NEEDS, 2005). But UNDP Report (1998 cited in Onah, 2006), feels that those who captured the benefits of the various poverty reduction strategies were not the Nigerian poor class, but rather the rich and powerful. Thus, the heightening of frustration, resentment, and disillusionment among the poor and unemployed in Nigeria, and the consequent violent activities against development trends in Nigeria. Given that the overall government efforts may not result to poverty and unemployment reduction at the desired pace, the need for  Nigerians to expedite actions to facilitate individual economic empowerment, particularly among the poor and other vulnerable groups are imperative. This project seeks to assess the impact of unemployment on Nigeria Economy.

1.2  Statement of the Problem

As a global phenomenon the duo of poverty and unemployment as Aremu (2004) rightly observes, are threatening the survival of mankind. The unemployment and poverty situation in Nigeria which is appearing insurmountable is the worst in the nation’s 52 years of history (Obi, 2005). They contribute in no small measure to the crimes in the Nigeria society. The increasing rate of crimes such as armed robbery, corruption, prostitution, cultism, nepotism and other social vices strongly correlates with the rate of poverty and unemployment in Nigeria. Furthermore, it is based on this fact that Englama (2001) submitted that poverty which anchors on unemployment “causes misery, social unrest and hopelessness for the unemployed. The recent ethnic and religious crises in some parts of this country are largely connected to the problem”. The only hope of putting a person into achieving the socio-economic and political vanguards is only by creating employment and the provision of paramount infrastructural facilities for the enhancement of living standards. The “haves” keep moving upward, not minding the social status of the “have nots” around them. This structural imbalance has over the years, paralyzed developmental projects which invariably improve the lots of the poor and unemployed in Nigeria. More importantly, successive Nigeria governments in the last four decades have put up various policies aimed at putting smiles on the faces of the governed. However, despite all attempts the problem of poverty and unemployment continue to rank high. This also informed the United Nations to declare 1996 as the “international year for the Eradication of poverty” worldwide of which Nigeria is not exempted (Aremu, 2004, Joseph, 2006). In his 2002 appropriation bill, president Obasanjo presented N 844 billion to the national Assembly with the overall thrust of tackling poverty and unemployment in Nigeria (Atojoko, 2001). Unfortunately, NEEDS (2004), Joseph (2006) and Onah (2006) accordingly, all agreed that these measures have hitherto, not materialized and yielded the desired result because “those who capture the benefits of the various poverty reduction strategies were not Nigerian poor, rather the Nigerian rich and powerful. The status quo or establishment analysis of this situation is that it is our price for living in a world which is economically disturbed Obi (2005). Without much polemics, many scholars concurred with the view of Englama (2001), which posited that “unemployment generally reduces output and aggregate income. It increases inequality since the unemployed lose more than the employed. It erodes human capital and it involves psychic costs”. He concluded that “those who are unemployed some times feel as if the society does not need them”. This serious social stigmatization created as a result of the situation, have eroded the work idea of national re-integration and individual attitude towards developmental projects, patriotism which could have cushioned the effects of poverty and unemployment in Nigeria Ajao (2004).  In view of the fore-goings, this research tends to carry out an in-depth study of the impact of unemployment on the Nigeria Economy between 1982 to 2017.

1.3   Objectives of the Study

The main objective of this research work is to ascertain the impact of unemployment on Nigeria economy. Specifically, the study would try to achieve the following objectives:

  • To ascertain the impact of unemployment on economic growth in Nigeria.
  • To determine the direction of causality relationship between the unemployment and economic growth in Nigeria.

1.4Research Questions: This study tends to answer the following questions:

i    What is the impact of   unemployment on economic growth in Nigeria?

ii  What is the relationship between unemployment and economic growth in Nigeria?

1.5    Research Hypotheses

For the purpose of this study, the following hypotheses were formulated:

i   Ho: Unemployment has no significant impact on economic growth in Nigeria

ii  Ho: There is no significant directional causality relationship between unemployment and economic growth in Nigeria.

1.6   Scope of the Study

This research focuses on the impact of Unemployment on economic growth in Nigeria between 1982-2017.

1.7 Significance of the Study      

This study will be of paramount importance to economic decision makers, as it will equip them with the knowledge and skills needed to tackle the pressing issue of unemployment in Nigeria.  The study will also help provide empirical evidence that the issue of unemployment in Nigeria requires a button up approach. This will enable governments, NGO’s and other stakeholders to redesign appropriate, effective and efficient strategies for the realistic eradication of poverty through full employment in our dear nation. Moreover, to those who would like to carry out further research on this topic, this research would be of valuable help in the course of their investigation.

  •   Definition of Terms

i Frictional unemployment: This results from the normal turnover of labour.Important source of frictional unemployment is young people who enter the labour force and look for jobs. Another source is people who are in the process of changing their jobs and are caught between one job and the next. Some may quit because they are dissatisfied with the type of work or their working conditions, others may be sacked. Whatever the reason may be, they must search for new a job, which takes time. People who are unemployed while searching for jobs are said to be frictionally unemployed.

ii Structural unemployment: This refers to unemployment arising becausethere is mismatch of skills and job opportunities when the pattern of demand and production changes. This can equally be referred to as technological unemployment. The unemployment comes as a result of new methods of production in an industry or business so to say.

iii Demand-Deficit Unemployment: refers to Keynesian unemployment, whenaggregate demand falls and prices have not yet adjusted to restore full employment. Aggregate demand is deficient because it is lower than full-employment aggregate demand.

iv Voluntary unemployment: This occurs when people who willing and able toworks at a given real wage rate are not working, but decide to remain unemployed. This could be due to frictional causes arising from geographical and/or occupational immobility of labour.

v Classical  unemployment:  this  refers  to  unemployment  created  when  the wage is deliberately maintained above the level at which labour supply and labour demand schedules intersect. It can be caused either by the exercise of trade union power or by minimum wage legislation which enforces a wage in excess of the equilibrium rate (Englama, 2001).

vi Economic Growth: Economic growth is the increase in inflation-adjusted market value of the goods and services produced by an economy over time. It is conventionally measured as the percent rate of increase in real gross domestic product, or real GDP.



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