This study examined the effect of poverty and unemployment rate in Nigeria for the period of 34 years (1981 to 2015) using a time series data. The study used the OLS estimation technique to examine the time series data under a multiple linear regression framework. The study found out that poverty is negative and insignificantly related to economic growth in Nigeria for the period under study. The study also discovered that unemployment is negative and significantly related to economic growth in Nigeria. Finally, the study established that inflation is negative and significantly related to economic growth in Nigeria. The study recommended that Poverty and unemployment reduction strategies should be pursued by the government to advert the diminishing effect poverty has on economic growth in Nigeria and this can done by creating job opportunities and supporting already established business to expand and employ more labor.
1.1 Background of study
Poverty and unemployment an identical bane is a global trend which affects people in various depths and levels at different times and phases of existence. The extent of association between poverty and unemployment in developing countries is often a subject of considerable debate. There is actually no nation that is absolutely free from poverty and unemployment. The major difference is the degree and pervasiveness of this similar blight.
Nigeria is the most populous country in Africa and the eight in the world with a population of 140million by 2006 census with a nominal GDP of $207. Billion per capita income of $140, As a result second largest economy in Africa salami 2002. A high level of unemployment and underemployment is one of the critical socio-economic problems facing Nigeria. While the labor force with an increasing proportion of youth employment opportunities is inadequate to absorb labor market entrants. As a result, youths are especially affected by unemployment. Moreover, young people are more likely to be employed in jobs of low quality. Underemployed working long hours for low wages, engaged in dangerous work or receive only short term and or informal employment arrangements. The inadequate employment situation of youth has a number of socio economic, political and moral consequences. This has resulted in poverty in Nigeria which is chronic and rising. The share of the total population living below $1 (one dollar),a day threshold of 46 percent is higher today than in1980‟s and 1990‟s, this despite significant improvements in the growth of GDP in recent years.
Unemployment and poverty are so intertwined that one can easily confuse one for the other. Although, it is possible for one to be employed and still remain poor, this is to be a case of underemployment. Unemployment and underemployment reflect the failure to make use of an important factor of production, labor, for fostering economic growth in Nigeria. Low returns to labor as well as high unemployment indicates poverty. Poverty makes it difficult to make investments in education and health that would increase ones productivity. The social aspects of the problem that lies in association of unemployment with social exclusion and a sense of hopelessness. Structural unemployment and wide spread poverty are believed to be the basis for the activities of miscreants such as militant youths in Niger Delta and the present deadly BokoHaram in northern Nigeria upsetting the seemingly peaceful and stable political situation of the nation. The activities of BokoHaram have resulted in many deaths and destruction of properties worth millions of dollars.
Unemployment in Nigeria is defined as the proportion of labor force that was available for work but do not work. An official figure from the bureau of statistics puts the figure of unemployed at 19.70 per cent about 3million but this figure still did not include about 40 million others captured in World Bank statistics in 2009. By implication it means that if Nigerians̛ population is about 140million Nigerians are unemployed (Njoku and Okezie 2011).Unemployment and poverty among others played a key role in the uprising one can only conclude that Nigeria’s unemployment and high poverty level poses even greater threat to its development, security and peaceful co-existence. It is in light of proffering solutions to the problem of poverty and unemployment that the current study is germane. TheWorld Bank and United Nations Development Programme (UNDP) 2002.
1.2 Statement of the problem
Theoretically, unemployment is always expected to be highly and positively correlated with poverty while economic growth is regarded as the driving force of conquering unemployment and poverty (obadan, 1997). However, this is not always the case as economic growth alone cannot overcome all the crucial factors that contribute to unemployment and poverty. This appears to be the case with Nigeria where economic growth, unemployment rate and poverty are both rising simultaneously. These have led to very high dependency ratio and low standard of living with a great multitude of people in Nigeria living in abject misery. Furthermore, unemployment and poverty have led to tremendous increase in criminal activities and social vices and still remains potential sources of political instability in Nigeria for the disenchanted, disgruntled and revolutionary elements in the society.
On the other hand, unemployment is one of the developmental problems that face every developing economy in the 21st century. International statistics show that industrial and service workers living in developing regions account for about some percentage of the unemployed (Patterson et al 2006).
Though Nigeria recorded 7.5 percent expansion in 2012 that was faster than the global and regional average in 2011 this growth which did not impact positively in the eyes of majority, might have neither improve the employment rate and living standards of Nigeria in 2012. Recent data from the National Bureau of Statistics placed the country’s misery index at 34% a development which analyst described as horrible and terrifying. According to the Bureau the figure of unemployed Nigerians in the first half of 2011 was 23.9% from 21.1% in 2010 and 19.7% in 2009. This shows that the rise in unemployment is bound to worsen as the year goes by 2015. Therefore the crucial problem of this research is on the effects of poverty and unemployment in Nigerian economy. What is the way forward? That is how poverty and unemployment will be reduced appreciably if not eradicated in Nigeria.
1.3 Objectives of the study
The fundamental aim of this project is to determine the effect of poverty and unemployment on economic growth of Nigeria: 1980-2015. The specific objectives of the study therefore include the following;
- To determine the effect of unemployment on economic growth in Nigeria
- To determine the effect of poverty on economic growth in Nigeria.
1.4 Research Question
- a) What is the effect of unemployment on economic growth in Nigeria?
- b) What is the effect of poverty on economic growth in Nigeria?
1.5 Scope and limitation of the study
The researchers work focuses on the effects of poverty and unemployment on economic growth of Nigeria between 1980- 2015 and also how poverty and unemployment has an impact on economic growth and development in Nigeria. The period of this study for the time series analysis is 35 years.
A study of this nature cannot be completed without the researcher experiencing some constrains. The first major limitation of the study experienced by researcher was lack of time. This is due to the fact that both academic course work and the study were talking place simultaneously.
Another limitation encountered by the researcher was the lack of sufficient data particularly on poverty which greatly affected the study in terms of carrying out a direct and detail econometric analysis on the variables.
Finally, for an in-depth work to be carried out in this study, the sourcing of data was not easy.
1.6 Hypothesis Formation.
Hoi: There is no significant relationship between poverty and unemployment in Nigeria
Hoii: There is significant relationship between poverty and unemployment in Nigeria