IMPACT OF INTERNATIONAL TRADE ON UNEMPLOYMENT IN NIGERIA

ABSTRACT

This study examined the impact of international trade on unemployment in Nigeria. It employed Ordinary Least Square (OLS) technique and Error Correction Mechanism on the data used. This study employed unemployment rate, net export, inflation rate, and exchange rate as economic variables. This revealed that net export has no significant impact on unemployment rate in Nigeria, but exchange rate has. The result of the analysis also showed that net export and exchange rate have a positive relationship with unemployment, while inflation rate has a negative relationship with unemployment. This study therefore recommends that there is the need for devaluation of the currency, so as to increase our exports. The export this time should be finished goods of high quality from our industrial sector. This will not only increase our foreign reserve but also reduce poverty through employment created out of our industrial sector.

 

 

 

 

 

 

 

  CHAPTER ONE

                                                INTRODUCTION

1.1 Background to the Study

Unemployment is one of the fundamental developmental challenges facing Nigeria. It has continued to be one of the major macroeconomic objectives of the government. Research showed that unemployment was high in 1980s, but the available reports from various local and international bodies, and the glaring evidence of joblessness in this decade are clear indications that there was no time in Nigeria’s chequered history where unemployment is as serious as now. At times, government brings in measures to curb unemployment in Nigeria. For instance, the creation of National Directorate of Employment (NDE) and its skills acquisition programmes,  NAPEP, PAP, YOUWIN, just to mention a few, are some of the various intervention mechanisms aimed at ensuring economic growth that is rich with job creation opportunities.

With the world having evolved into a global village, it is a precept for a nation to be in alliance with other nation(s). One of the coherent ways to create such an alliance between or among nations is via international trade. International trade allows for the exchange of goods and services cum foster healthy relations among countries irrespective of their level of economic development. A country involved in international trade need not have fear of hegemony or loss of its sovereignty because it is a mutual agreement to engage in trade across their border. A nation not participating in international trade is at risk of a slow pace of economic development due to the cogent fact that a country cannot be fully endowed with all the resources essential to be utilized for sustainable economic development.

International trade is the exchange of capital, goods and services across the international borders or territories. In most countries such trade represents a significant share of Gross Domestic Product (GDP). Therefore, international trade has been an area of interest to policy makers as well as economists. It enables nations to sell their domestically produced good to other countries of the world (Adewuyi, 2002). International trade has been regarded as an engine of growth, which leads to steady improvement in human status by expanding the range of people’s standard and preferences (Adewuyi, 2002). Since no country has grown without trade, international trade plays a vital role in restructuring economic and social attributes of countries around the world, particularly, the less developed countries. The economic growth of Nigeria to large extent depends on her trade with other nations. Nigeria as a developing country has been grappling with realities of developmental process not only politically and socially but also economically.

Government earn revenue through international trade activities. International trade, as a major factor of openness, has made an increasingly significant impact to economic growth (Sun and Heshmati, 2010). The openness of a nation influences a country’s growth rate by impacting upon the level of economic activities and facilitating the transfer of resources across borders. Nigeria is basically an open economy with international transactions constituting a significant proportion of her output (Emeka, Frederick & Peter, 2012).

In 1960s, agriculture was the main stay of the economy and the greatest foreign exchange earner, and Nigerian government was able to execute investment projects through domestic savings, earnings from exports of agricultural products and foreign aids (Ezike et al, 2011). But since the advent of oil as a major source of foreign exchange earning in Nigeria since 1974, the picture has been almost that of general stagnation in agricultural exports. This led to loss of Nigeria’s position as an important producer and exporter of palm oil produce, groundnut, cocoa and rubber (CBN annual report, 2006). Between the year 1960 and 1980, agricultural and agro-allied exports constituted an average of sixty percent of total export in Nigeria, which is now accounted for, by petroleum oil export, (CBN annual report 2004). However the importance of international trade in the Nigerian economy has grown rapidly in recent time, especially since 2002. Economic openness measured as the ratio of export and imports to GDP has risen from just above 3 percent in 1991 to over 11 percent in 2008 due to the unrest in Nigeria’s oil producing Niger Delta region which resulted in significant disruption in oil production and shortfalls in oil export from Nigeria.

1.2 Statement of the Problem

Nigeria as a country has been unable to achieve sustainable employment through international trade due to factors such as poor policy, corruption, which has been a daunting obstacle to sustainable employment as it adversely affects not only international trade but also education, healthcare and poverty alleviation. Another major sustainable development challenge facing Nigeria through international trade is the poor state of infrastructures. Trade offers opportunities and food security to the poor by creating a condition, which raises their incomes and lives, open small farmers to international competition which can also undermine the agricultural sector with long term negative effects for poverty and hunger.

However, 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.

1.3 Research Question

This study would attempt to answer the following questions;

1. What impact do changes in net export have on unemployment?
2. How does a change in exchange rate affect unemployment?

1.4 Objective of the Study 

The broad objective of the study is to examine the impact of international trade on unemployment the Nigerian economy. The specific objectives are as follows.

1. To examine the impact of net export on unemployment in Nigeria.
2. To ascertain the effect of exchange rate on unemployment in Nigeria.

1.5 Research Hypothesis

H₀: Net export has no significant impact on unemployment in Nigeria.

H₁: Net export has significant impact on unemployment in Nigeria.

H₀: Exchange rate has no significant impact on unemployment in Nigeria.

H₁: Exchange rate has significant impact on unemployment in Nigeria.

1.6 Significance of the Study

This research work is carried out to study how international trade influence unemployment in Nigeria economy. The findings of this research work transcend beyond mere academic brainstorming, but will be immense benefit to federal agencies, policy makers, intellectual researcher, etc. This work would be of great intellectual value to the general public and to students who would want to make further research on this subject matter as it would add a lot to already existing body of knowledge.

 

1.7 Scope of the Study

This work aims at examining the impact of international trade on unemployment in Nigeria, the appraisal, and possibly the solution to the problems. And this work will cover through the period of 1986 – 2015.

1.8 Organization of the Study

This work is made up of five chapters. Chapter one contains the introduction, chapter two and three are the review of literature and the research methodology respectively. Then, chapter four and five are the data presentation, analysis and summary of finding, conclusion and recommendation respectively.