ABSTRACT
The study examined the impact of macroeconomic variables on unemployment in Nigeria from 1980 to 2015 using a secondary data obtained from central bank of Nigeria statistical bulletin and national bureau of statistics 2015 and ordinary least square estimation technique. The empirical findings of the study provided evidence that inflation and GDP have its impact on unemployment since they are all exerted significant. The study therefore recommended that if the federal government wants to reduce the unemployment level in Nigeria, they should pay close attention to controlling inflation and maintaining a sustained economic growth as they significantly impact the level of unemployment.
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
Unemployment is defined as the condition of having no job or being out of work or proportion of people which are able to work and actively searching for jobs but they are unable to find it. Unemployment is a problem of great concern to policy makers of both developing and developed countries. In view of Kyei and Gyeke (2011) unemployment is a real matter of concern as it can yield devastating effect on economic welfare, crime, the erosion of human capital, misery and social instability. Similarly, unemployment results in some psychological problems of hopelessness, frustration, hostility & gradual drift of some visible unemployed youth into all manner of criminal behaviour, (Bakare (2011)). According to Maqbool, Sattar and Bhalli (2013), the focus of every government must be to create employment opportunities through various productive activities by using all available factors of production. Additionally, persistent unemployment not only affects the status of a nation in comparison to other nations, but it also leads to cruel home country problems. Long-term unemployment always results in creating financial hardships, poverty, homelessness, crime, frustration and many other problems like breakdown and family tension, social isolation, loss of confidence and self-esteem. All these lead to the erosion of a healthy society.
The shocks to output extract influence on unemployment throughthe relationshipbetween output and unemployment implied by Okun’s Law. This relationship might be changed in terms of magnitude, but it implies as positive shocks to output reduce unemployment. Economy’s output and unemployment are related through, as mentioned,Okun’s Law but the recent study of Daly and Hobijn (2010) showthat this relationship between output and unemployment isnot the one predicted by Okun’s Law for the United States: Decline in output created by recent crisis isFound to be two times more unemployment than the one that Okun’sLaw suggests being.Ascertaining policies that have worked in addressing unemployment in Nigeria is rather difficult in light of the incredibly high and rising unemployment rate—and at least around 1.8 million youth are entering the labour market every year (Falusi, 2014). Since it is unclear to what extent any given intervention may have reduced the youth unemployment rate in aggregate, it may be more helpful to think of effective policies as those which have delivered on their stated objectives. The sustainability of a program could also be considered an indicator of success.
Different programs have been introduced by various administrations over time to address youth unemployment, which has been an issue of significant public concern since the days of SAP. In fact, youth unemployment became the focus of the social policy of the military government that ruled Nigeria for much of its years as an independent nation. The initial reaction of the government was to draft unemployed youth to public programs such as Operation Feed the Nation (OFN) and the Directorate of Food, Road and Rural Infrastructure (DIFRRI), which provided immediate and direct jobs to participants interested in agriculture.
More coordinated and planned measures later followed, and these are classified into three categories: labour demand, labour supply and labour market interventions. Labour demand strategy focused on creating jobs immediately through public works or creating certain jobs in the private sector aimed at promoting entrepreneurship and skills enhancement. Labour supply strategy dealt with the training and education of prospective job seekers. The labour market intervention strategy focused on improving the labour market and matching demand and supply interrelationships.
However, with the transition to civilian rule in 1999, successive civilian administrations including the current leadership—have tried to refocus unemployment programs, discontinuing many of the old programs, restructuring some of them and creating new ones. It should be noted that as federal government elation, public policy on employment has been addressed at the three levels of government (federal, state and local) and that this new emphasis on unemployment has made youth the primary constituency of concern. Consequently, certain institutional arrangements and agencies have been established to promote employment among youth. Three of the current and most prominent programs include the Subsidy Reinvestment and Empowerment Programme (SURE-P), the Youth Enterprise With Innovation in Nigeria (YOU-WIN) and the Osun State Youth Employment Scheme (O’YES), among others.
The SURE-P was introduced in February 2012 and focuses on management and investment of federal government savings derived from proceeds accruing from the partial removal of the subsidy on petroleum products. The SURE-P is the flagship of recent efforts to provide job opportunities to graduates of tertiary institutions. It is more or less a whole range of activities and programmatic schemes, including the Graduate Internship Scheme (GIS), Community Services Scheme (CSS), Vocational Training Scheme (VTS), and Community Services, Women and Youth Empowerment (CSWYE), among others.
One of the more successful schemes of the SURE-P is the GIS, which offers unemployed graduates the opportunity to undergo a one-year internship in firms, banks, ministries, government departments and agencies, as well as in small and medium enterprises (SMEs), relevant to beneficiaries’ disciplines. The purpose of GIS is to help beneficiaries acquire the appropriate skills and practical knowledge that will make them more suitable for the job market. About 50,000 graduates were selected for the first phase of the scheme out of some 85,000 applicants.
This indicates that most of the firms that wished to participate in the program were unable to meet the rigorous selection criteria. To be selected, a firm had to be registered with the Corporate Affairs Commission, show evidence of Value Added Tax registration and possess a Tax Clearance Certificate. In addition, the firm had to submit training and mentoring plans for each of their interns. The firms were further assessed on the basis of their years of business experience and location. A final criterion was that the firm had to pass a verification exercise, which involved confirmation of information regarding its mentoring capabilities and the number of interns it could host.
Companies that met these criteria and were selected to participate enjoyed a host of benefits, including tax rebates, free labour from their interns (the government paid a monthly stipend of N18,000, approximately US$110, to interns) and the opportunity to claim that they are fulfilling some aspects of their corporate social responsibility (CSR) to the community in which they operate. Testimony from participants shows overwhelming acceptance of the scheme, saying it enhanced their job skills, provided them with practical knowledge, improved their chances of employment by the firms that provided their training, and by other private companies, government institutions, or helped them establish their own businesses through an initial capital provided by the government. The number of participants for the 2014/2015 period of the program will be increased to 100,000.
The YOU-WIN program was designed to create job opportunities specifically, again, for graduates of tertiary institutions that elect to go into business as entrepreneurs. Simply put, participants are required to develop and execute their own business ideas that will provide jobs for themselves and other unemployed youths who may or not be graduates. By 2015, the program is expected to have provided 40,000 to 50,000 new jobs, encouraged expansion, specialization and job spinoffs of existing businesses, and enabled young entrepreneurs to have a broad professional and business network (NPC, 2013).
At the state level, the government established various forms of employment-creating programs. The most prominent one is the Osun Youth Empowerment Scheme (OÝES) established by the state of Osun. The scheme provides a series of employment opportunities for participants as traffic controllers, sanitation and environmental officials, security personnel, and other works and services. The World Bank has singled out the OYES scheme for its success in promoting youth employment in Nigeria and has recommended the scheme for replication by the federal government and other state governments.
1.2 Statement of Problem
In the 1960’s and 1970’s the Nigerian economy provided jobs for the teeming population. The economy also absorbed considerable imported labour in the manufacturing sectors. The wage rate compared favourably with international standards. There was also relative industrial peace in most industries and some groups. Specifically, following the oil boom of the 1970’s, there was rapid migration, especially the youths to the urban areas in search of wage employment. But following the downturn in the economy in the 1980’s, the problem of unemployment started to manifest. The introduction of IMF-World Bank Structural Adjustment Programme (SAP) led to rapid depreciation of the naira exchange rate and the inability of most industries to import the raw materials required in supporting their output levels. A major consequence of the rapid depreciation of the naira was the sharp rise in the general price level. This development subsequently led to a significant decline in real wages. The low wage in turn resulted in a weakening purchasing power of wage earners and declining aggregate demand. Consequently, industries started to accumulate unintended inventories. As normal economic agents, the International Journal of Economics, Commerce and Management, United Kingdommanufacturing firms started to reduce their workforce. In the public sector, embargo was placed on employment. More importantly with the simultaneous rapid expansion in the educational sector, new entrants into the labour market increased beyond the absorptive capacity of the economy, (Central Bank of Nigeria (2003)). These developments have eventually worsened the unemployment situation in the country, Some of the very common causes of unemployment in Nigeria is due to structural factors such as the nature of the educational system and its interface with the labour market (i.e., the mismatch problem), technological change, permanent shifts in the demand for goods and services and the skill content of the labour force. Cyclical factors such as the fluctuations in aggregate local and foreign demand for goods and services and institutional factors such as the presence of strong labour unions and labour legislation also determine the underlying changes in the unemployment rate. This study aims at finding the relationships between unemployment rate and variables like GDP and Inflation Rate
1.3Research Questions
- What is the impact of inflation on unemployment in Nigerian economy?
- What is the impact of growth on unemployment in Nigerian economy?
- Objectives of The Study
The objectives are;
- To determine the impact of inflation on unemployment in Nigerian economy.
- To determine the impact of growth on unemployment in Nigerian economy.
1.5 Statement of Hypothesis
This study will be guided by the following null hypothesis;
H01: Inflation rate has no significant impact on unemployment in Nigeria.
H02: Economic growth has no significant impact on unemployment in Nigeria.
1.6 Significance of the Study
Why has unemployment continue to rise despite the growth in GDP and resources available? Is it that government neglect the issue of unemployment and other macroeconomic variables or has the twin problems defied all economic theories? These are questions that need immediate answers, because unemployment and other macroeconomic variables are current issues that is affecting our country and which is being discussed by both experts and lay-man alike.
Therefore, the study will be of great paramount important to economic decision makers as it will equip them with knowledge and skill needed to tackle the pressing issue of unemployment and other macroeconomic factors in the country, also to the government, the firm, general public and academia, for academia, it creates a reference base for further improvement on the above stated problem, for the government, it helps them know the variables to adjust in other to make good policies to correct the problem of unemployment in Nigeria.
1.7 Scope Of The Study
The study examines the impact of macroeconomic variables on unemployment in Nigerian. The study will cover the time period 1981-2015 (a period of 34 years). This is to ensure updated information and to follow the trend. The range will be chosen based on data availability and to have adequate observation for a meaningful analysis
