THE EMPIRICAL RELATIONSHIP BETWEEN UNEMPLOYMENT AND ECONOMIC GROWTH IN NIGERIA

TABLE OF CONTENTS

CHAPTER ONE

INTRODUCTION

1.1       Background to the Study

1.2       Statement of the Problem

1.3            Research  Questions

1.4            Objectives of the Study

1.5            Hypotheses of the Study

1.6            Significance of the Study

1.7            Scope and Limitations of  the Study

CHAPTER TWO

REVIEW OF RELATED LITERATURE

2.1       Theoretical Literature

2.1.1    Classical Theory of Unemployment

2.1.2    Keynesian Theory of Unemployment

2.1.3    Efficient Wage Theory of Unemployment

2.1.4   Insider-Outsider Theory of Unemployment

2.1.5    Search Theory of Unemployment

2.1.6    Concepts of Economic Growth and Unemployment

2.2       Empirical Literature

2.3       Gap in Literature                                                  

CHAPTER THREE

METHODOLOGY

3.1       Research Design

3.2       Model Specification

3.3       Estimation Techniques

3.4       Data Discussion

3.5       Data Source

CHAPTER FOUR

PRESENTATION AND ANALYSIS OF RESULTS

4.1       Unit Root Test

4.2       Cointegration Result

4.3       Vector Error Correction Model (VECM)      

4.4       Granger Causality

4.5       Tests of Hypotheses

4.6       Implication of the Study

CHAPTER FIVE

SUMMARY, RECOMMENDATIONS AND CONCLUSION

5.1       Summary of Findings

5.2         Recommendations                   

5.3       Conclusion

References

CHAPTER ONE

INTRODUCTION

1.1       Background to the Study

Unemployment   constitutes the major impediments to social progress. A part from representing a colossal waste of a country’s manpower resources, it generates welfare loss in terms of lower output thereby leading to lower income and well-being. It is see as both macro and   socio-economic problem; which   arises as a result of insufficient and non- availability of jobs to correspond with the growing population (Uwazie & Ihugba, 2009). It is defined by the international labour organization (1982) as comprising all the persons above a specified age who during the reference period, are without work, that is, are  not in paid employment.  Feridun and Akindele (2006) identified unemployment as one of the major challenges confronting the Nigeria economy. Bello (2003) defined unemployment as the percentage of the labour force that is without job, but is able and willingness to work.  According to Noko (2013), unemployment in Nigeria is defined as the proportion of labour force that was available for work but did not work in the week proceeding the survey period for at least 39hours. Muhammand, Inuwa, and Oye (2011) submitted that unemployment constitutes a series of serious development problems and is increasingly more serious all over Nigeria.

There is actually no nation that is absolutely free from unemployment. The major difference is the degree and pervasiveness of this plight. According to the central intelligence Agency (CIA ) (2014), Nigeria with an estimated population of about 177million (2014 est.) following an  April 2014 statistical “rebasing “ exercise, Nigeria emerged as Africa’s  Largest economy, with 2013 GDP estimated at US &502 billion with a GDP growth rate of 6.2 percent (CIA). As impressive as the above figures may appear, youth unemployment has been one of the major problems facing Nigeria. A high level of unemployment and unemployment is one of the critical socio-economic problems facing Nigeria as the labour face with an increasing proportion of youths who are unable to get absorbed into the labour market. As a result, youths are especially affected by unemployment. Furthermore, young people are more likely to be employed in jobs of low quality, underemployed and working   long hours for low wages engaged in dangerous work or receive only short term and informal employment arrangements. The inadequate number of socio-economic,  political and moral   consequences.  This has resulted in poverty in Nigeria which is awful; and this rising poverty and unemployment are identical bane with   a wide trend, which affects people in various depth and level at different times and phases of existence.

The term unemployment could be used in relation to any of the factors of production which is idle and not being utilized properly for production. However, with reference to labour, there is unemployment if it is not possible to find jobs for all those who are eligible and able to work below capacity or not fully utilized in production (Anyawuocha, 1993). Unemployment can either be voluntary or involuntary.  Voluntary in the sense that one chooses not to work because he or she has means of support other than employment. Example is an idle rich man. On the other hand, involuntary unemployment exist when persons who are eligible and   willing to work at the prevailing rate of pay are unable to find work. (Anyanwa, 1995;  Amassoma and Nwosa, 2013).

Unemployment according to Lipsey (1960; and  Noko, 2016), brings about economic waste and cause human suffering. According to Osinubi (2006), unemployment is as a result of the inability to develop and utilize the nations manpower resources effectively especially in the rural sector. The socio-economic effect of unemployment includes: fall in national output, increase in rural- urban migration, waste of human resources,  high rate of dependency ratio,  poverty, recession, frustration, all sorts of immoral acts and criminal behaviour  e.g  prostitution ,  armed robbery  etc. The social effects  of unemployment bring  to light the need to proffer possible solution to salvage our nation Nigeria, which the possible solutions are various  programs that  have been  initiated by the government  at various levels in order to address the problem. Such as National Economic empowerment and Development Strategy (NEEDS) and National Directorate of Employment.    

1.2   Statement of the Problem

The incidence of unemployment in Nigeria has been deep and wide spread, cutting across all facets of age groups educational strata and geographical entities. Unemployment has reached a very alarming proportion in Nigeria, with a great number of the unemployed being primary and secondary school learners and university graduates (Durosinmi, 2012). This situation has recently be compounded by the increasing unemployment of professionals such as bankers, engineers and doctors. The toll is within the productive segment of the Nigeria population (Jelilov, Gylych; Muhammad Yakubu, Maimuna, 2015). The magnitude of unemployment in Nigeria   not justified by  available financial statistic phenomenon.  The reason is that there have been steady  fluctuations in  unemployment rate in Nigeria  (Bello 2003). Theoretically, unemployment is always expected to be highly and positively correlated with poverty while economic growth is considered as the engine force of conquering unemployment and poverty (Obadan, 1997). However, this is not always the case as economic growth alone cannot over come all the crucial factors that contribute to unemployment and poverty. This appears to be the case with Nigeria where economic growth and unemployment rate are fluctuating. For instance in 1981 GDP was N144.83 and unemployment 5.2%, N1982 GDP was N154.98 and unemployment 4.3%, in 1990 GDP was N499.68 and unemployment was 3.5%, 1991 GDP was N596.04 and unemployment was 3.1%, 2001 GDP was N 8134.14 and unemployment was 13.7%,  2002 GDP was N11.332.25  and unemployment  was 12.2%  2015 GDP was N 94,144.96 and unemployment was 9.0%, 2016 GDP was N 101,489.49 and unemployment was 13.4%.

These have led to very high dependency ratio and low standard of living with a great multitude of people in Nigeria living in servile misery. Moreover, unemployment and poverty have led to rapid 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.

The prolonged trend in the terrible situation of unemployment mention above led the researcher to investigate the empirical relationship between  unemployment and  Nigeria’s economic growth in Nigeria for the period of 1980-2016

1.8                Research  Questions

In the course of this study, the stated question below is sought to be answered.

1. Is there any significant long run relationship between unemployment and economic growth in Nigeria?

2. To what extent does unemployment rate impact on economic growth in Nigeria?   

3. Is there significant causal relationship existing between unemployment and economic growth in Nigeria

1.9                Objectives of the Study

The main objective of this study is to investigate empirical relationship between unemployment and economic growth   in Nigeria. While the specific objectives are:

1. To determine the existence of long run relationship between unemployment and economic growth in Nigeria.

2. To ascertain the extent that  unemployment rate impact   on economic growth in Nigeria.

3. To find out if there is significant causal relationship existing between unemployment and economic growth in Nigeria.  

1.10             Hypotheses of the Study

 Hypothesis of this study are stated below in null form as this:

1. H_o: There is no significant long run relationship between unemployment and economic growth in Nigeria.

2. H_o: unemployment rate has no significant impact  on economic growth in Nigeria.

3. H_o: there is no significant casual relationship existing between unemployment and economic growth in Nigeria.  

1.11             Significance of the Study

This study will be very crucial since it will give a perception into literature and assist to nude the causes  and effects of unemployment in  Nigeria. Unemployment in   any   system is seen as a policy failure and there is concerted effort on the part of the government in checkmating the impact of   unemployment in an economy. The study of unemployment is relevant to the policy makers, politician, general populace, and researchers/student of economics. It will avail policy makers with the knowledge of the state of unemployment in the system which will help them formulate good policies that will geared to wards eradicating unemployment. It will also be a great help to the general populace to understand that unemployment is a persistent that needs to faced with rapid attention in order to achieve economic growth and development. Finally, it will be of extreme relevant to future researchers because it will serve as a springboard for further research.

1.12              Scope and Limitations of  the Study

This study will cover the whole of Nigeria,   from the period of 1980 to 2016.  The scope of this   study will concentrates on the relationship between unemployment and economic growth and development of Nigeria with emphasis on the effect of unemployment  on  economic growth in Nigeria.  The study made use of time series data between  1980-2016. Data was collected from secondary sources. Explicitly, the major sources of data is Central Bank of Nigeria (CBN). That is, the quantitative data was use to   determine the rate of unemployment   on economic growth and  development  of    Nigeria.  As it regard to the limitation encountered, the study of this cannot be completed without the researcher experiencing some constrains. The first major limitation of the study experienced by researcher was data availability, financial constraint and lack of time. This is because both academic course work and the study were taking place simultaneously. Despite all the limitation adequate effort was put place to ensure that all constraints were overcome.

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