The Effect Of Unemployment On Economic Growth In Nigeria

Project and Seminar Material for Economics

The Effect Of Unemployment On Economic Growth In Nigeria


Abstract


It is an established economic reality that the size of the workforce directly impacts on a country’s GDP (growth). Not only does the work force produce manufactured goods or services or agricultural produce in direct proportion, but also brings in its wake increasing purchasing power, which in turn, fuels economic growth. This paper looks at the relationship between unemployment and growth in Nigeria (1985-2009). One major findings of the study is that the economy grew by 55.5 percent between 1991 and 2006; and the population increased by 36.4 percent. All things been equal, this should have resulted to a decrease in the rate of unemployment but rather, unemployment increased by 74.8 percent. The study also found out that the average contribution of the oil sector to the GDP between 1991 and 2006 is 30.5 percent while agriculture that is the main source of gainful employment in the country contributed 36.7 percent just a difference of 6.1 percent from that of oil that employs less than 10 percent of the labour force. The study recommends that the agricultural sector as a medium of reducing unemployment in Nigeria should be harnessed and advises that Government and all relevant stakeholders continue in their quest towards reducing unemployment, as well as give their support in ensuring that the agricultural sector is not downtrodden but embraced in this task.


Chapter One


1.0 Introduction

1.1 Background of the Study

One of the greatest challenges facing the Nigeria economy is unemployment which has maintained a rising trend over the years. The total labour force in Nigeria is made up of all persons aged 15-64 years excluding students, home keepers, retired persons and stay-at-home to work or not interested. 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. Official figures from the Bureau of Statistics puts the figure of unemployed at 19.70 per cent, about 30 million, but this figure still did not include about 40 million other Nigerian youths captured in World Bank statistics in 2009. By implication, it means that if Nigeria’s population is 140 million, then 50 percent of Nigerians are unemployed. Viewing this from the perceptive of the recent events in the Middle East where unemployment and poverty among others played a key role in the uprising, one can only conclude that Nigeria’s unemployment poses a threat to its development, security and peaceful co-existence, being that Nigeria is made up of diverse entities from different cultural and religious backgrounds most of whom have shown differences in political, cultural and religious understanding and accommodation emanating from concerns of abuse of power, resource allocation, nepotism, negligence and corruption among others.

According to Bello (2003) from time immemorial, the subject of unemployment has always been an issue of great concern to the economists, policy makers and economic managers alike; giving the devastating effect of this phenomenon on individuals, the society and the economy at large. The classical school of thought that provided the earliest thinking on economic issues did not fail


1.2 Statement of Problems

Anyaele (1995:214) stated that the problem has become continually without solution being in sight it has constituted itself into one of the worst enemies of the populace in this part of the world. That the problem unemployment has been exacerbated by the previous and retrenchments unbridle rural urban migrate. Etc.
Unemployment is a great problem associated with both rural and urban communities of the Nigeria economy it results to the following problems to Nigeria.

A) Threat to Peace:

The unemployed Constituted available book for political troubles shooters in a Country.

B) Escalation of Crime Rate:

An idle mind they say is the devils workshop, and as a result of this many unemployed youths and able bodies men and women engages themselves in crime such as armed robbery, prostitution, etc in order to earn living.

C) It Causes Migration:

This is to move from one place to go and live or work in another place. This can be rural urban or from one Country to another which creates vacuum in a nation march to economic and social development.

D) Waste of Manpower:

Unemployment especially that of graduates waste the much needed manpower which delays the economic development of the nation Nigeria.

E) Increase in Dependents:

The unemployment people increase the number of dependants and contribute in sapling the income of their families instead of contributing to them.

F) Reduction in Investment:

The money spent in educating the unemployed and the once spent in them as depredates should have been invested in one


1.3 Objectives of the Study

The purpose of this study is contribute in any meaningful way to the idea of how the growing rate of unemployment among young people in Our Society can be deal with, so that its ugly effects can be reduced at least to minimal. The problem caused by unemployment in Our Society is not far-fetched.

  1. To evaluate the nature of relationship between unemployment and economic growth.
  2. To determine the effect of unemployment in the Nigeria Economy.
  3. To offer some recommendations based on the findings of the study.

1.4 Research Question

  1. What are the course of unemployment in Nigeria?
  2. What are the economic effect in the economy?
  3. What factors contribute most the problem of unemployment?
  4. What will be the possible solution to unemployment ravaging Nigeria?

1.5 Research Hypothesis

  • H0: Unemployment Rate has no significant impact on Economic Growth in Nigeria.
  • H1: Unemployment Rate has significant impact on Economic Growth in Nigeria.

1.6 Significance of the Study

Owing to the down turn in the economic fortunes of this country over the years, the Nigerians have lost their pride of place. Their status in the society has continued to dwindle.

Today, it is sheer mirage for fresh graduates to dream of the good things of life. They are made to understand and accept that the graduates, unemployment should be seen as a passing phase in the history of the nation. It is very doubtful if the much desired change in the near future will bring us anything.

Therefore, this study is aimed at showing how these effects of unemployment have on economic growth in Nigeria Economy.

It is desirable to create a new forum in which the government plays a dominant role and actively promotes private enterprises, establishes new enterprises with a centrally directed mobilization of resources towards the definite objectives of solving these problem.


1.7 Scope and Limitation of the Study

The scope of this study cover the economic effects of unemployment in Nigeria economy which the periods 2000-2012.

It can be seen from all indications that a research such as this cannot be carried out in one semester. There are constraints that limit the work of the researcher. Among these are:

The limitation of our study centers around time, availability of material and money. The time limit with which this study has to be completed is little more than three months.

Theses limitation not with standing the researcher has made every effort to ensure in realization of the research objectives.


1.8 Definition of Important Terms.

In this aspect we are concerned with the types of unemployment in Nigeria economy, they are as follows: –

a) Frictional Unemployment:

This type of unemployment arises when people leave their present job with hope of getting another one or a new one, but fails at that time. It may or may not be a temporary unemployment depending on the prevailing economic situation.

Therefore frictional unemployment is the period between the worker left his former work and the time of getting a new job or work.

b) Seasonal Unemployment

This type of unemployment is caused by seasonal change that affect some types of work, for example workers that work in road construction companies remain unemployed during raining season.

On the same hand farmers stay idle during the time in between harvesting and planting periods.

c) Search Unemployment

This type of unemployment occurs when some people turn down offer of work in search of better-paid employment. How long this search will last depend on he prevailing economic situation in the Country.

d) Structural Unemployment:

Unemployment is as a result of slight change in the Industries structure of a country, workers will be retrenched as a result. This is causal by economic recession and it happened in Nigeria in 1984 when firms folded up as a result of this.

e) Voluntary Unemployment

This type of unemployment undecorated occurs when some people refuse to take up any paid employment. That is to say that they voluntarily decide not take up any paid employment for example some husband may order their wives not to do any type of work but to stay at home as full time house wives.

f) Deficient Demand (Cyclical) unemployment:

This type of unemployment occurs when there is decrease in the quantity of goods demanded or there is over production, which result to fall in prices. Industries will be affected and the may cause lay off of workers of the Industries that are affected.

g) Under Employment:

This type of employment result when a workers potential is under utilized or when a worker is paid less than the effort puts on the job. E.g. A graduate doing the work of a cleaner


Chapter Five


Summary of the Finding, Conclusion and Recommendations

5.1 Summary of the Findings

This research work “Economic Effect of Unemployment in the Nigeria Economy” was set to find out the impact of unemployment rate on Economic growth in Nigeria. Hypothesis was stated to guide the study. The hypothesis was stated thus:

H0: Unemployment Rate has no significant impact on Economic Growth in Nigeria.

To evaluate this hypothesis, annual time series data on gross domestic product a proxy for economic growth and unemployment rate were collected from the year, 1980 to 2011. To analysis these data, simple linear regression were adopted employing Ordinary Least Square (OLS) techniques.

This analysis yielded some interesting results. From the results it was observed that unemployment rate has no significant impact on economic growth of Nigeria. Also that dependent variable (Gross Domestic Product) has a negative relationship with independent variable (Unemployment Rate).


5.2 Conclusions

From the findings of this study, it was concluded that unemployment rate has no significant impact on Nigeria economy. Based on this, any action taking towards reducing unemployment rate will have external effect which must be positive to the economy, because reducing unemployment means increasing employment rate.

Finally, it was concluded that since the relationship that exist between unemployment rate will always lead to increase in gross domestic product.


5.3 Recommendation

From the finding of this study, the following recommendations are made.

  1. Government should try and diversity the economy in order to increase the employment opportunities in the society.
  2. Agricultural sector should be made attractive by government through attaching some incentive to the sector in order to make it viable.
  3. Skill acquisition programme should be organizing by government through attaching some incentive to the sector in order to make it viable.
  4. Soft loans should be given to fresh graduates so as to enable them engage on one economic activity or the other.
  5. Further studies should be encouraged from economists and other professionals a like to test the effectiveness of some macro economic tools available to the government for enhancing employment opportunities.

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