The Impact Of Unemployment On Economic Growth In Nigeria

Project and Seminar Material for Economics

The Impact Of Unemployment On Economic Growth In Nigeria


The term unemployment can be defined as an economics condition marked by the fact that individual actively seeking jobs remain unhired. Unemployment is expressed as a percentage of the total available work force. The level of unemployment varies with economics conditions and other circumstances. This is mostly seen in graduate of various institutions of learning especially in under developed nations like Nigeria. The study was designed to investigate the impact of unemployment on economics growth in Nigeria of 41 years (1970-2014).

The research focuses on determining the cause and impacts of unemployment, and how the problem of unemployment in Nigeria will be reduced, to a minimal level or even eradicated. It focuses on this objective is to determine the relationship between unemployment and economic growth in Nigeria (GDP). The method of analysis used in testing the hypothesis is the hypothesis is the T-test, F-test etc. the major findings was that unemployment has a negative impact on the gross domestic product (GDP) of the Nigeria economy. Some suggestions and policy recommendations were made based on the findings.

Chapter One


1.1 Background of the Study

Unemployment is generally agreed to be symptom of macro-economic illness which could be “Voluntary” or “involuntary “. When it is said voluntary I mean a condition where somebody chooses not to

work because they have a means of support other than employment example is the idle rich man. On the other hand involuntary unemployment exists when persons are willing to work at the prevailing rate of pay but unable to find work. (Anyanwu 1995).

Balogun, ed et el (2003) also defined unemployed as the percentage of the percentage of the labour force that is without job, but is able and willing to work. In Nigeria however the ability and willingness to work is not sufficient. It is necessary for the unemployment to be registered with an employment bureau in order to be recognized as unemployed. Yet, from an economic viewpoint, the unregistered unemployed are part of the labour force and are, therefore, technically unemployed. In Nigeria, unemployment data are obtained through labour force sample surveys which ask if the respondent has worked in the week preceding the survey. However, the international labour organization (ILO), realizing the shortcomings of the labour survey as it affects developing economies, such as Nigeria, with a large informal sector, has encouraged a review of the methodology to incorporate further disaggregation of respondent responses to bring out the true rate of unemployment.

In order to establish the type of unemployment existing in an economy, economists have lsiid uepomn saoa‟srcua‟ r ylcl.

  1. Frictional Unemployment occurs when people are temporarily out of work because they are changing jobs. This is unavoidable in an economy in which both the labour force and the jobs on offer are continually changing.
  2. Seasonal unemployment is said to occur in a situation in which people are laid off seasonally, due to the nature of the job they do, e.gagriculture workers in developing countries may be laid off during the growing season.
  3. Structural unemployment is the unemployment that exists when an economy is in full employment. Structural unemployment occurs where employment in one or more declining industries is falling. It is as result of movement in the natural employment rate itself, which can result from changes in labour market institutions, demographic shifts etc. this situation is brought about by economic variables, such as the level of aggregate demand and the actual and/or expected real wage rate.
  4. Cyclical unemployment occurs as result of fluctuations around the natural employment rate, which can be attributed to changes in aggregate demand.

Industrial relations refer to the process of conflict resolution, such as collective bargaining, between employers and employees in the course of fulfilling an employment contact. It could be achieved either by conquest (when one party overwhelms the other), or by mutual consent. The latter, preferred outcome is likely to result from collective bargaining. Continuous industrial harmony is, therefore, often the result of positive industrial relations.

In Nigeria, unemployment is regarded as one of the most challenging economics problem facing the federal government. Although, there are variations in the measurement of unemployment, official estimates show their results as follows: from 1985-2003, the data shows a highly fluctuation trend from both the urban and rural sectors of the economy. From the data, the 1985 figure shows the percentage of the national urban and rural unemployment as follows: national 6.10%, urban 9.8%m rural 5.2%and in year figure is as follows: national 3% urban 3.8% rural 2.7 %( CBN 2004).

The rising rate of the population of the country which is faster than the job opportunities, a situation in which birth rate is rising, death rate falling and the population growth rate is between 2.5% and 3% unemployment is bound to exist. There had been also a total neglect of the agricultural sectors and consequent mass exodus of able bodied youths from the rural to urban areas in search of the none existing while cooler jobs.

This further reduces employment in agriculture and puts pressure on existing urban jobs (Anyanwu 1995)

1.2 Statement of the Problem

Unemployment has reached a very alarming proportion in Nigeria, with a greater number of the unemployment being primary and secondary school learners and university graduates. This situation has recently been compounded by the increasing unemployment of professionals such as bankers, engineers and doctors. The toll is within the productive segment of the Nigeria population (Vision 2010).

The extent of unemployment in Nigeria in is not justified by the available financial statistics phenomenon. This is because of the nature of unemployment in the country where many job seekers do not see the need for registration as unemployed due to expression of futility in such exercise. This harnesses the sharp disparity between the official statistics on the phenomenon and the reality on ground (Bello 2003). Disguised unemployment otherwise known as concealed unemployment is a situation in which more people are available for work than is shown in the unemployment statistics (Bannock et el 1998)

The problem of disguised unemployment is quite acute in Nigeria. This explains why official unemployment statistics sharply differs from the true state of employed or unofficial statistic available. The recorded figure unemployment significantly understates the number of people who are actually willing to work at the existing set of wage rate. Consequently, the unemployment figure in Nigeria is obtained through labour force sample survey, by asking if the person has worked in the past week preceding the survey.

Obviously, because even a graduate whohawks around respond yes to the question, the unemployment rate will always be very low.

Unemployment is a situation of a labour not having enough paid work or not doing work that makes full use of his skills and ability. It can be measured by the numbers of hours worked per week.

Generally in Nigeria, the official period of working time per week is forty hours which manyworkers fall short of due to non – availability of work. In some instance available work is rationed especially among the low skilled and casual labours in the formal sector tends to be worse (Bello 2003) therefore the major problem we have in Nigeria is the distinguished unemployment form. The official figures of the rate of unemployment form.

December1998, a total of 66.3% of male and 62.0% of female unemployment were recorded at the urban centres while rural centreshad an estimate of 47.1% and 45%male and female job seekers respectively. As at December 1999, school levers unemployment rate had raised to 67.0% for males and 68.8% for females in the urban centres while the rural centres was as high as 59.1 and 55.7%. For male and female respectively (Bello 2003).For polytechnic and university graduates, the figures shows relatively low unemployment rate as compared to the school leavers experience. For instance, during the period under investigation a peak of 14.0% rate of unemployment was recorded for polytechnic female graduate in 1998 which the male graduate records had its peak in 1999 with 15.0% point in urban areas (Bello 2003). The graduate unemployment rate in the urban centres had 8.5 per cent record high in September 1999 for males and 4.5%in June 1999for female during the periods (Bello 2003).

Many people are frustrated by lack of unemployment opportunities they include these without work and those who have jobs but want to work longer hours or more intensively. A considerable size of utilized and underutilized labour abounds in Nigeria and which ought to be brought into the circle. These shows that iei ‟employment problem has become chronic and should be a matter of utmost national concern.

1.3 Research Question

From the above discussions the research question is:

  1. Has unemployment had any impact on Nigeria economy?

1.4 Objective of the Study

The objectives that will guide this study are as follows;

  1. To determine the relationship between unemployment and economic growth in Nigeria.
  2. To ascertain the magnitude of this relationship.
  3. To make policy recommendations based on the finding.

1.5 Statement of Hypothesis

The hypothesis that would guide this work is as follows;

  1. H0: Unemployment has no significant impact on economic growth in Nigeria.
  2. H1: Unemployment has no significant impact on the economic growth in Nigeria.

1.6 Importance of the Study

One of the macroeconomics goals of any country is the actualization of full employment. Therefore, unemployment in any system is seen as a policy failure and there is always concerted effort on the part of the government in checkmating the impact of unemployment in an economy. The study of unemployment is important to the policy makers, politicians, and student of economics.

To the policy makers ascertaining the rate of unemployment, in an economy to the desired height, the policy maker with the knowledge of the state of unemployment in the system stands the best chance of controlling it through appropriate initiative like poverty eradication programmes and creation of employment opportunities that touches the lives of the population.

1.7 Scope and Limitation of the Study

The limitation of this research were much and varying.

First was the difficulty in getting access to some relevant research documents. There were several cases of limited copies of materials.

The second constraint to this research was finance and time. The time allowed for the completion of this work was short, coupled with the fact that other academic work were in progress.

Chapter Five

Summary, Conclusion and Recommendation.

5.1 Summary

Unemployment is generally agreed to be symptom of macroeconomic illness, which could be “voluntary”“ involuntar.

Voluntary unemployment is a condition whereby one chooses not to work because he or she has means support other than employment. On the other hand, involuntary unemployment exist when persons are willing to work at the prevailing rate of pay but unable to find work.

Base on this, unemployment has different types such as frictional, seasonal, cyclical, and technological unemployment.

In Nigeria, Unemployment is regarded as one of the most challenging economic problem. A situation whereby the population of a country grows faster than the job opportunities, that is birth rate is rising while death rate is falling and unemployment is bound to exist.

There had been also a total neglect of the agricultural sector and consequently mass exodus of able bodied youths moving from the rural to urban areas in search of non –existing white collar jobs.

5.2 Conclusion

From the research carried out on the impact of unemployment on economic growth in Nigeria from 1970 – 2010 using atrivariate ordinary least square, data shows that unemployment is negatively related to the economic growth.

The economic analysis of the findings in table 2shows that the variables under consideration confirm to apriority expectation of the economics theory. The statistical evaluation equally shows a higher level of statistical significant (table 2).

The evidence stems from the fact that the T- statistics on the variables shows that GEXP is insignificant while LM2 and UNEMP are significant as shown in table 3.

Based on this, the R², which had a value of 95% indicate that the entire regression had a good fit and also explain that 95% fluctuation in the dependent variable is expended by fluctuation in the regression.

More so the F-test showed that the entire regression was adequate. More so, the summary of the whole regression as shown that overall regression is statistically significant implying a good fit.

The econometric finding shows that from then Durbin Watson test (DW)that all the variables under consideration were stationary at order. That is, the absolute values of DW statistics are greater than various critical values at 5%.

The normality test shows the residual is normally distributed at 5% level of significance. And the test for autocorrelation shows that there is no serial autocorrelation present in the model.

The test for multicolinearity , in table 4 shows that there is multicolinearity between the regressors. But has noted by Blanchard quoted by Guajarati (2004) a good model cannot be discarded due to multicolinearity. As well as test for heteroscedasticity conclude that the error term has a constant variance and that in the test specification errors is not wrongly specified.

From the evaluation of the forcasting performance of the model, it shows that the predictive power of the model is fairly robust and reliable.

Finally GDP growth does not cause unemployment but rather unemployment causes GDP growth.

5.3 Recommendation

In the light of the above empirical findings the analysis carried out so far, the following recommendations are proposed to the government in the issue of unemployment in Nigeria would be minimized.

  1. There is need for the government to revitalize the agricultural sector, modern equipment in agricultural facilities is likely to entice the youths into that sector, since the sector have been left in the hands of the old men.
  2. Government should formulate policy that will aim at discouraging gender discrimination in the labour market since this will provide more opportunities for the females in the labour market participation final.
  3. Government should embark on provision of social amenities in the rural areas so as to reduce the urban –rural drift which have consequences of reducing the rate of unemployment.
  4. There is need for government to restructure the educational system in a way it will lead to the youths with capability of self-reliance and self-employment.
  5. Government should formulate monitoring policy to check the channel of increase government spending to find out why the huge spending has not transmitted into a viable economics growth.
  6. The government should embark on social security program that would help in elevating the unemployment condition of the people in Nigeria.
  7. There is equally an urgent need for more infrastructure facilities like expanding the telecommunication network to the rural part of the country, good roads and electrification projects which can create employment for the jobless citizens.
  8. A conducive environment for foreign direct investment should ecetdt nueNgrasfbusiness opportunities that would create job for the teeming population.

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