The Nexus between Unemployment and Economic Growth in Nigeria (1986-2018)

Abstract

The study investigated the nexus between unemployment and economic growth in Nigeria covering a temporal period 1986 to 2018. It modelled by specifying GDP growth rate as a measure of economic growth and unemployment rate as a measure of unemployment while capacity utilization, government expenditure and inflation were used as control variables. Secondary data were sourced from CBN Statistical Bulletin of various editions and World development indicators. The variables employed were estimated using auto regressive distributed lag (ARDL) for short and long run relationship. Relying on Okun's Law theory, the study found that, variables are co-integrated, implying that they move together in a long run. It further revealed that, there exist both short and long run relationship between unemployment and economic growth and that unemployment has an inverse relationship on economic growth in the long run but not significant while the study found capacity utilization to be more significantly impacted on economic growth more than others. In addition, government expenditure insignificantly and negatively impacted on economic growth both in the short and long run while inflation has insignificant positive and negative impact on economic growth. The study therefore concluded that, though unemployment has relationship with economic growth, its effects is negatively insignificant in a long run. The study recommends among others that, for proper policy making, government should endeavor to provide a conducive and enabling environment for business enterprises to strive as it is certain that government can't provide jobs for all, hence, an enabling environment will make people create business ideas and innovation which in the long run can enhance the growth of economy. There is also need for government to formulate policies that will be tailored towards development of informal sector with the motive of SMEs development which can help in reducing the level of unemployment and consequently, improves economic growth in Nigeria.