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PROJECT TOPIC AND MATERIAL ON IMPACT OF UNEMPLOYMENT ON ECONOMIC GROWTH IN NIGERIA
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- Name: IMPACT OF UNEMPLOYMENT ON ECONOMIC GROWTH IN NIGERIA
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High and persistent rates of unemployment is one of the most dramatic aspects of the current economic crisis in Nigeria and which contributes to the poor growth of the country. Many economists generally agree that high rate of unemployment in Nigeria contributes to the poor growth performance of the country. The study therefore examine the impact of unemployment on economic growth in Nigeria during the period of 1980-2016. In executing this study, the method of Error Correction Model (ECM) was employed after Augmented Dickey Model (ADF) unit roots tests as well as Johansen co-integration test has been applied to the determinants of economic growth in Nigeria. Our findings show that Unemployment rate (UNEMP), inflation (INF) were found to be in significant determinants of economic growth in Nigeria while Investment (INV) and Government capital Expenditure (GCEXP) were found to account for significantly changes in the growth of the Nigerian economy.
TABLE OF CONTENTS
Title Page i
Approval Page iii
Table of Contents vii
CHAPTER ONE: INTRODUCTION
- Background to the Study 1
- Statement of the Problem 3
- Research Questions 6
- Objectives of the Study 6
- Statement of Hypotheses 6
- Significance of the Study 6
- Scope and Delimitation of the Study 7
- Organization of the Study 7
CHAPTER TWO: REVIEW OF RELATED LITERATURE
2.1 Theoretical Literature Review 9
2.1.1 Conceptual Issues 9
2.1.2 Basic Theories 14
2.2 Empirical Literature Review 23
2.3 Summary of Literature Review 25
2.4 Justification of the Study 27
CHAPTER THREE: RESEARCH METHOD
3.1 Theoretic Framework 28
3.2 Model Specification 30
3.2.1 A piori Expectation 32
3.3 Explanation of Estimate 33
3.4 Estimation Technique and Procedure 35
3.5 Test of Research Hypotheses 38
3.6 Nature and Sources of Data 39
CHAPTER FOUR: PRESENTATION OF RESULT AND EMPIRICAL ANALYSIS
4.1 Data Presentation 40
4.2 Data Analysis 44
4.3 Evaluation of Research Hypotheses 48
4.4 Discussion of Finding 49
CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATION
5.1 Summary of Findings 51
5.2 Conclusion 51
5.3 Recommendation 52
5.4 Agenda for further Studies 53
- Background to the Study
The population of Nigeria is divided into the two categories; the economically active and the economically inactive. The economically active population (labour force) refers to the population that is willing and able to work but are unable to find jobs (unemployed). The next category, the economically inactive population refers to people who are neither working nor looking for jobs. Examples include housewives, full time student, invalids, those below the legal age of work, old and retired people.
Tracing how the nation got into unemployment trap; Dotun and Anderson (1999), the problems of employments persist because the economy has no growth with population. Thomas Robert Malthus said in his theory of population that population is growing at geometric progression while food production is growing at arithmetic progression. He said that there will be a time the population of a country will increase without corresponding increase in the food production of the country. Unemployment is one of the social problems in Nigeria which has assumed a greater dimension. By 1986, an estimated 3.7 million people were said to be unemployed with about 1.5 youths joining the labour force annually. This resulted in an urban unemployment rate of 10% and rural unemployment rate of 4% ( federal office of statistics, 1986). All the component of the labour force suffered from the scourge of unemployment of youths, especially graduates, retrenched civil servants and private sectors employees and which has been creating an adverse effect on the economic growth. Economic growth can be defined as the amount of production in the country or region over a certain period of time measured through the Gross Domestic Product (GDP). Economic growth can also be referred to as the steady process by which the productive capacity of the economy is increased over time to bring about rising levels of national outputs and income.
The concept of unemployment is ambiguous, with references to labour, there is unemployment if it is not possible to find jobs for all those who are eligible and able to work. In other words, unemployment of labour occurs in the economy if there are people who are capable of working and who are qualified by age, law, custom and other factors to work, but who cannot find a paid job. We may think that unemployment is an issue of microeconomics, that affects just the individuals not employed, but that is not the case, high rates of unemployment also hurt the economy as a whole. The nation loses the goods and services that the unemployed would produce if they were working thereby creating a reduction in economic growth (GDP); business loses sales because the unemployed cannot buy as many products. The two concepts “Unemployment” and “Economic Growth” are related and intertwined; the level of unemployment is one of the indicators of the state of the economic growth of an economy. If economic growth is to be sustained, the general level of employment must not fall below a determined level, the moment the level of unemployment falls beyond this desired level, it becomes a detriment to the economic growth. Nigeria is likely to be endowed with diverse and scores of resources –both human and material. However, due to the gross mismanagement, profligate spending, graft and adverse policies, sometimes misplaced priorities of various governments in Nigeria, these resources have not been adequately channeled to profitable investments to bring about economic benefits. As a result of these, accumulated problems compounded the already existing problem. Unemployment is a social problem in the country, it accounts for most of the social crimes perpetrated by graduates most especially in the Nigeria economy today; it has also worsened poverty situation for decades. Unemployment in Nigeria has contributed to the low rate of economic growth; as per the report of the World Bank, the GDP at purchasing power parity of Nigeria was $170.7 billion during 2005. The unemployment problem in Nigeria remains persistent and even growing by the day with a labour force of approximately 3 million persons (mostly youths) annually moving into job market (Adelodun, 2006). Statistics of Nigeria unemployment seems to consist, not of uneducated, rural population who have been uprooted by failing agricultural production resulting from the absence of mechanization and decreasing incomes but also of some highly educated populations as well as those who normally would form the core of the productive vanguard in a developing country. In other words, many of Nigeria’s unemployed and consequently poor are well educated even by European and American standards. Nigeria’s underemployment and low productivity constitute a vicious cycle that explains the endemic poverty in the country. Unemployment impedes Nigeria’s progress in many ways; apart from economic waste, it also constitutes danger for political stability (Ipaye, 1998). It is disturbing to note that Nigeria’s graduates have limited chances of becoming gainfully employed. It is even more disheartening that the country’s economic condition is such that, it is hardly able to absorb an optimal proportion of the production of its own educational system. Gone were the days when employers go about looking for employees. It is now the turn of employees to move from one office to the other seeking non-existent jobs. These days thousands of young people are found waiting to be interviewed for just one, two or few vacant positions in come organizations or firms. Most people who cannot earn their living are prone to social vices. They look at themselves as second-class citizens for being unable to contribute to the society. Youth employment is a crucial issue in Nigeria because the youths constitute a major part of the labour force and they have innovative ideas, which among other factors are important in the development and growth process of the country.
1.2 Statement of the Problem
One of the targets of most Nigerian policies is to reduce the rate of unemployment; but irrespective of efforts made by the Nigeria government to achieve this target, the country still faces problems of mass unemployment for more than 20 years. There has been extent of controversy, mixed reactions regarding the real impact which unemployment has on economic growth. Various authors have divergent views as to the real impact of unemployment on the economic growth of developing nations, Nigeria in particular, but one thing is sure in these disagreements: the impact of unemployment on the economic growth can be country-specific, depending on economic, political and other conditions of these politics. This would therefore be one of the objectives of this study; to find out the impact of unemployment on the economic growth of Nigeria.
Unemployment situation in Nigeria has been on high rate as policy makers are not committed to evolve pragmatic measures capable of reducing unemployment to the barest minimum, we find out that the unemployed are alienated because such polices as Poverty Alleviation Programme (PAP), National Directorate for Employment (NDE) have not in any way reduced the problem of unemployment, but has been hijacked by some selfish and greedy Nigerians. Each year thousands of graduates from the tertiary institutions enter the labour market with greater percentage of them remaining without jobs after reasonable time period. As of 2015, there was a total labor force of 76.96 million and not up to 20% of them were employed (World Bank, 2015); the national unemployment rate increased from 1.69% to 30.7% in 2016, the unemployment rates in the urban and rural areas stood at 52.6% and 21.1% respectively up from 27.0% and 17.4% in 2015 (CBN Annual report, 2016). All these have caused increased fears among undergraduates as they are uncertain of what their plight would be when they also become graduates.
In a bid to overcome this problem of unemployment, the Nigeria government so far have initiated different policy reforms like Youth Empowerment Scheme (YES) which is a technical skill trainings for selected unemployed youths geared towards empowering them and making them self-reliant and stimulate entrepreneurial development; this programme was established in 2001 but has not gone a long way to achieve its objectives. The government also initiated Self Employment; the Obasanjo Administration which began in May 1999 had made it clear that it has adopted self-employment as a policy. Dr. Hassan Lawal, the labour and productivity minister, declared that self-employment is the best option for youths. He made the declaration while opening an Entrepreneurship Development Programme organized by the National Directorate of Employment (NDE) for the 2004 batch B member of the NYSC, in Abuja in September 2004. He said, “I wish to remind you that from now onwards, your future lies in your hands”. But it is obvious that the NDE entrepreneurial activities have not produced the needed results partly because of poor educational planning where the system of Education does not equip school leavers with those practical skills required for earning a living. There are other policy reforms such as; Agricultural Development Programme etc which have not yet achieved the target of curbing unemployment in Nigeria. For the case of ADPs, it has not worked because the agricultural sector which has been the leading provider of employment in Nigeria has been neglected since the discovery of oil.
General Gowon launched the third National Development Plan (NDP) on behalf of all government in the country. The plan covered a five-year period from April 1975 to March 1980. One of the cardinal objectives of the plan was the reduction in the level of unemployment, but the implementation was adversely affected by the change of government in July 1975 barely three months after the plan was launched. President Goodluck Jonathan with his economic team led by Dr. Ngozi Okonjo Iweala the coordinating minister for the economy and the minister of finance initiated You WIN (Youth Enterprise with Innovation) scheme in 2011, an innovative business plan competition aimed at job creation by encouraging and supporting aspiring entrepreneurial youths in Nigeria to develop and execute business ideas. Anyone who writes an outstanding business plan is being given some fund to start up a business or to support the already existing one. YouWIN has empowered thousands of Nigerian youths, many becoming beneficiaries of the scheme based on pure merit. President Jonathan on Monday 25th November, 2013 announced with certainty that over 27,000 jobs has been created in the last two years, (2013 being the current year) through You WIN programme. While the government takes the leading role in the task of employment generation by providing the necessary enabling environment for economic activities, it is necessary to note that the battle against unemployment in Nigeria is like a war that is too important to be left for the generals alone, cannot be left for the sole effort of the government. All stakeholder must therefore work together to get over the hurdles of unemployment.
- Research Questions
Relative to the above objectives, this research tends to provide answers to the following questions;
- What impact does unemployment have on economic growth in Nigeria?
- What is the long run relationship between unemployment and economic growth?
- Objectives of the Study
This study focuses on the impact of unemployment on the economic growth of Nigeria; to this end, the specific objectives are as follows:
- To examine the impact of unemployment on economics growth in Nigeria.
- To determine the long run relationship between unemployment and economic growth in Nigeria.
- Research Hypotheses
- Ho: Unemployment has no significant impact on economic growth of Nigeria.
H1: Unemployment has significant impact on economic growth of Nigeria.
- Ho: There is no significant long run relationship between unemployment and economic growth in Nigeria.
H1: There is a significant long run relationship between unemployment and economic growth in Nigeria.
- Significance of the Study
The study is significant in the following ways:
- This study will contribute to the advancement of the existing knowledge on the impact of unemployment on economic growth of Nigeria as well as evaluate the need to fight unemployment by examining its impact on the growth process of the economy.
- The empirical result and recommendation of this work would be useful to the government and policy formulators, and with the knowledge of the rate of unemployment in the system and its problems on the economy, the policy maker stand the best chance of controlling it through appropriate policies.
- The findings will provide a blue print for government polices towards the reduction of unemployment in the country. It will not only be an educational study, but also lay a good ground work for further exploration on the theme.
- Also, further researchers and the general public would find this paper very informative, because it provides a well thought out analysis of the impact of unemployment on the economic growth of Nigeria.
- Scope and Limitations of the Study
The scope of this study covers the impact of unemployment on the economic growth of Nigeria. Using annual time series data, it considers the time periods of 1980-2016 sample size of 37. The data used for this study is however limited to secondary data sourced from the Central Bank of Nigeria (CBN) statistical bulletin of various series. The main limitation of this work is the difficulty in getting access to some relevant research documents.
- Organization of the Study
Chapter one of this study will introduce the problem statement and described the specific problem addressed in the study as well as the research question, objective and hypotheses of the study. Chapter two will present a review of literature, both theoretical and empirical literature and relevant research associated with the problem addressed in this study. Chapter three will present the methodology and procedures used for data collection and analysis. Chapter four will contain an analysis of the data and presentation of the results. Chapter five will offer a summary and discussion of the findings, recommendations and conclusion.
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