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The highly unstable economic conditions in Nigeria have been a major source of concern among economist and policy makers in recent time. The growth  in  Nigeria  economy  has  been  described  as an exclusive  growth  which  is  worrisome  and  calls  for concern as the per capita income is low while unemployment and  inflation  rates  are  high.

This research work sets out toexamine the relationship that exists between inflation, unemployment and the economic growth of Nigeria. From the research work, we discovered that unemployment and inflation through the use of the instruments of investments, exchange rate, Government expenditure and money supply could be controlled  toachieve economic stabilization.

This work also viewed the different types of unemployment well distinguished by economist they include cyclical or Keynesian unemployment, frictional unemployment, structural  unemployment  and  classical  unemployment.  Some  additional  types  of unemployment  that  are  occasionally  mentioned  are  seasonal  unemployment,  hardcore unemployment, and hidden unemployment.

This work also focused on the types of inflation the world currently face that is Cost-push inflationand demand-pull inflation. This research work consist of a dependent variable in its hypothesis and some independent variables to explain the effects of unemployment and inflation on economic growth,the Johansen co-integration test and a vector error correction method (VECM) will be employed to carry out an investigation on the subject matter to derive the significance of the independent variable on the dependent variable. A data covering the duration of 36 years (1980 – 2016) was introduced in the model, the result was established, interpreted and conclusion was drown with recommendation.




Unemployment and inflation are persistently complex and alarming problems to every economy. These twin macroeconomic variables are significant in influencing economic growth especially in developing economies like Nigeria.The growth  in  Nigeria  economy  has  been  described  as an exclusive  growth  which  is  worrisome  and  calls  for concern as the per capita income is low while unemployment and  inflation  rates  are  high.

In  the  1960s  and  early  1970s,  the  Nigerian  economy  provided  jobs  for  most  Nigerian  and absorbed  considerable  imported  labor  while  inflation  rates  were  low. Overtime, especially with the exploration of oil in Nigeria, the rate of unemployment gradually began to rise. According to …., this was as a result of the excessive migration of people from the rurla areas into the urban regions.

According to Aminu, et al.,  (2013) government in Nigeria over the  years has been pursuing various policies aiming at reducing unemployment and achieving price stability but these two twin evils keep on increasing day by day. Government and private groups tried over many years to create employment opportunities for the teeming youths. The National Directorate of Employment and school to land Skill Acquisition programmes have youth employment as the primary goal. The National Employment Policy, approved in 2002, aimed at achieving full youth employment and encouraging more private job creation. The policy emphasized linking education  to  the  needs  of  the  labour  market.  Entrepreneurship  was  compulsory  on  the curriculum  of  all  Nigerian  Universities.  But  youth  unemployment  continues  to  rise.  There remains  a  skills-mismatch  for  the  labour  market,  including  for  university  and  college graduates.  The  Central  Bank  started  Entrepreneurship  Development  Centres  (EDCs)  in  the country’s  six  main  geographical  zones.  There  is  entrepreneurship  training  for  unemployed university, polytechnics, college and secondary school leavers. By January 2011, EDCs had trained  and  counselled  over  34,000  graduates,  created  about  2,800  jobs  and  enable  about 1,000 graduates to access N171million for their activities.

President Jonathan introduced  the  “Youth Enterprise with Innovation in Nigeria” (YouWin) programme  in  2010  aiming  to  encourage  and  support  youth  business  ideas.  The  Nigerian Youth  Entrepreneurship  Development  Programme,  launched  by  the  ministry  of  Youth Development, also seeks to enhance skills and experience and provide access to finance for youth entrepreneurs. The programme is expected to benefit 10,000 people aged between 18 and 35.

According  to  Wikipedia,  the  free  encyclopaedia  (2013),  Oil  companies  have  also  helped employment  efforts.  In  2004,  Shell  Petroleum  Development  Company  (SPDC)  launched  a youth  development  programme  to  provide  skills  for  self-employment.  It  trained  more  than 1,900  people  in  entrepreneurship,  leadership  development,  conflict  management  and industrial  vocational  skills.  Nigerian  Liquefied  Natural  Gas  (NLNG)  launched  the  Youth Empowerment  Scheme  (NLNG  YES)  in  2004  targeted  at  youths  from  over  100  rural communities.  By  2011,  more  than  660  people  had  been  trained.  Several  agencies  and schemes  were  established  to  tackle  poverty  and  unemployment,  including  the  National Poverty  Eradication  programme,  the  small  and  Medium  Enterprises  Development  Agency and Microcredit and Entrepreneurship Development schemes. In some local government in the  country  especially  Lau  LGA  Palliative  staffs  were  also  employed  to  reduce unemployment in the country.

According to CBN communiqué No. 78 (2011), by 1993, it was clear that the macroeconomic policies  pursued  were  no  longer  sustainable  and  needed  drastic  change.  In  response  to  the ensuing macroeconomic instability, government reverted to a guided de-regulation in 1994. Interest rate again was administratively fixed. The exchange rate regime was changed and the autonomous foreign exchange market (AFEM) was introduced in 1995, while fiscal measures were  introduced  to  curtail  deficits.  However,  because  these  measures  were  taken  at  a  time when  there  were  excess  money  supply,  scarce  foreign  exchange,  severe  shortages  in commodity supply, as well as continual labour and political unrest following annulment of the  June  elections  of  1993,  there  was  remarkable  rise  in  the  rate  of  inflation.  However, government  has  mounted  an  elaborate  food  programme  that  would  promote  food  crop production and export as well as pay more attention to the development of small and medium scale enterprises to promote wealth creation and increase output.

The exchange rate has also been relatively stable, with significant real appreciation. In response to the global economic crises, the Central Bank of Nigeria (CBN) pursued measures in 2009 and 2010 to promote growth and financial stability. However, in 2011, the central bank tightened monetary policy to  mop-up  excess  liquidity  in  the  banking  system  and  ward  off  inflationary  pressures stemming  from  high  fiscal  spending,  the  implementation  of  a  new  minimum  wage,  and injection of funds into the bank system through the purchase of non-performing loans through bonds issued by asset management corporation of Nigeria (AMCON). The monetary policy rate,  which  was  6.25  present  in  September  2010,  increased  six  times  in  2011,  to  reach  12 percent in December, 2011. Similarly, the cash reserve ratio was increased steadily from 1 percent  in  March  to  8  percent  in  December  2011.  With  these  measures,  also  inflation  fell from 13.7 percent in 2010 to 10.2 percent at the end of 2011 and is expected to decline to 10.1  percent  in  2012  and  8.4  percent  in  2013  due  to  the  central  bank  monetary  policy tightening  and  easing  food  prices.  (see,  CBN  communiqué  No.  78  (2011)).  With  these developments,  inflation  inertia  has  been  curtailed  and  high  inflation  may  be  a  thing  of  the past, if sustained. Another strategies put in place to stabilize the economy was privatization


The adverse effects of unemployment and inflation on economic growth has attracted the  attention  of  government  and  researchers  all over the  world.  Among  the  main  and  major problems  of  policy  makers  are  how  to  maintain  low  and  stable  unemployment  as  well  as relatively  stable  prices  so  as  to  achieve  high  economic  growth.

The  various macroeconomic policies by  government have  been  unable  to achieve  sustained  price  stability,  reduction  in  unemployment  and sustained growth cannot be achieved. The poor state of the economy has confirmed the need to manage the economy effectively. The essence of macroeconomic management underlines the rationale for the existence of government as a vital economic agent. However, it appears that government intervention has not been able to cure the ills in the Nigerian economy.


The broad objective of this study is to examine the relationship that exists between inflation, unemployment and the economic growth of Nigeria. This objective is categorized into the following specific objectives:

  • Examine the effect of inflation and unemployment on economic growth.
  • Find out if there is a long-run relationship among inflation, unemployment and economic growth in Nigeria.
  • Find out if there is a short-run relationship among inflation, unemployment and economic growth


  • This study will be of importance to monetary and economic policy makers in Nigeria. This includes the federal government policy makers and the central bank of Nigeria. Some other additional benefit of this study includes that:
  • It would provide an objective view of the effectiveness of the relationship between the growth of the economy, inflation and unemployment rate for decision making purposes and research purposes.
  • The study would also provide an econometric basis upon which to examine the effect of inflation and unemployment on the economic growth of Nigeria.
  • Lastly, it would provide policy recommendations to policy-makers on ways to make the Nigerian economy growth and stabilize the inflation rate in the country.



H0: There is no relationship between inflationrate and  the economic growth in Nigeria.

H0: There is no relationship between unemployment  and  the economic growth in Nigeria.



The economy is a large component with lot of diverse and sometimes complex parts. However, this study will only focus on some macroeconomic variables such as inflation rate and  unemployment rate. Data collected for the purpose of the study includes records from the year 1980 through 2016 and shall be collected from the central bank database.


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