Estimating the Impact of Sectoral Output on Employment for Nigeria Economy (1981-2021)

Abstract

The purpose of this research is to determine the employment effects of contributions to GDP by the main sectors in the context of Nigeria and to understand the relative importance of each sector. This study investigates the contributions of the three broad sectors of the economy to total employment over the period 1981 to 2021 using the autoregressive distributed lag (ARDL) technique. Sectoral output was proxied by agricultural GDP, industry GDP and services GDP respectively while employment was measured by total number of employed persons. The Bounds test signaled the existence of cointegrating relationships between the series at both aggregated and disaggregated levels, necessitating both short and long run analysis for the study. The best performing sector in terms of employment intensity is the agricultural sector suggesting its labour-intensive nature. The impact of growth in industrial sector on employment appears to be a case of jobless growth while the impact of increases in service sector GDP on employment appears to be more like the case of job-loss growth. The agricultural sector supports growth-led employment for Nigeria while the service sector negates it. The service and industry sectors have low labour absorption capacity as the former is technology-driven while the latter is capital-intensive. The government should as a matter of urgency improve on its provision of finance and other support services to the agricultural sector. It is also necessary to devise verifiable methods to attract the teeming young population to actively participate in the agricultural sector with a view to developing its value chain. A growing service sector and a shrinking agricultural sector can only at best perpetuate the already challenging unemployment situation in Nigeria. The government should conduct an audit of the country’s agricultural sector for an in-depth understanding of the needs and then prioritise these needs in public expenditure allocations while ensuring that targeted funds get to those who are active farmers.