Unemployment and its Effect on the Growth of Nigeria Economy

Abstract

Unemployment is known to be a worldwide economic problem which retards economic growth. It is found to be one of the serious impediments to colossal waste of a country’s manpower resources; hence it generates lower output thereby leading to lower income and sluggish economic growth. This empirical study however investigated the effect of unemployment on Economic Growth in Nigeria. This study was carried out in Nigeria between the period of 1986 and 2008. The data were analyzed using the ordinary least square approach. This paper also employed the techniques of   stationary test, co – integration test, and error correction model to estimate the dynamic relationship between dependent and the independent or explanatory variables.    The result shows R2 to be 0.697 i.e. about 70 percent, Adjusted R2    to be about 53 percent due to data transformation, F. statistic 3.709958, t. Statistics of each explanatory variables shows 2.361284 for UNEMPLR, 0.222837 for EMPL, 3.037337 for GCF, 1.938742 for UNEMPLOY, and 0.799706 for JCV, showing that the explanatory variables are statistically significant in explaining the economic growth in Nigeria. Nevertheless, the result give a coefficient of 11.56651 for Unemployment Rate (UNEMPLR), 0.014065 for Employed Labour (EMPL), 0.852883 for Gross Capital Formation(GCF), 3.982484 for Unemployed Labour (UNEMPLOY), 1.161745 for Job Vacancies (JVAC). The result of the Co-integration test shows the presence of long run relationship between employed labour and growth. This result corroborates the fact that unemployment rate retards Nigeria’s economic growth thus, one percent increase in unemployment rate lead to about 11.56 percent decreases in Gross Domestic Product. It was also found that job vacancies have a negative relationship with growth. Based on the finding, it is recommended that the Nigerian government has to be involved as major players in the establishment and management of economic and other forms of enterprises in order to promote job employment, and growth. To optimally raise the level of capital formation in Nigeria, government has to maintain a steady supply of energy (power) and other infrastructural supplies needed to raise employment level and boost economic growth. And being a reoccurring economic problem, this however needs further work to proffer solution.