THE IMPACT OF UNEMPLOYMENT ON ECONOMIC GROWTH IN NIGERIAN


THE IMPACT OF UNEMPLOYMENT ON ECONOMIC GROWTH IN NIGERIAN

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ABSTRACT

This study is designed to investigate on the impact of unemployment on the Economic growth in Nigeria for the period of 26 years (1981-2008). This is done in other to find out its influence on the persisted occurrence of unemployment among the Nigeria youths and stagnates the growth of the economy. It focuses on those objectives.

1) To determine the relationship between unemployment and economic growth in Nigeria.

2) To ascertain the magnitude of this relationship the study also tested for two hypothesis.

The data for the study was obtained from the Central Bank of Nigeria statistical bulletin on gross domestic product (GDP). The major findings were that unemployment contributes negatively to the Gross Domestic product (GDP) while government expenditure contributed positively to Gross Domestic product some recommendations were made based on the finding.

CHAPTER ONE

1.1 BACKGROUND OF THE STUDY.

Unemployment is generally agreed to be a symptom of macroeconomic illness which could be “Voluntary” or “involuntary “. When it is said to be voluntary, one means a condition where somebody chooses not to work because they have means of support other than employment. Example of such is an Idle rich man. On the other hand, involuntary unemployment exist when one is willing to work and able to work at the prevailing rate of pay but unable to find work (Anyanwu 1995).

Base on this, unemployment has different types such as frictional, seasonal, cycling, structural and technological unemployment. The frictional unemployment occurs as a result of a few processes such as:

1. Labour immobility: people move from one job to another either by loosing one of finding another ( vakrm 2007).

2. Labour force expansion: Every year there are new entrants to the labour force and this increases the number of people that are unemployed.

The frictional types of unemployment exist when there is lack of adjustment between demand and supply of labour. This may as a result of knowledge on the part of employers about the availability of works or on the part of workers that unemployment exists on a particular place. It is also caused by lack of necessary skills for a particular job, labour immobility, break down of machinery shortage of raw materials etc. the period of unemployment between loosing one job and finding another is also included under frictional unemployment.

CYCLICAL UNEMPLOYMENT: It arises due to cyclical fluctuations in the economy. This may also be generated by international force. A business cycle consists of alternating periods of boom and depression. It is during the downswing of the business cycle that income and output fall leading to wide spread unemployment (Vakrm 2007).

SEASONAL UNEMPLOPYMENT: This result from seasonal fluctuations on demand. Employment in ice factories is only for the summer. Similarly the ice-cream sellers remain unemployed during winter and destruct sellers during summer. The same is case with harvesting and sowing, farmers remain idle and unemployed for the rest of the year.

In Nigeria, unemployment is regarded as one of the most challenging economic problem facing the federal government and economy as a whole. Although, there are variations in the measurement of unemployment, official estimates show their result as follows: from

1985 – 2003, the data shows a high fluctuation trend for both the urban and rural sectors of the economy. From the data the 1985 figure shows the percentage of the national, urban and rural employment as follows: National, 6.10%, urban 9.8% rural 5.2% and in a the year figure is as follows: National 3% urban 3.5% and rural 2.7% (CBN 2004).

The rising rate of population of the country which is faster and higher than the job of opportunities, a situation in which birth rate is rising, death rate is falling and the population growth rate is between 2.5% and 3% unemployment is bound to exist. There had been also a total neglet of able bodied youths from the rural to urban areas in search of none existing white colar jobs.

1.2 STATEMENT OF THE PROBLEM:

Unemployment has reduced a very alarming proportion in Nigeria, with a great number of unemployment being primary and secondary school learners and university graduates. This situation has recently been compounded by the increasing unemployment of professionals, such as bankers, engineers and doctors. The tool is within the productive segment of the Nigeria population (vision 2010).

The extent of unemployment in Nigeria is not justified by the available financial statistics on the phenomenon. This is because of the nature of unemployment in the country where many job seekers do not see the need for registrations as unemployed due to expression of futility on each exercise.

This enhances a sharp disparity between the official statistics on the phenomenon and the reality on ground (Bello 2003). Disguised unemployment otherwise known as concealed unemployment is a situation where people are available for work than is shown in the unemployment statistics (Bannock et al 1998).

The problem of disguise unemployment is quit acute in Nigeria.

This explains why official unemployment statistics sharply differ from the true state of unemployment or unofficial statistics available. The record figure for unemployment significantly understates the number of people who are actually willing to work at the existing set of wage rate. Consequently, the unemployment figure in Nigeria is obtained through Labour force Sample survey, by asking if the person has worked in the past week preceding the survey.

Unemployment situation of a labour not having enough paid work or not doing work that makes full use of his skills and abilities can be measured by numbers of hours worked per week. Generally, in Nigeria, the official period of working tenure per week in forty hours which many workers fall short of due to non availability of work. In some instances available work is rationed especially among the low skilled workers and casual labourers in the formal sectors. The situation on the informal sector tends to be worse (Bello 2003) therefore, the major problem we have in Nigeria is in terms of unemployment. The official figures of rate of unemployment from December 1999 indicated a total of 27.6% and 27.8% unemployment rate for male and female respectively.

The 2000 figure saw the rate for male increasing slightly to 32. 4% with slightly decrease in female unemployment to 26.4% the break down shows that the secondary school leaves to be worse hit by the unemployment exercise. In December 1998, a total of 66.3% of male and 62.0% of female unemployment were recorded at the urban centers while the rural central had an estimate of 47.1% and 45% male and female job seekers respectively. As at December 1999, school leavers unemployment rate had risen to 67.0% for male and 68.8% for females in the urban centre while rural centre was as high as 59.1 and 55.7% for male and female respectively (Bello 2003). For polytechnic and university graduates, the figure shows relatively low unemployment rate as compared o the school leavers’ experience. For instance, during theperiod under investigation a peak of 14.% rate of unemployment was recorded for polytechnic female graduates in 1998 which the male graduates records had its peak in 1999 with 15.0% points in urban areas (Bells 2003). The graduate unemployment route in the urban centre had 8.5 percent record in September 1999 for males and 4.5% in June 1999 for females during the period (Bello 2003).

Many people are frustrated by lack of employment opportunities. They include those without work and those who have jobs but want to work longer hours or more intensively. A considerable size of utilized and under utilized labour abounds in Nigeria and which ought to be brought into the circle. These show that Nigeria employment problem has become chronic and interactable and should be a matter of utmost national concern.

1.2 OBJECTIVE OF THE STUDY

The overall objective that will guide the study is as follows:

1. To determine the relationship between unemployment and Economic growth in Nigeria.

2. To ascertain the magnitude of the relationship

1.2 TEST OF HYPOTHESIS:

The test hypothesis that would guide the work is as follows:

1. HO: That unemployment does not affect the economic growth in Nigeria

2. HI: That unemployment affects the economic growth in Nigeria.

1.5 SIGNIFICANCE OF THE STUDY:

One of macroeconomic goals of any country is the actualization of full employment.Therefore unemployment n any system is seen as a policy failure and the concerted effort on the part of thegovernment in checkmating the impact of unemployment is important to the policy makers, politicians and students of economics.

To the policy makers, ascertaining the rate of unemployment in an economy would help in their effort in mapping out policies that would bring the economy to the desired height. The policy makers with the knowledge of the state of unemployment on the system stands the best chance of controlling it through appropriate initiatives like poverty eradication programmes and creation of employment opportunities that touches the lives of the population

1.6 LIMITATION OF PREVIOUS STUDIES:

The impact of unemployment and economic growth are derived from the advanced economic right, for its original version of Taylor’s curve to okon’s law in the U.S.

However, other works that focus on the developing countries especially in Nigeria have differed considerably in their methodological approach while Simbowole 2003 used econometric approach that spine from 1960 – 2000.

In a related investigation by Ajecomobi and Ayenwale (2005) their main focus was on sectoral government expenditure and unemployment. It can be seen that little or more information have been provided by previous studies on the supposed relationship if they exist between economic growth and unemployment especially during this reform period. This forms a point of departure for this present study as the scope will include 1981 – 2008. Also the present study will focus on the relationship between unemployment and output growth to determine using a tripartite ordinary least square method which differ from the previous studies given the fact that economic reforms that has taken place from 1990 till date have significance effect both on unemployment and output and as such affect their supposed relationship.

Levin and Wright (2000) use annual data to find that unemployment create impact on output growth ratio without finding the significant relationship and that unemployment has negative relationship with output growth which this will look at using time series data in regression analysis that range between 1981 – 2008. Based on this research, work, one can see that unemployment is due to rate of the population of the country that is higher than the job opportunities Osinubi(2006) used time series data for 38 years (1970 – 2008)for relationship between poverty, unemployment and economic growth in Nigeria without finding the cause of the problem. But from this present work, one can see that unemployment is due to gross mismanagement excess spending and adverse policies of government of Nigeria.

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