Impact of Unemployment on Economic Growth of Nigeria

Running head: IMPACT OF UNEMPLOYMENT ON ECONOMIC GROWTH OF
NIGERIA
Impact of Unemployment on Economic Growth of Nigeria
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IMPACT OF UNEMPLOYMENT ON ECONOMIC GROWTH OF NIGERIA1
Acknowledgement
I would like to convey my gratitude to all people who have helped me to complete the
research. The journey towards accomplishment of the current research was a great experience
mainly due to the assistance of my supervisor Mr/Mrs.................... The support and
assistance that I received from my advisor helped me to face the challenges in completion of
the research project. I am also thankful to my friends who helped me in gathering the
authentic data. Cooperation of my parents and their continuous support encourage me to
make my research noteworthy. I am highly grateful to authorities of my institution for
providing me the opportunity to give my best effort in the research area.

IMPACT OF UNEMPLOYMENT ON ECONOMIC GROWTH OF NIGERIA2
Executive Summary
The paper attempts to address the problem of unemployment in Nigeria and its impact on
economic growth of the nation. one of the hardest challenge that Sub-Saharan African
countries encounters is the continuously increasing unemployment trend in the economy. The
tendency of rising unemployment is well known among the average Nigerian. The prevailing
unemployment in the economy put the nation in danger because of its harmful socio-
economic consequences. The economy of Nigeria despite the expectation largely remained
underdeveloped as most of the human and natural resource remain underutilized. The per
capita income remains considerably low along with a high unemployment. Macroeconomic
policies undertaken by the government are unable to successfully reduce unemployment and
achieves sustained growth rate in the economy. The failure reduce unemployment has been
connected to failure of macroeconomic management. There are any evidences showing the
extent of relationship between unemployment and economic growth. Some of these evidences
support a positive relationship while some evidences support an inverse relation. The
growing rate of unemployment tends to reduce ability of people to purchase goods and
services by reducing income. This by lowering aggregate demand restricts economic growth
of the nation. Unemployment refers to the group of people in the labor force who are though
willing to work but are unable to find suitable jobs at the existing wage rate in the labor
market. Unemployment therefore indicates a state of joblessness in the economy. The
economic growth of a nation is mostly defining in terms of percentage change in gross
domestic product of the nation between two consecutive years. In studying the relation
between unemployment and economic growth of Nigeria the paper considers a sample data of
last eighteen years ranging from 2001 to 2018. Data has been analyzed using statistical
measures of descriptive statistics, correlation coefficient and regression. The historical data
on unemployment and economic growth of Nigeria revealed that both the series have

IMPACT OF UNEMPLOYMENT ON ECONOMIC GROWTH OF NIGERIA3
constituted a stable trend and moved in the opposite direction. GDP growth in Nigeria
declined over time while unemployment increased over time. The study has first found a
negative significant correlation between the economic growth and unemployment in Nigeria
meaning that unemployment has a negative significant association with GDP growth of
Nigeria. From the regression result a statistically valid negative relation between
unemployment and economic growth has been obtained. The result thus indicates that
unemployment adversely affects economic growth of Nigeria. The empirical finding of the
paper provides a better understanding to the policy maker regarding the linkage between
unemployment and economic growth. It is the responsibility of government to undertake
various policies supportive to job creation within the economy and keep unemployment as
low as possible.

IMPACT OF UNEMPLOYMENT ON ECONOMIC GROWTH OF NIGERIA4
Table of Contents
Chapter 1: Introduction..............................................................................................................6
1.1 Background of the study..................................................................................................6
1.2 Problem statement............................................................................................................8
1.3 Research aim....................................................................................................................8
1.4 Research question.............................................................................................................8
Chapter 2: Literature Review.....................................................................................................9
2.1 Conceptual Literature.......................................................................................................9
2.1.1 Concept of unemployment........................................................................................9
2.1.2 Concept of economic growth....................................................................................9
2.2 Theoretical Review........................................................................................................10
2.2.1 Phillips curve...........................................................................................................10
2.2.1 The Harrod-Domar Growth Model.........................................................................10
2.3 Empirical literatures.......................................................................................................11
2.4 Hypothesis......................................................................................................................13
Chapter 3: Research Methodology...........................................................................................14
3.1 Research Philosophy......................................................................................................14
3.2 Research approach.........................................................................................................14
3.3 Research design..............................................................................................................15
3.4 Data collection process..................................................................................................15
3.5 Secondary data collection..............................................................................................15

IMPACT OF UNEMPLOYMENT ON ECONOMIC GROWTH OF NIGERIA5
3.6 Sampling and sample size..............................................................................................16
3.7 Data analysis..................................................................................................................16
3.8 Ethical consideration......................................................................................................17
Chapter 4: Presentation of findings..........................................................................................18
4.1 Descriptive statistics.......................................................................................................18
4.2 Correlation analysis........................................................................................................19
4.3 Regression analysis........................................................................................................20
Chapter 5: Implication and Recommendation..........................................................................23
5.1 Implication.....................................................................................................................23
5.1.1 Hypothesis: Relation between unemployment and economic growth....................23
5.2 Recommendation............................................................................................................24
Chapter 6: Conclusion..............................................................................................................26
References................................................................................................................................28

IMPACT OF UNEMPLOYMENT ON ECONOMIC GROWTH OF NIGERIA6
Chapter 1: Introduction
1.1 Background of the study
Unemployment is considered as one serious problem that most developing and
developed nations face. Unemployment results in various socio-economic problem in a
nation. Now a day, one of the hardest challenge that Sub-Saharan African countries
encounters is the continuously increasing unemployment trend in the economy (Olotu, Salami
and Akeremale 2015). The tendency of rising unemployment is well known among the
average Nigerian. The unemployment rate in Nigeria according to the published report in
2012 was 23.9 percent. The rate of unemployment among the youth people was 20.3 million.
In the group of youth unemployment 4.5 million were new entrants, 2.2 million were just
completed their primary school and had not gone for higher secondary studies and 1 million
were completed their secondary education but had not gone for further studies at the tertiary
level (Seth, John and Dalhatu 2018). The prevailing unemployment in the economy put the
nation in danger because of its harmful socio-economic consequences.
In reducing unemployment, economic growth rate is considered as one key variable
that address the problem. In economic development of a nation, economic growth plays an
important role (Oduwole 2015). Economic growth is regarded as an important instrument
through which unemployment can possibly be reduced, price level can be stabilized,
innovation can be encouraged and the target of poverty alleviation can be achieved.
Economic growth offers entrepreneurs the necessary platform to expand activities which in
turn reduces unemployment by creating new jobs (Okoye 2017). Considering all these facts,
it can be said that unemployment rate is likely to reduce as a result of economic growth.
The economy of Nigeria despite the expectation largely remained underdeveloped as
most of the human and natural resource remain underutilized. The per capita income remains
considerably low along with a high unemployment. Macroeconomic policies undertaken by

IMPACT OF UNEMPLOYMENT ON ECONOMIC GROWTH OF NIGERIA7
the government are unable to successfully reduce unemployment and achieves sustained
growth rate in the economy (Michael, Emeka and Emmanuel 2016). The failure reduce
unemployment has been connected to failure of macroeconomic management. The economy
provided sufficient employment to most of the Nigerian during 1960s and 1970s. This is due
to favorable wage rate and relative peace in most of the industries. The oil boom occurred in
late 1970s led to huge migration. Most of the migrant people are youth. Economic downturn
in the beginning of 1980s aggravated the problem of unemployment (Orji, Orji-Anthony and
Okafor 2015). To combat unemployment and stabilize economic growth government
introduced Structural Adjustment Program (SAP) in the year 1986.
As a result of crude oil glut and adaption of SAP result in an increase in Gross
Domestic Product of Nigeria. Despite economic growth between 1986 and 2014 Nigeria
failed to translate into an economically developed state because of high rate of
unemployment in the economy. The unemployment statistics between 1986 and 2014 were
somewhat puzzling. Statistics of central bank revealed that unemployment constituted an
upward rising trend during this period with rate of unemployment increased from 5.3 percent
in 1986 to 24.7 percent in 2012 (Adu et al. 2019). Unemployment reached to its lowest level
of 1.8 percent and 2.0 percent in the respective years of 1995 and 1990. This was the period
when unemployment rate responded considerably to the economic growth. In other years,
unemployment rate kept on increasing significantly despite recorded economic growth of the
nation. Okun’s law stating an inverse association between unemployment and economic
growth seems to be not applicable for Nigeria.
There are any evidences showing the extent of relationship between unemployment
and economic growth. Some of these evidences support a positive relationship while some
evidences support an inverse relation. The growing rate of unemployment tends to reduce