EFFECT OF UNEMPLOYMENT IN NIGERIA ECONOMY
ABSTRACT
Unemployment is a macro economic problem that affects individuals most differently and severely. This study investigated the effect of unemployment on gross domestic product (GDP) in Nigeria. The quarterly data was used for the estimation capturing the periods of 1981 through 2014. The research work used ordinary least square for estimation. The unit root test, etc were carried out in this research work. The researcher was able to find out that there is a negative relationship between unemployment and GDP. Recommendations and policies were suggested to the government in order reduce the rate of unemployment in Nigeria.
1.1 Background of the Study
Unemployment according to the Bureau of Labour Statistics (BLS) is defined as people who do not have a job, but are actively seeking for work and are currently available for work. The total labour force in Nigeria comprises of those within the age bracket of 15-64 years willing and able to work. Unemployment also is defined as when people who are without work are actively seeking paid work. The unemployment rate is a measure of the prevalence of unemployment and it is calculated as a percentage by dividing the number of unemployed individuals by all individuals currently in the labor force. During periods of recession, an economy usually experiences a relatively high unemployment rate. According to International Labour Organization report, more than 200 million people globally or 6% of the world’s workforce were without a job in 2012.
Unemployment arises as a result of insufficient and non-availability of jobs to correspond with the growing population. According to Lipsey (2013), this state of non availability of jobs, brings about economic waste and cause human suffering. According to Fadayomi (2012) and Osinubi (2016), unemployment is as a result of the inability to develop and utilize the nations manpower resources effectively especially in the rural sector. According to Bello (2013) from the ancient time, the subject of unemployment has always been an issue of great concern to upsetting the economists, policy makers and economic managers alike; giving the effect of this phenomenon on individuals, the society and the economy at large. Not only does the work force produce manufactured goods or services or agricultural produce in direct proportion, but also brings in its wage increase purchasing power which in turn, fuel economic growth(Njoku And Ihugba,2011).
In Nigeria, available data from National Bureau of Statistic(2010), show that as the incidence of poverty is higher in the rural than urban area, so also is the rate of unemployment, particularly in the late 1990s and 2000s. The incidence of poverty is higher in Nigeria among those who have little or no education than the others categories (Okeju and Olanipekun 2014). For almost two decades (1995-2011) Nigeria unemployment rate averaged 13.33 with the an average growth rate of 6.36 for the same period, also unemployment in Nigeria increased by 69 percent in 1985 from 6.1 to 19.7 in 2009 while in 2010 and 2011 it experienced an increase to 21.1 and 23.9 percent respectively. The economy grew by 72 percent from 281,407.4 in 1995 to 814,407.0 in 2011. What this means, is that, as unemployment was increasing, the economy was equally growing (Nwankwo and Ifejiofor, 2014).
The Nigerian government, at various levels, has adopted policies aimed at enhancing the performance of the informal sector in other to reduce unemployment. As a result different administrations, often in collaboration with the private sector, have embarked on youth employment programmes, to address poverty and unemployment. Nigeria has been exploring various approaches including microfinance. Accordingly, in December 2005, the central bank of Nigeria (CBN) introduced a microfinance policy framework to provide access to small entrepreneurs and low income household to financial services. This was done by recognizing that no comprehensive growth can be achieved without providing access of the vast segment of the national population to factor of production, especially financial service, according to the National Commercial Bank (NCB, 2011). Also, the NCB recognizes the existence of informal institution and the aims for mainstreaming those into the national financial system, and seeks to harmonize operating standard and provide a strategic platform for the evolution of microfinance institution.