Re-Examination of the Impact of Unemployment on Economic Growth of Nigeria: An Econometric Approach

Abstract

The study has examined the impact of unemployment on economic growth of Nigeria using time series data between 1982 and 2014. Secondary data were sourced from Central Bank Statistical Bulletin. An exploratory research design was conducted using OLS, Phillips-Perron unit root test and Pair-wise Granger causality test. The major objective of this paper is to analyse the impact as well as direction of causality between unemployment and economic growth in Nigeria. The result of the OLS shows a negative relationship between unemployment and real GDP proxy for economic growth which is in line with Okun’s law. Also, granger causality test shows absence of causality between the unemployment and Nigerian economic growth. Government expenditure and capacity utilization that are incorporated in the model portrays positive relationship with economic growth. The existence of a negative relationship between unemployment and economic growth necessitates the need for government to introduce programs and policies that will create job opportunities for the teeming unemployed youths in Nigeria. The study also recommends provision of skills acquisition centres and transformation of the educational system so that youths will be job creators rather than job seekers.

Keywords: Unemployment, Economic growth, Granger causality, Okun’s law and OLS.