MACROECONOMIC DETERMINANTS OF UNEMPLOYMENT IN NIGERIA

Abstract

Unemployment is a problem of great concern to policy makers of both developing and developed countries as it can yield devastating effect on economic welfare, misery and social instability. Further, unemployment results in some psychological problems of hopelessness, frustration, hostility & gradual drift of some visible unemployed youth into all manner of criminal behaviour. This study thus analyzed the macroeconomic determinants of unemployment in Nigeria using a time series data and an error correction mechanism. The parsimonious result indicates that GDP growth rate, inflation rate, degree of openness, and private domestic investment are statistically significant in influencing unemployment in the short run, particularly during the period under consideration. The Johansen co-integration test supports the existence of a long run relationship among the variables and the negatively signed and significant ECM shows high speed of adjustment from short run fluctuations to long run equilibrium. It is thus recommended that policies focusing on increasing GDP growth should be implemented. Private sector investment should be encouraged by the government all levels. Government should decrease trade restriction and this will result in an increase in openness of trade.