Abstract:
The study investigates empirically the contribution of financial sector development in reducing unemployment in Nigeria using Vector Autoregressive framework. By employing Annual data from the period of 1980 to 2014, Domestic credit to the private sector and stock market capitalization were found to have a negative and statistically significant impact on the level of unemployment in the short run and long run respectively. Hence if the financial sector is developed by increasing the amount of money channeled to private investments, the menace of unemployment can be curbed. The Granger causality test also reveals a unidirectional causality running from market capitalization and domestic credit to unemployment. As such the importance of the capital market and the banking sector in creating job opportunities and increasing employment rate cannot be over emphasized. It is therefore important for the government to channel its efforts in creating policies that will aid in developing the financial sector to contribute to curbing unemployment in Nigeria.
