An Analysis of the Relationship Between Unemployment, Inflation and Economic Growth in Nigeria: 1986-2015

Abstract

The Nigerian economy has remained largely underdeveloped despite the increases in growth rate declare every year. The per capita income is low, unemployment and inflation rates are high, thus leading to many socio-economic challenges. It is against this background that this study examined the relationship between unemployment, inflation and economic growth in Nigeria for the periods 1986 to 2015 using the Ordinary Least Squares (OLS) Method. The stationery properties of the variables were tested using the Augumented Dickey Fuller Test (ADF), while the Johansen Co-integration and the Granger Causality Tests were employed to determine the long run relationship and direction of causality of the variables respectively. The estimated regression showed Unemployment and Inflation were not statistically significant in explaining growth in the economy for the periods under review. The study therefore recommended that policy direction should focus on creating job opportunities for both uneducated and educated individuals by stimulating economic activities within the real sector of the Nigerian economy and pursuit of expansionary fiscal policies that could boost economic growth in the long-run.