Revisiting the Determinants of Unemployment in Nigeria: Do Resource Dependence and Financial Development Matter?

Frank Iyekoretin Ogbeide, Hilary Kanwanye and Sunday Kadiri

African Development Review, 2016, vol. 28, issue 4, 430-443

Abstract: The paper examines the determinants of unemployment in Nigeria from 1981 to 2013, using the error correction model (ECM), and with ordinary least squares (OLS) method for robustness check. Results from the short†run and long†run regressions show that resource dependence and growth in private credit/GDP by banks significantly worsen labour unemployment, suggesting likely effects of resource†curse, high cost of financial intermediation cum limited credit to the real economy. Real GDP per capita, FDI, trade openness and exchange rate depreciation significantly reduce labour unemployment in Nigeria, whereas increasing industrial capacity usage intensifies it. Government capital expenditure aggravates unemployment in both estimated models, though not significantly, showing rent†seeking and prolonged deficit†financing. Inflation had a mixed outcome and was not significant in both short†run and long†run estimation. Key policy implications of the study include the need to efficiently manage our natural resources; deepen the domestic financial sector; enhance fiscal discipline; promote a favourable macroeconomic environment to attract the right kind of real†sector investment; and raising the economy's competitiveness in labour†intensive processes.

Date: 2016
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