International Journal of Research and Innovation in Social Science (IJRISS) | Volume VI, Issue VII, July 2022 | ISSN 2454–6186
Fiscal Policy and Unemployment Rate in Nigeria: An Empirical Investigation
Chukwuemeka Nwamuo, Ph.D
Department of Economics, Rhema University, Aba.
Abstract: The study investigated the impact of fiscal policy on unemployment rate in Nigeria. Time series data spanning from 1991 to 2020 which were sourced from the Central Bank of Nigeria (CBN) statistical bulletin and the World Development Indicators (WDI). The ARDL bounds testing approach to co-integration was used to analyse the data. Autoregressive Distributed Lag (ARDL) model and Error Correction Model (ECM) were utilized to address the main objectives of the study. The estimated short run coefficient result revealed that total public debt, total public expenditure and non-oil revenue all have a positive and significant impact on unemployment rate The speed of adjustment for correcting disequilibrium from the previous year to equilibrium in current year is 14.92 percent as shown by the coefficient of ECM. The long run result of the study showed that there is a positive and significant impact between total expenditure (TEXP) and unemployment rate in Nigeria but a negative and significant impact between non-oil revenue (NOR) and unemployment rate in Nigeria. The long run result showed that there is no relationship between total public debt (TDBT) and unemployment rate in Nigeria while the short run result showed that total public expenditure has a positive and significant impact on unemployment rate while non-oil revenue has a negative and significant impact on unemployment rate in Nigeria. Based on these findings, the study recommends proper management of government expenditure by ensuring that capital expenditures are channeled towards productive sectors and ensure that there is transparency in the management of such fund.
Keywords: Unemployment, public expenditure, public debt, tax revenue
I. INTRODUCTION
Unemployment is among the most difficult and politically sensitive economic issues that policy makers face. High rates of unemployment generate intense public concern because its effect is direct and visible (Abel and Bernanke, 2005). Unemployment of labour is seen as a situation when there are people who are capable of working and also qualified by age, custom, law and other factors to work but cannot find jobs (Dimoji, Atorudibo and Onwuneme,2013). Cown and Tabbarrok(2011) opined that one is unemployed only when one is willing and able to work but cannot find a job while Okafor and Obasi (2011) argued that unemployment arises when people within the age of the working population, who are able, willing and seek for jobs without finding any at the prevailing wage rate. Ahuja (2010) defined unemployment as a state of affairs when in a country there are a large number of able-bodied persons of working age who are willing to work but cannot find work at the