Unemployment, Inflation and Economic Growth: Evidence from Nigeria

Abstract

Nigeria has continued to grapple with rising unemployment amidst high inflation and slow growth of Nigeria’s gross domestic product. This precarious situation has become worrisome as it remains unabated not minding all the efforts of policy makers. The study evaluates the effect of unemployment and inflation on economic growth of Nigeria for the period between (1981-2021). The study used standard econometrics techniques such as autoregressive distributed lag model (ARDL) to measure the degree of effect of inflation and unemployment on economic growth. It also deployed the Pesaran and shin bound testing procedure to determine the short run and long run relationship of the variables under study. The findings revealed that inflation and unemployment have long run relationship with economic growth. It further revealed that unemployment is inversely correlated with economic growth whereas inflation is positively related to economic growth. In specific terms, one per cent increase in GDP resulted to a fall in unemployment rate by -0.019. The result also shows R² value of about 0.61 percent indicating that gross domestic product accounts for about 61 per cent of the variation in unemployment rate in Nigeria. The study therefore recommends that the government should tailor policies that can spur economic activities which in turn will reduce unemployment rate and stabilize prices.