Information and Communication Technology and Unemployment: Is Technology Labor-substitutive in the Nigerian Banking Industry?

Abstract

The increasing demand for better banking service delivery has prodded Nigerian Banks to deploy more information and communication technology (ICT) in their production. While several studies have evaluated the effects of the technological innovations on service delivery and financial performance in the Nigerian banking industry, limited attention has been paid to the role of ICT deployment on labour employment in the industry. This study therefore analysed a neoclassical production function to estimate the effects of ICT on labour employment in the industry. General Method of Moment was employed to analyse annual data on selected banks from 2003 to 2014. Results show that banks’ production functions in Nigeria are not perfectly factor-substitutive but characterized by some elements of complementarity. ICT did not substitute for labour and thus not worsen unemployment. Banks should thus be encouraged to further embrace ICT in their production processes as this not only improves their service delivery and financial performance but also enhances employment generation in the country.

Keywords: ICT, Unemployment, Nigerian banking sector, neoclassical growth model