MONEY SUPPLY AND UNEMPLOYMENT RATE IN NIGERIA
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MONEY SUPPLY AND UNEMPLOYMENT RATE IN NIGERIA
Chapter one
INTRODUCTION
Background to the Study
Unemployment and economic growth have been major topics of inquiry and analysis in Nigeria, as indicated by Akeju and Olanipekun (2014). Despite its enormous natural resources and potential for economic improvement, Nigeria has struggled to effectively combat unemployment and achieve long-term economic growth (Essien et al., 2021).
Unemployment rates in the country have fluctuated over time, having a significant impact on individuals’ general well-being and inhibiting progress towards social and economic stability (Ndekwu, 2021).
Nigeria’s economic landscape is characterised by a number of unemployment-related difficulties, a major issue that policymakers and scholars must address.
Despite the country’s substantial oil and natural resource reserves, employment growth has lagged behind the rising work force, resulting in persistent unemployment (Akeju & Olanipekun, 2014). This disparity between workforce supply and demand has exacerbated economic risks and social instability.
Furthermore, Nigeria’s shifting unemployment rates highlight the necessity for a thorough study of the factors impacting employment dynamics (Essien et al., 2021).
The country’s economic policies and external influences, like as global economic crises, have had a considerable impact on the employment environment over time (Oke & Ajayi, 2020).
Unstable unemployment rates have hampered efforts to achieve long-term economic growth, creating a challenge for policymakers looking to establish a favourable environment for businesses to prosper and provide job opportunities.
Monetary policies have a significant impact on a country’s economic landscape and labour market circumstances. In Nigeria, the Central Bank of Nigeria (CBN) is actively involved in the design and execution of monetary policies aimed at achieving macroeconomic stability and promoting economic growth.
The CBN’s policies, notably those involving the money supply and interest rates, have a significant impact on the country’s unemployment dynamics (Choudhry, 2019).
As the primary body in charge of monetary policy, the CBN uses a variety of mechanisms to control the money supply and interest rates. The CBN tries to achieve its macroeconomic objectives by changing the money supply via open market operations, reserve requirements, and discount rates (Raskin, 2021). These objectives include price stability, exchange rate stability, and long-term economic growth.
The money supply in an economy has a direct impact on aggregate demand, investment, and consumption patterns, all of which influence employment dynamics (Choudhry, 2019).
If the CBN implements expansionary monetary policies, such as expanding the money supply or decreasing interest rates, it hopes to increase economic activity and job growth.
Conversely, contractionary monetary policies, which entail cutting the money supply or rising interest rates, are used to control inflation but may limit credit availability and lead to fewer job prospects.
In Nigeria, the effectiveness of monetary policies in influencing unemployment dynamics is a hotly debated topic (Choudhry, 2019). Policymakers continue to face the difficulty of striking a balance between managing inflation and encouraging job creation.
While monetary policies can be an effective instrument for promoting economic activity, their impact on unemployment is dependent on a number of circumstances, including the overall economic climate, government policies, and global economic conditions.
The link between monetary policies, money supply, and unemployment rate requires a sophisticated understanding of the country’s economic background (Raskin, 2021).
For example, Nigeria’s reliance on oil exports and vulnerability to variations in global oil prices might complicate the development and implementation of efficient monetary policy.
Furthermore, the country’s vast informal sector and inadequate financial inclusion make it difficult to ensure that monetary policies reach the broader economy, especially small and medium-sized firms, which play an important role in employment creation.
The global financial crisis of 2007-2008 had a significant influence on Nigeria’s economy, emphasising the necessity of understanding the relationship between the money supply and the unemployment rate. The crisis curtailed foreign investment and demand for Nigeria’s exports, resulting in job losses and rising unemployment rates.
Financial sector development is an important consideration in the context of Nigerian unemployment and economic growth (Aliero et al., 2021).
A well-developed financial sector may play a critical role in facilitating loans and investment, resulting in job creation and economic growth. When financial institutions lend money to firms, entrepreneurs, and individuals, they help to boost economic activity and job prospects.
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