IMPACT OF UNEMPLOYMENT AND INFLATION ON THE ECONOMY OF NIGERIA.
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IMPACT OF UNEMPLOYMENT AND INFLATION ON THE ECONOMY OF NIGERIA.
Chapter one
INTRODUCTION
1.1 Background for the Study
Unemployment is a typical occurrence in the global economy. It is a major barrier to emerging economies’ economic progress (Raheem, 2009; Nwokwu, 2015). Unemployment is a problem in developed economies as well, albeit on a smaller scale. Unemployment increases the needs of those who want to work but can’t find one (Sulaimon, 2015).
Unemployment happens when the number of jobs available fails to keep up with the rising population. Those who are working may develop a fear of unemployment as a result of job insecurity and staff retrenchment due to low labour demand, particularly during a recession (Akiri, 2016).
Unemployment can be attributed to any productive factor that is idle and underutilised for optimal productivity. In terms of labour, Anyanwu (2010) describes workers as enthusiastic. Unemployment can be classed into two types: voluntary and involuntary.
Voluntary unemployment refers to the scenario in which an individual decides not to work while having means of support or yearning for a better job with higher pay.
On the other hand, involuntary unemployment occurs when people who are able and willing to work at the current wage rate are unable to find acceptable jobs.
Unemployment has been viewed as an economic monster that stifles a country’s social and economic development. Unemployment represents a waste of a country’s human resources. Unemployment reduces productivity, which leads to poorer income and level of living (Raheem, 2009).
The growing unemployment rate in Nigeria has been a major source of concern for successive governments. Over the years, the government has focused its policy on reducing unemployment to the bare minimum.
According to Omotosho (2009), South-east Asian countries’ soaring employment and output trends, particularly those of the Asian Tigers, are due to their exceptional economic performance.
The lack of such an economic blueprint to enhance employment and productivity in Nigeria is the leading cause of unemployment (Sulaimon, 2015). Unemployment in Nigeria is a problem, and it is likely to worsen in tandem with the country’s high annual unemployment rate.
Looking at the development of unemployment in African economies, Nwokwu (2013) identified three causes of unemployment: poor quality education, the choice of technology, which can be labour or capital intensive, and insufficient attention to capital.
The use of machines to replace labor-intensive tasks, as well as technical advances, have contributed to the unemployment crisis. The rise of unemployment in Nigeria has a negative impact on the youth and the entire community.
Unemployment in Nigeria was particularly severe in the early 1980s (Akiri, 2016). Inefficient labour utilisation in developing countries is a major contributor to their lower living standards when compared to developed countries.
Adebayo and Ogunriola (2012) discovered that the unemployment trend in Nigeria disproportionately affects job searchers aged 20-24 and 25-44 years, but unemployment is less prevalent among those aged 15-19, 55-59 years, and 65 years and above.
This suggests that unemployment has a serious influence on young Nigerian graduates. Unemployment impedes both economic and social progress. Unemployment promotes political instability and is a multifaceted issue, and its threat has been identified as a critical developmental obstacle for the country.
Unemployment is widely regarded to be a serious impediment to long-term growth in almost every developing country. Unemployment decreases an economy’s overall production and indicates inefficient use of human resources.
One of emerging countries’ primary policy goals has been to reduce unemployment. The issue of actual output and employment in developing countries is critical for poverty reduction and equitable income and wealth distribution (Omotor & Gbosi, 2006).
The term ‘inflation’ is well-known in the global market economy, and it has become a household phrase in most African countries, including Nigeria. Inflation is a monster that threatens any economy, yet some researchers suggest that little of it is required for long-term economic growth (Jhingan, 2011).
However, it should be recognised that inflation is detrimental to economic growth. Inflation is not a new phenomena; it has been a serious concern in the country for the last three decades.
According to Adenuga and Bello (2012), inflation is a monster that endangers all economies due to its negative consequences. Inflation is generally defined as a sustained increase in the general price level of goods and services in a country over time.
According to a report provided by the Central Bank of Nigeria (2013), Nigeria has seen four major episodes of high inflation of more than 30%. The first period occurred in 1976, when a drought in Northern Nigeria devastated agricultural production and increased the cost of agricultural food products, combined with excessive monetization of oil earnings, which may have given inflation a monetary character (CBN, 2013).
During the Structural Adjustment Programme in the late 1980s, pay rises caused cost-push inflation. In 1985, inflation reached 40% during a period of slow economic expansion.
At the time, debtor organisations were pressuring the government to make an arrangement with the International Monetary Fund, which included devaluing the native currency.
The expectation of imminent devaluation fueled inflation as prices adjusted to the parallel rate of exchange. Over the same time period, extra money increased by around 43% (CBN, 2009).
The third high inflationary period occurred in the fourth quarter of 1987 and lasted until 1989. This episode was tied to the fiscal growth that came with the 1988 budget. However, as the government launched a major monetary contraction in mid-1989, inflation dropped dramatically to 13% in 1991 (CBN, 2013).
The fourth inflationary episode began in 1993 and persisted until the end of 1995. Inflation accelerated towards the end of 1992, reaching 57% by the end of 1994 and 72.8% by the end of 1995 (CBN, 2013).
This was linked to both an expansionary fiscal deficit and rising money supply. Between 1996 and 2016, the inflation rate fell dramatically, yet it remained in double digits.
It is widely held that the achievement of all other macroeconomic goals, such as price stability, full employment, and economic growth, is dependent on the preservation of steady and low inflation and the effective use of human resources. This study will look into the consequences of unemployment and inflation on the Nigerian economy.
1.2 Significance of the Study
The study’s conclusions will be valuable to policymakers, international organisations, and the academic community. Policymakers would understand the prevalence of unemployment and inflation, as well as the potential economic consequences.
Policymakers would be driven to develop appropriate policies that would successfully address these difficulties while minimising their impact. International organisations include the United Nations (UN),
the World Bank, the G7, and the G20. The International Labour Organisation (ILO), the International Monetary Fund (IMF), the Organisation for African Unity (AU), and others would like to help the country combat unemployment and inflation.
This study also serves as a repository of restricted knowledge for academics and students interested in furthering their studies on unemployment, inflation, and economic growth.
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