THE IMPACT OF UNEMPLOYMENT, INFLATION AND CLIMATE CHANGE ON NIGERIA ECONOMY (2015 – 2022)

Abstract

Nigeria has been experiencing high inflation, unemployment  and climate change over the years. The main objective of this paper is to analyses the impact of inflation, unemployment and climate change on Nigeria economy from 2015 to 2022. The variables used in this research include log of real GDP, log of inflation rate, log unemployment rate and log of climate change. This paper carried unit root test using the Augmented Dickey Fuller test with structural breaks. The result of the test showed that the inflation rate and the climate change rate were stationary at level, while the unemployment rate and GDP became stationary at first difference. The long run and short run impact of the variables were analysed using bound testing co-integration. The result shows there is long run relationships among GDP, inflation, unemployment and climate change. The dynamic error correction for the country was carried out and the long run and short run coefficients were extracted using the ARDL model. The result shows that inflation has a positive and an insignificant impact on Nigeria economy while unemployment has a negative and an insignificant impact on Nigeria in the long run. Climate change shows a positive and significant impact on economy in the long run. In the short run, inflation has no impact on climate change, while unemployment has positive and significant impact on it but the impact turned negative and statistically insignificant at lag 1. Climate change has a negative and statistical significant impact on Nigeria change at both lag1 and lag2 in the short run. The Granger causality shows that inflation does not cause Nigeria economy, while unemployment and climate change rates cause Nigeria economy. This study recommends harmonization of the monetary and fiscal policy, vocational education and low or the absence of interest on loans to young graduates, the diversification of the economy and the provision of key economic infrastructure.

Chapter one

Introduction

1.1Background of the study

In the global economy, unemployment is a widespread occurrence. It is a major impediment to emerging economies achieving economic progress (Raheem, 2009; Nwokwu, 2015). Unemployment is a problem in developed economies as well, though to a lesser extent. The current level of unemployment exacerbates the needs of individuals who want to work but can’t find one (Sulaimon, 2015). Unemployment happens when the number of available jobs does not keep pace with the rising population. Those who are employed may acquire a fear of being laid off as a result of job instability and employee retrenchment owing to low labor demand, particularly during a recession (Akiri, 2016). Unemployment is linked to every productive factor that is idle and not being used to its full potential. In terms of labor, I am eager to work (Anyanwu, 2010). Unemployment is divided into two types: voluntary and involuntary. When there are available jobs, voluntary unemployment refers to a situation in which an individual chooses not to work because he has means of support or is yearning for a better job with greater pay. Involuntary unemployment, on the other hand, occurs when people who are capable and eager to work at the current wage rate are unable to find suitable employment. Unemployment has long been considered as an economic monster that stymies a country’s social and economic progress. Unemployment is a waste of a country’s human resources. Unemployment reduces productivity, resulting in poorer income and a lower standard of living (Raheem, 2009). The rising rate of unemployment in Nigeria has been a key worry of successive Nigerian governments. Over the years, the government’s policy focus has been on reducing unemployment to the minimal minimum. According to Omotosho (2009), the exceptional economic performance of South-east Asian countries, particularly the Asian Tigers, is responsible for their rising employment and output trends. The primary reason of unemployment in Nigeria is the lack of such a crucial economic blueprint to enhance employment and productivity (Sulaimon, 2015). The problem of unemployment in Nigeria continues unabated, and it is likely to worsen in tandem with the country’s high unemployment rate.

Looking at the trend of unemployment in African economies, Nwokwu (2013) identified three causes of unemployment: poor educational quality, technology selection that is either labor or capital intensive, and insufficient capital attention. The use of machines to replace labor and technical advances have exacerbated the unemployment crisis. Unemployment in Nigeria is having a negative impact on the youth and the entire community. Unemployment in Nigeria was particularly severe in the early 1980s, compared to any other time period (Akiri, 2016). Inefficient labor use in developing countries is a major contributor to their low living standards when compared to advanced countries. According to Adebayo and Ogunriola (2012), the unemployment trend in Nigeria disproportionately impacts job searchers aged 20-24 and 25-44, whereas unemployment is less prevalent among those aged 15-19, 55-59, and 65 and above. This suggests that unemployment affects young Nigerian graduates severely. Unemployment stymies not only economic but also social advancement. Unemployment is a multifaceted problem that promotes political instability, and its threat has been identified as a critical developmental barrier for the country. In almost all emerging countries, unemployment is recognized as a key impediment to long-term growth. Unemployment lowers an economy’s overall productivity and indicates inefficient use of human resources. One of the primary policy goals of emerging countries has been to reduce unemployment. The issue of actual output and employment in emerging countries is critical for poverty reduction and equitable income and wealth distribution (Omotor & Gbosi, 2006).

In today’s global market economy, the word “inflation” has become a household term in most African countries, including Nigeria. Although some researchers suggest that modest inflation is essential for long-term economic progress, inflation is a monster that threatens any country (Jhingan, 2011). Inflation, on the other hand, is harmful to economic growth. Inflation is not a new phenomena in the United States; it has been a serious issue for the country for the past three decades. Inflation, according to Adenuga and Bello (2012), is a monster that threatens all economies due to its negative consequences. Inflation is defined as a long-term increase in the general price level of goods and services in a country.

Climate change has been defined as a statistical variance that lasts for a long time, usually a decade or longer. It involves changes in the frequency and amplitude of occasional weather events, as well as a modest but steady rise in global average surface temperature (IPCC, 2001). Climate change, according to the German advisory council on climate change, is already having a significant impact on humans and the natural eco-system in both industrialized and developing countries, but to varied degrees (German Advisory Council on Global Change [WBGU, 2003]).

Due to natural advantages, high adaption skills, advanced technology, a mechanized agriculture system, and wealth position, the impact of climate change is believed to be less severe in industrialized countries. Because of these variables, industrialized economies have been able to mitigate the negative effects of climate change. Given the high temperature level, weak adaptation capacity, and absence of an early warning system, climate change has a significant impact on developing countries like Nigeria.

Climate change would have a negative influence on the Nigerian economy, with visible effects ranging from lower agricultural output to higher rates of disease, morbidity, and mortality. Climate change has had an influence on hydropower plants, which are the country’s primary source of electricity. Many other industries, including as transportation, tourism, and manufacturing, have also been impacted, which has a broad impact on the Nigerian economy and GDP. According to assessments undertaken by the Department for International Development (DFID), climate change will cost Nigeria between 6% and 30% of its GDP by 2050, amounting to $100 billion to $460 billion

Statement of the problem

Because of the consequences, the prevalence of unemployment is unsettling and frightening. The increase in the unemployment rate suggests that the policies put in place by previous and present governments are not yielding beneficial results. It is concerning that Nigerian graduates who are educated, qualified, and eager to work are unable to find work. As unemployment continues to climb, the situation is getting dismal. According to the National Bureau of Statistics, almost four million people lost their jobs between 2015 and 2017. This backs up the claim that the administration is joking about when it comes to unemployment. Climate change is expected to cost Nigeria between 6% and 30% of its GDP by 2050, amounting to $100 billion to $460 billion. Looking at the situation of the country, it appears that the chances of young graduates finding work are dwindling, in line with the country’s current developments, which include lower oil prices, slow growth, political instability, and insecurity, among other things. In recent years, unemployment in Nigeria has become increasingly widespread and deplorable, impacting people of all ages, educational levels, and geographical locations (Sulaimon, 2015). Apart from the economic impact of lower national productivity, it has social consequences such as increased rural-urban migration, waste of manpower, high dependency ratio, poverty, insecurity, depression, frustration, and increased criminal activity such as drug abuse, armed robbery, kidnapping, prostitution, drug trafficking, unwanted pregnancy, and cybercrime (Adepegba, 2011; Akiri, 2016). According to the International Labour Organization (ILO), unemployment is one of the most serious threats to many countries’ economic and social stability (Nigeria inclusive). Nigeria’s unemployment rate is higher than that of other African nations such as Ghana and South Africa. According to Subair (2013), unemployment in South Africa has averaged 25.2 percent over the last decade, compared to -14 percent in Ghana and 37 percent in Nigeria. According to World Bank figures, Nigeria’s unemployment rate is 22 percent, with young unemployment reaching 38 percent (Asaju, Arome & Anyio, 2016). According to the International Labour Organization, the age group of 15-35 years accounts for approximately 60% of Nigeria’s population and 30% of the labor force. The situation is exacerbated by the lack of credible data on unemployment in Nigeria. So far, no organization has produced unemployment statistics in Nigeria (Udu & Agu, 2013). The World Bank and the National Bureau of Statistics frequently contradict each other. The mismatch in employment statistics, according to Raheem (2009), is due to the fact that official statistics only recognize open unemployment. As a result, the government must design methods to address unemployment, as no economy can flourish with a high unemployment rate.

Macroeconomic stability, notably low inflation, is virtually universally agreed to be favorably associated to economic growth. Nigeria, on the other hand, has yet to attain price stabilization due to its relatively high inflation rate. Money loses value during inflation, and people are deterred from saving, affecting the volume of money in the money market as well as investment, which leads to overall economic growth. In Nigeria, many governments have implemented a variety of policies, the most important of which are fiscal and monetary policies. Despite the increased implementation of these strategies throughout time, inflation continues to be a major danger to Nigeria’s economy.

Objective of the study

The objective of the study is to find out the impact of unemployment, inflation and climate change on Nigeria economy. The specific objectives are;

1. To find out the impact of unemployment on Nigeria economy
2. To find out the impact of inflation on Nigeria economy
3. To find out impacts of climate change on Nigeria economy.

Research hypotheses

The research hypotheses were formulated;

H1: there is no significant impact of unemployment on Nigeria economy

H2: there is no significant impact of inflation on Nigeria economy

H3: there is no significant impact of climate change on Nigeria economy

Significance of the study

Policymakers, international organizations, and academics would benefit from the conclusions of this study. Policymakers would be aware of the prevalence of unemployment, inflation and climate change, as well as their potential economic consequences. Policymakers would be pushed to develop smart policies that effectively address these concerns with the least amount of resources. United Nations (UN), World Bank, G7, and G20 are examples of international organizations. The International Labour Organization (ILO), the International Monetary Fund (IMF), the Organization for African Unity (AU), and other organizations are eager to help the country combat unemployment and inflation. This research also acts as a repository of knowledge for academics and students interested in continuing their research on unemployment, inflation, climate change and economic growth.

Scope and limitation of the study

The scope of the study covers the impact of unemployment, inflation and climate change on Nigeria economy. The stud will be limited from 2015 to 2022 period of 8years

The following factors poses to be a limitation during the course of this research

Financial constraint– Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
Time constraint– The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

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