AN EMPIRICAL ANALYSIS OF FISCAL POLICY MEASURES AND UNEMPLOYMENT IN NIGERIA

Abomaye-Nimenibo, Williams Aminadokiari Samuel & Inimino, Edet Etim

Department of Economics, Obong University, Obong Ntak, Akwa Ibom State, Nigeria,

Department of Economics, Obong University, Obong Ntak, Akwa Ibom State, Nigeria

Email:wasanim2006@yahoo.com & clergyedet1@yahoo.com

Abstract: The paper examines fiscal policy measures and unemployment in Nigeria from 1980 to 2014. The objective of this study is to examine the impact of fiscal policy on unemployment rate in the Nigerian economy. To achieve this objective, we utilized data on government capital expenditure, government recurrent expenditure, unemployment rate and government tax revenue sourced from CBN statistical bulletin. The econometric method of co-integration/Error Correction Mechanism was employed as the analytical tool. The result of the parsimonious ECM shows that the overall model is satisfactory given the coefficient of determination of 55 percent and f-statistic of 2.442869. In addition, the government capital expenditure appeared with the right sign i.e., negative and statistically significant at 5% level of significance in reducing unemployment rate in Nigeria. But government recurrent expenditure and government tax revenue were not statistically significant at 5% level of significance in reducing unemployment rate in Nigeria. Furthermore, the coefficient of the parsimonious ECM has the appropriate sign that is negative and statistically significant at 5% level. Meaning that, the short run dynamics adjust to long run equilibrium relationship. Based on the findings above, the study suggests; Government should increase her capital expenditure and ensure a well combination and coordination of both fiscal and other policies to increase employment opportunities in Nigeria. Government should avoid mismanagement of national resources, misappropriation of funds and wasteful spending. Fiscal policy should be given more attention towards reducing unemployment in Nigeria. Government should create more entrepreneurial skill acquisition programmes to aid self employment which in turn will reduce unemployment. Also, there should be smooth co-ordination and consistency in fiscal pursuits to solve the problem of unemployment in Nigeria.

Keywords: Economic Policy, Fiscal Policy, Unemployment, ECM and Government Expenditure