Macroeconomic Dynamics and Unemployment in Nigeria: The Moderating Role of Government Expenditure
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This study examines the interactive effect of government expenditure and credit to the private
sector as well as inflation and economic growth on unemployment rate in Nigeria. It employed
ARDL and annual data from 1991 to 2021. The bounds test of the ARDL specification suggests
the presence of cointegration among the variables. Which include unemployment, inflation,
economic growth, credit to the private sector and government expenditure. Thus, there is a
significant long run relationship between unemployment and the explanatory variables. The
long run ARDL shows that economic growth government expenditure (both capital and
recurrent) as well as the interaction between government recurrent expenditure and credit to the
private sector have negative impact on unemployment. The result confirms the Okun’s law nexus.
It also shows that increase in government spending and its interaction with credit to the private
sector holds prospects for reducing unemployment rate in Nigeria. On the other hand, inflation,
credit to the private sector and its interaction with government capital expenditure have a
positive impact on unemployment in Nigeria. Thus, the findings failed to support the Phillips
curve hypothesis in Nigeria. The study recommends thatdevelopment financial institutions such
as the Bank of Industry (BOI) should be mandated to allocate a higher proportion of their credit
to job-creating ventures. Also, the problem of corruption should be addressed in order to
enhance the efficiency of government spending.
Keywords
HB Economic Theory, HJ Public Finance