INTERNATIONAL TRADE FLOWS AND EMPLOYMENT IN NIGERIA: A TREND ANALYSIS FROM 1981-2006

ABSTRACT

This study investigates the relationship between international trade flows and employment in Nigeria for the period 1981 to 2006. Using time series estimation technique, we found no significant link between trade flows and employment in Nigeria both in the short-run and long-run. However, external factors such as FDI, real effective exchange rate, SAP and internal factors such as political stability, labour regulation and real wage are more important factors in explaining employment rate in Nigeria. Like explanations of these outcomes are probably due to the country trading majorly in primary products which are largely uncompetitive and the non-diversification of the productive base of the economy such as the overdependence on oil exports. An effective and result-oriented employment effect from trade is likely to be aided by fortifying appropriate and enabling environment institutional regulatory measures to enhance the diversification and competitiveness of Nigeria’s trade, the removal of impediments to labour market participations and labour market interventions such as putting effective social commitments to principles of competition and diversification.

TABLE OF CONTENTS

Title Page

Abstract

Table of Contents

CHAPTER ONE: INTRODUCTION

•           Background to the Study

•           Statement of the Problem

•           Objective of the Study

•           Significance of the Study

•           Research Question of the Study

•           Research Hypotheses of the Study

•           Scope of the Study

•           Limitations of the Study

•           Scheme of Chapters

CHAPTER TWO: LITERATURE REVIEW

2.1. Introduction

2.2.1. Trade Theories

2.2.2. Vent for Surplus Theory of International Trade

2.2.3. Natural Resources Curse

2.2.4. Dutch Disease Phenomenon and Employment

2.2.5. Volatility of Natural Resources

2.2.6. The Political Economy

2.3.      Empirical Study Review

CHAPTER THREE: METHODOLOGY

3.1.      Introduction

3.2.      Sources and Composition of Data

3.3. Methods of Data Collection

3.4. Methods of Data Presentation

3.5.1. Methods of Data Analysis

3.5.2. Justification of Using Time Series Analysis

3.5.3. Choice of Variables

3.5.4. Model Specification

CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS

4.1. Introduction

4.2.1. Nigerian Labour Market

4.2.2. Nigeria’s Employment Performance

4.3.      Nigeria’s Export Performance

4.4.      Nigeria’s Import Performance

4.5.      Nigeria’s Trade Balance

4.6.      Trend in Wages

4.7.      Exchange Rate

4.8.1. Time Series Analysis

4.8.2. Time Series Stationary

4.9.1. Cointegration Analysis Results

4.10. Short-Run Dynamics

4.11. Robust Checks

4.12. Alternative Specification/Sensitivity Analysis

CAPTER FIVE: SUMMARY, RECOMMENDATIONS AND - CONCLUSION

5.1. Introduction

5.2. Summary

5.3. Recommendations

5.4. Conclusion

Bibliography

CHAPTER ONE: INTRODUCTION

1.1.   Background to the Study

Nigeria is characterized with a ‘dualistic’ (dual) labour market in which the minority of workers has regular formal sector jobs, while majority works in informal sector, with a large pool of surplus labour. This is seen from its rapidly increasing labour force. For instance, the labour force increased from 25.7 million persons in 1980 to 33.9 million persons in 1990 and further increased to 45 million and 52.7 million persons in 2000 and 2006 respectively(CBN,1993). In addition to this, statistical evidences from the government show that the absolute number of total employment in the country has been steadily increasing since 1980. For instance, total employment increased steadily from 18.6 million in 1980 to 22.1 million in 1990, which further rose to 27.5 million in 2000 and later to 34.4 million in 2006.

However, in spite of the country’s large pool of surplus labour, rapidly growing labour force and increasing employment, the share of employed workers in total labour force has been declining since 1980, coupled with this, in the last two decade, the trend has been below 70%, which is an indication of high unemployment as more than 30% of its active population are unemployed. For instance, in 1980, the participation rate was 69%, however, the share of employed in total labour force is given as 72.4% which is indicative that about 27.6% of the labour force are unemployed in this period. However, in 1990, while the participation rate increased to 71%, share of employment in total labour force declined to 65.2% (CBN, 1993). In 2000, both the share of employment in total labour force and participation rate further declined to 61.1% and 70% respectively. However, in 2006, share of employment in total labour force marginally rose to 61.5% while the participation rate marginally fell 69%. In the same vein, 27.6% of the labour force was unemployed in 1980 and this rose to 34.8% in 1990 and further rose to 38.9% and 38.5% in 2000 and 2006, respectively. These trends are indicative of a huge employment problem as the economy’s capacity to absorb its rising labour force is low as more than 30% of its active population is unemployed.

In addition, imports value increased from U$1058.9 million in 1970 to US$16646.4 million in 1980 but fell to US$5687.9 million in 1990. However, it rose again in 2000 to US$9647 million and rose further to US$33398.1 million in 2006(CBN, 2007). This trend is not surprising as Nigeria is highly dependant on imports for most of its raw materials inputs (Oyejide, 1986) and the employment effect of these imports might be positive if a significant portion of imports serves as inputs for labour intensive industries. However, this trend has given rise to debates in developing countries where concerns have been expressed over the....

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