ABSTRACT
This study was
undertaken to ascertain the impact of monetary policy on unemployment in
Nigeria.This research is being carried out to determine the overall impact of
monetary policy on unemployment. In
this study, we empirically determined the impact of selected monetary policies
on unemployment in Nigeria from 1980 – 2015. The specific objectives of this study are to determine the impact of selected monetary policy
on unemployment in Nigeria,to determine if there is a
long run relationship between monetary policy and unemployment.From our findings, there exist a
positive but insignificant relationship between monetary policy rate and
unemployment rate.It
will educate the public on various Government policies as related to Monetary
and Unemployment.
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
Monetary policy rests on the relationship
between the price at which money can be borrowed and the total supply of money
in the economy. It is generally referred to as being expansionary or
contractionary, where an expansionary policy increases the total supply of
money in the economy rapidly, and contractionary policy decreases the total
money supply, or increases it slowly. When a central bank embarks on an
expansionary monetary policy, it does so to stimulate domestic economy and
reduce unemployment, while contractionary policy involves raising interest
rates to combat inflation.
According to Adekanye (1986), monetary
policy can be described as the various ways by which the Federal Government and
the Central Bank of Nigeria (CBN) seek to influence the supply of money and
credit as well as their price asindicated by interest rate in order to achieve
stated or desired economic goals.
Chukwudire (1993) refers to monetary policy as
measures to control the availability, cost and use of money and credit in the
economy for the purpose of achieving stated objective. He went further to say
that monetary policy covers a broad range of policies and measures which
include not only such monetary measures that influence the availability, cost
and use of money, but also those non-monetary measures which influence monetary
situations. He argued that in so far as these non-monetary measures such as
price control, income policies, physical control, budgetary measures that deal
with inflation aimed at influencing monetary are involved in monetary policy.
Today, unemployment may be viewed as one of
the most intractable problems facing Nigeria since 1960 and climaxing in these
millennium years. It has become a cankerworm that is now eating deep into the
fabric of the Nigerian economy. The existence of high unemployment in any
economy is a source of concern to policy makers as well as the general
citizenry. According to Englama (2001), the issue of persistent unemployment is
now frightening in Nigeria considering the fact that it is widening poverty,
misery, and social unrest, ethnic cum religious crisis, robbery, kidnappings,
terrorism and other social vices. These have posed a great challenge to policy
makers/planners, human resource experts and persons dealing with unemployment
programmes, planning and implementations.
Monetary policy has a dual mandate of
guaranteeing high employment rate and price stability. At one time or another,
economic agents around the globe have also tried to use monetary policy to
achieve almost every conceivable economic objective with economic growth and
low level unemployment often high in the list. As a case in point, Sellon
(2004) posited that when the Federal Reserve of the United States raises its
target for the federal funds rate, other rates rise, reducing
interest-sensitive spending and slowing the economy, and when it is lowered,
other rates tend to fall - stimulating spending and spurring economic activity.
The
official unemployment rate steadily increased from 12.3 per cent in 2006 to 23.9
per cent in 2011 (ILO) while the revised rate records shows an increase from
12.3 per cent in 2006 to 19.7 per cent in 2009, but declined to 6.0 per cent in
2011. Between 2013 to first quarter 2014, the unemployment rate rose from 24.7
per cent to 25.1 per cent (ILO), while the revised rate shows a decrease from
10.0 per cent to 7.8 per cent.
The government through the monetary authority
promote monetary stability and evolve an efficient and reliable financial
system through the application appropriate monetary policy instrument and
systemic surveillance. Despite these efforts of
government in boosting the performance of financial sector, the sector is still
not witnessing significant development in relations to solving the problem of
unemployment.
In an effort to encourage employment
generation using monetary policy, interest rates were liberalized (deregulated)
and were also controlled on several occasions. The failure of these polices and
the onward escalation of unemployment problem necessitated the reason for
determining the impact of selected monetary policy on unemployment in Nigeria.
1.2
Statement Of The Problem
One of the major objectives of monetary policy in Nigeria is
price stability. But despite the various monetary policy instruments that have
been adopted by the Central Bank of Nigeria over the years, inflation still
remains a major threat to Nigeria’s economic growth.
Disappointedly,
the average growth of the aggregate economy was accompanied by increased in the
average growth of unemployment and poverty rates from 3.93% and 42.07%
respectively between 1981 to 1990 to an alarming rate of 14.7% and 63.99% respectively
between 2001 and 2010. Also, within this period the disparity in income
distribution (measured by Gini Index) rose from 34.18 in 1980 to 42.9 in 2004
and further to 48.8 in 2013 (World Bank Indicators, 2013).
However, unemployment in Nigeria is primarily youth
unemployment, especially secondary school leaver for instance in 1986, they
constituted 65.3 percent of all the employed in Nigeria. The figure for 1987
for this group was 70.7 percent when figures are desegregated by location
figures for urban unemployment were higher for all the years under survey with
the exception of 1986. The national figures for unemployment were 6.1 percent
in 1986. It tell slightly to 5.3 percent in 1986 for all the year data indicate
that unemployment was higher in the urban than within the rural area.
This study is therefore concerned with finding out the impact
of selected monetary policy on unemployment in Nigeria. Also, intend to
investigate clearly the extent to which these policies have contributed to
worsening the problem of unemployment or alleviating it completely through
these question;
Does monetary policy have any impact on unemployment in
Nigeria?
What is the relationship between monetary policy and
unemployment?
1.3
Objectives of the Study
The general objective is to
determine the impact of selected monetary policy on unemployment in Nigeria for
the period of 1980-2015. Under this general objective, the specific
objectives this study covers are;
1.
To determine the impact of selected monetary policy on unemployment in Nigeria.
2.
To determine if there is a long run relationship between monetary
policy and unemployment.
1.4 The statement of hypothesis
The study is guided with both null and alternative
hypothesis which is denoted using Ho for null hypothesis and Hi for alternative
hypothesis.
Ho- Monetary policy has
no significant effect on unemployment rate.
Hi- . Monetary policy has
significant effect on unemployment rate.
1.5 Significance of the Study
This research work
is being carried out to determine the overall impact of monetary policy on
unemployment. The findings of this work will be of immense use and benefit to
government Ministries, National Directorate for Employment and Monetary Authorities (Central Bank of
Nigeria), Department and Agencies at federal level in solving some
macro-economic problems, state and local, policy makers and intellectual
researchers who may be willing to improve the work subsequently. Lastly, it
will educate the public on various government policies as related to monetary
and unemployment.
1.6 Scope of the Study
The research
work deals with the impact of selected monetary policy on unemployment. This
research work covers the period of years (1980-2015) which
is sufficient and suitable for conducting a research, making new findings and
relevant recommendations.
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Item Type: Project Material | Attribute: 43 pages | Chapters: 1-5
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