Investments and Unemployment Nexus in Nigeria: an Application of Vector Error Correction Model (VECM)
Kabiru Saidu Musa *
Department of Economics, Faculty of Social and Management Sciences, Bauchi State University Gadau, P.M.B. 065, Yuli Campus, Bauchi, Nigeria.
Rabiu Maijama’a
Nigerian National Petroleum Corporation, NNPC Towers, Central Business District, P.M.B. 190, Garki, Abuja, Nigeria.
Tahir, Hussaini Mairiga
Department of Economics, Faculty of Social and Management Sciences, Bauchi State University Gadau, P.M.B. 065, Yuli Campus, Bauchi, Nigeria.
*Author to whom correspondence should be addressed.
Abstract
The main objective of this paper is to examine the nexus between investments and unemployment in Nigeria using data for the period of 1991 to 2019 and employed VECM to realize the objective. Result from VECM estimation revealed that domestic and foreign investments were negative and significantly associated with unemployment while economic and population growths had significant positive relationship with unemployment in the long-run with all the short-run coefficients were insignificant. Therefore, it is recommended that government should provide conducive investment atmosphere for foreign investors in order to attract foreign investment in the country since it has negative impact on unemployment. On the other hand, access to finance at a subsidized interest rate to domestic investors should be one of the top policy priorities because high cost of borrowing reduces the opportunities for domestic investment and investors in the real sector of the economy should be considered for taxes concession basically due to the sector’s direct effect on employment in the country. More so, population growth checking measures should be re-emphasized and by so doing it will go a long way in reducing the rate of unemployment in country.
Keywords: Investments, unemployment, vector error correction model, Nigeria