INFLATION AND UNEMPLOYMENT IN A DEVELOPING COUNTRY NIGERIA EXPERIENCE

ABSTRACT

The purpose of this project is to enlighten people and all the students of Management Department on Inflation and unemployment in a developing country: Nigeria Experience. In order to carry out an indept study of the subject matter, the author reviewed the records kept in view of inflation and unemployment. This project is divided into five chapter.  The first chapter, which is the introduction, deals with the background of the study, up to the definition of the terms. Various problems associated with inflations and unemployment were also stated.   The significance and limitation of the study were introduced in this chapter. The second chapter contains the literature review of inflation and unemployment in Nigeria.   This review was made up of the concepts of inflation and unemployment.  Various contribution by different scholars were also stated.   Theories causes and consequences of the subject matter was also highlighted. The effects of inflation in Nigeria and policies stated with the view to curb this ugly trend was also stressed. Various types of unemployment found in Nigeria and its effects, together with the suggestion made by expert in the economy with view to decrease its effect were critically discussed. The third chapter consist of methodology, research design and data analysis techniques.  The aim of this chapter is to desirable how this thesis was carried out. While the fourth segment of work involved the presentation, analysis and interpretation of the data. Some of the hypothesis drawn up in chapter one were tested using chi-square method of testing hypothesis.  This was made to enable the author draw a clear conclusion in the succeeding chapter. Finally, chapter five was the end of this work, from where the author expressed his summary, recommendation and conclusion to support his indept knowledge from the literature review.

CHAPTER ONE INTRODUCTION

1.1    BACKGROUND OF THE STUDY

The research is based on two macro – concept, which are inflation and unemployment.  And these two macro-concept have been very big problem facing developing nations of the world with Nigeria as a good example.

Inflation refers to a persistent rise in the general price level, the price of most goods and services rises steadily but not necessarily at the same rate during inflationary period, there is too much money in circulation, and the too much money in circulation chases fewer goods and services and equally the valve of money therefore fulls during inflationary period.

1)A period, Price increase (which do not persist) are not regarded as inflation, periodic increases and fall in the general price level lack to a condition of price instability.

2)A period of rising prices deliberately caused by the government is known as re-inflation.

Unemployment concept, generally can be ambiguous; the term unemployment could be used in relation to any

factors  of  production,  which  is  idle  and  not  being  utilized  for production.

Therefore labour is said to be unemployed, when the people in the labour force are unable to find job.

According  to  Okonkwo  (1986)  Inflation  is  a  rise  in  the general level price (or average level of price) of all goods and services, he said that the general price level, this varies inversely with the purchasing power decreasing by one – half.  If price has purchasing power doubles.  Therefore, inflation is also reduction in the purchasing power of a unit of money.

Before 1970, unemployment and inflation are not known in

Nigeria as it is today.

Solow (1979) sees inflation going on when one needs more and more money to buy some representative bundle of goods and services or a sustained fall in the purchasing power of money. It is a sustained rising trend, in the general level or put another way.  It is a high and persistent rise in the price level.

1.2    STATEMENT OF PROBLEM

Unemployment in Nigeria can be said to have been caused by so many factors. Political, economical and social factors like

a)      Population growth

b)The supply of labour is greater than the demand and therefore there is a disequilibrium in the labour market.

c)The rural – urban migration

d)Limited industries to absorb the labour force e)Government ineffective monetary and fiscal policies f)Economic instability

g)Political instability

Inflation   in   Nigeria,   were   been   caused   by   various government policies to stimulate fast rate of economic growth and development.

Since 1970 and some policies like Structural Adjustment Programme (SAP) External Dept policies, Second Tier, foreign exchange.  Market policies, policies on subsidiaries on petroleum product and fertilizer, policies of privatization and commercialization, policies on Trade liberalization and interest

rate deregulation.

Seeing some of these problems, that causes inflation and unemployment in Nigeria.  The questions that readily calls to mind are as follows

1a)Knowing what is inflation and unemployment,

b)How can we get ride of it or reduce it to a minimum level in our economy?

2)Knowing what causes them, which other measures can be taken to check or stop it from growing in our economy?

The decision embarked on the study of these macro- economic problem was borne out of the need to find out how to stop them in our economy.

1.3    OBJECTIVE OF THE STUDY

The objective of this research paper therefore are:-

1.To investigate the hypothesis whether inflation has no significant in unemployment in Nigeria.

2.To seek for the stability of their relationship for better economic growth.

1.4    SIGNIFICANCE AND IMPORTANCE OF THE STUDY

The Central Bank of Nigeria Budget and Planning Authority and other individuals who are interested in the welfare of the economy need to have a good knowledge of effects and impact of unemployment and inflation on the nation today.

The knowledge will help them to determine when and how to make a particular policies and how to implement them in order not to trigger inflation and unemployment.

This  study is  therefore  of  immense  important  to federal government planning authority, Central Bank of Nigeria, National Directorate of Employment (NDE) practitioners, professionals and persons of entities who are interested in how to stop or reduce the rate of inflation and unemployment in the economy of our nation.

1.5    SCOPE OF THE STUDY

In undergoing this study, special effort was made to cover the meaning of unemployment and inflation, what have contributed so much to the inflation in the country.

In unemployment, the researcher concentrated on unemployment of labour while on inflation, the researcher have insight to these areas.

a)      CPI Inflation rate?

b)      GDP Implicit Deflator (inflation rate)

c)      Oil and Gas Sector d)Agricultural sector e)wholesale and retail sector f)Finance and insurance sector g)Government services

h)Other services

The information in the researcher’s research was gotten from mostly Central Bank of Nigeria Enugu branch, federal office of statistics Enugu.

Although the research was conducted successfully, it was however with some weakness and short comings.  One found it was hard to gain access to some of the officials of these institution.

In most cases, the researcher met with outright refusal from them to disclose institution policies which they believed was only for their use. Nevertheless, some success was

recorded to be able to cover all the area mentioned above, alot of money was spent on transportation, readily and accommodation.

Finally, the major constraint to my investigation was the short time given for the conduct and reporting of such an elaborate investigation.  It is believed that subsequent research mean that the researcher will continue from where the researcher stopped.

1.6    HYPOTHESIS

The following hypothesis have been drawn in suggestion to the solution of the problems.

1)      H0        :There   are   significant   impact   of    inflation   on unemployment in Nigeria.

HA       :Inflation has no significant impact on unemployment in Nigeria.

2)      H0        :The increase in population in Nigeria is not the brain behind the increase in inflation and unemployment.

HA       :Increase  in  population  has  impact  in  increase  in inflation and unemployment.

3)      H0        :Compliance to the economic policies and budget trust are brain behind increase in inflation and unemployment.

HA       :Non-compliance to the economic policies and budget trust  are  not  the  brain  behind  increase  in inflation and unemployment.

1.7    DEFINITION OF TERMS

!   Unemployment

This is a situation in which persons capable and willing to work are unable to find suitable paid employment.

!   Stagflation

It is paradoxice phenomenon where the economy experiences stagnation as well as inflation. It is a

combination of stag plus inflation making “stag” from stagnation and flation from inflation.

!   Inflation

This is a galloping rise in prices as a result of the excessive increase in the quantity of money.

!   Inflation Gap

This an excess of planned expenditure over the available output pre-inflation or base price.

!   Re-inflation

This  is  a  period  of  rising  in  price  deliberately caused  by the government.

!   Refinancing

This is a strategy for transforming short term department obligation into long term department.

!   Re-Scheduling

This is the negotiation of terms of an outstanding department which depends on agreement with International Monetary Fund (IMF) to become effective.

!   Population

This is the number of people living in a given geographical area at any given time.

!   Emigration

This is the out-ward movement people make from one’s country to another country.

!   Immigration

This  is  the  inward  movement  from  one’s  country  to  another country.

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