FISCAL POLICY AND UNEMPLOYMENT: THE NIGERIAN CONUNDRUM
Christopher N. Ekong, Joel I. Okon, and Ubong E. Effiong
Department of Economics
University of Uyo, Uyo
Email:ubongeffiong78@yahoo.com
ABSTRACT
The study aimed at examining the influence of fiscal policy on unemployment in Nigeria for the period 1990-2018 with a view to ascertaining the effectiveness of fiscal policy tools in counteracting the problem of unemployment. The study used unemployment rate as the dependent variable; tax revenue, capital expenditure, recurrent expenditure and external debt as proxies for fiscal policy while inflation rate and exchange rate were introduced as control variables. Stationarity tests were carried out on the variables using the Augmented Dicker Fuller and Phillips-Perron Tests and the Johanson Co-integration Test was employed to ascertain the short-run and long-run relationship among the co-integrating equations. The OLS estimate was employed to determine the relationship between the dependent and independent variables. It was found that capital expenditure, recurrent expenditure, external debts, inflation rate and exchange rate have a positive relationship with unemployment in the long-run, only tax revenue was found to have an opposite relationship with unemployment rate. However, in the short-run, capital expenditure, recurrent expenditure and external debts reduced unemployment rate whereas inflation rate, exchange rate and tax revenue were positive. It is recommended that borrowed funds be used only for the intended productive purposes. There should be strict monitoring of government projects to ensure that every naira spent counts. The fight against corruption must be upheld to restore sanity into the polity and accountability in the use of public funds. There is need to transmogrify the economy into a productive hub, this will reduce the rate of external borrowing, inflationary pressures and enhance effective and beneficial exchange rate policy. Tax policies/regimes should not be such that discourage investments and other productive economic activities. There is need to urgently address the lack of sustained political will to implement viable economic policies and strictly adhere to every aspect of those policies. Any recommendations will be useless if not implemented to the later.
Key words: Fiscal Policy, Unemployment
