-
Unemployment And Inflation In Nigeria
CHAPTER ONE -- [Total Page(s) 4]
Page 2 of 4
-
-
-
Also, empirical analysis carried out by other economists over the years,
have in one way or the other disproved the authenticity of the
trade-off thesis as postulated by Phillips. Both high inflation rates
and high unemployment rates were discovered to co-exist, giving rise to
what has come to be known as stagflation. These twin problems are
currently crucial elements of most Less Developed Countries‟ economic
crisis.
Unemployment and inflation are issues that are central to
both the social and economic life of every country. The existing
literature refers to unemployment and inflation as constituting a
vicious circle that explains the endemic nature of poverty in developing
countries. And it has been argued that continuous improvement in
productivity- which brings about the adequate supply of goods and
services - is the surest way to breaking the vicious circle.
The
Nigerian experience of the crisis of unemployment and inflation was
delayed until the early - and mid- 1980s with the collapse of oil prices
on which the economy had become dangerously dependent on. Before the
1980s, previous records showed that the Nigerian economy was able to
provide jobs for its increasing population, and was able to absorb
considerable imported labour in the scientific sectors. The wage rate
compared favourably with international standards, the inflation rate was
moderate, and there was relative industrial peace in most industry
sub-groups.
The oil boom in the 1970s led to the mass migration of
youths into the urban area, seeking to get work. However, following the
recession experienced in the 1980s, the available data revealed that,
the problem of unemployment started to manifest, precipitating the
introduction of the Structural Adjustment Programme (SAP), the rapid
depreciation of the naira exchange rate and the inability of most
industries to import the raw materials required to sustain their output
levels.
A major consequence of the rapid depreciation of the naira
was the sharp rise in the general price level (inflation), leading to a
significant decline in the real wages. The low wages in turn fuelled a
weakening purchasing power of wage earners and a decline in the
aggregate demand. Consequently, industries started to accumulate
unintended inventories and, as a rational economic agent, the
manufacturing firms started to rationalize their market prices. With the
simultaneous rapid expansion in the educational sector, new entrants
into the labour market increased beyond absorptive capacity of the
economy. Thus, the avowed government‟s objective of achieving “full
employment†failed.
The research work is therefore intended to access the applicability of the trade-off thesis in Nigeria.
1.2 STATEMENT OF THE PROBLEM:
Anthony
De Mello, in his famous book titled „Awareness‟ stated that, “Life is a
banquet. And the tragedy is that most people are starving to deathâ€.
This situation is prevalent in the Nigerian economy. Nigeria is richly
blessed with abundant human and natural resources, but still finds
itself battling with high unemployment and inflation rates, due to years
of neglect of the social infrastructures and general mismanagement of
the economy. Previous governments in their own capacities have been
embarking on various policies to control inflation and reduce the level
of unemployment in the country. However, government efforts have not
yielded the desired results as these problems are known to be
skyrocketing rather than plummeting.
The problem of inflation in
Nigeria was brought about by the oil glut in 1981, which resulted into
balance of payment deficits leading to foreign exchange crisis that
necessitated various measures of import restrictions. These restrictions
reduced raw materials for domestic production and spare parts for
machinery operation. The resultant shortage of goods and services for
local consumption spurred the inflation rate to rise from 20% in 1981 to
39.1% in 1984 (Itua, 2000).
CHAPTER ONE -- [Total Page(s) 4]
Page 2 of 4
-
