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The Analysis Of The Impact Of Unemployment And Inflation On Balance Of Payment In Nigeria (1980-2010)
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1.2 STATEMENT OF PROBLEM
Inflation, unemployment
and maintenance of stable balance of payment are all basic
macro-economic problems facing every government in the world today.
Inflation causes uncertainty about future prices, thereby affecting the
decision on expenditure, savings and investment and causes misallocation
of resources. High inflation equally boosts growth and development
policies of the policy makers. Our concern on unemployment is based on
the fact that high unemployment leads to loss of output and reduction in
aggregate income, it increases inequality since the unemployed loose
more than the employed. Prolonged unemployment can cause misery, social
unrest, loss of confidence and hopelessness for the unemployed; more so
unemployment usually unwanted by the unemployed.
Nigeria’s balance of
payment have continued to show deteriorating trends. The cause of this
deterioration includes, the import syndrome, mounting external
indebtedness, hostile international environment, over dependence on
crude petroleum etc, there is a link among these variables, which after
time leave government confused and defected. This is because low
unemployment is associated with a rapid rate of inflation; similarly
high unemployment implies self-labor markets and consequent inability to
push up wages. Consumers income and spending and also depressed and
demand condition for rapid inflation are therefore unfavorable.
Therefore, there is a tradeoff between the rate of inflation and
unemployment. Price stability can only occur at the cost of high
unemployment rate and low unemployment rate can only occur at the cost
of inflation.
However, the Nigerian economy does not reflect this so
called tradeoff. This is because experience has shown that rising
inflation also leads to unemployment rate increase, despite the monetary
and physical policies by the authoritative in Nigeria.
1.3 OBJECTIVE OF THE STUDY
The
objective of the study; “an empirical analysis of the link between
inflation, unemployment and balance of payment in Nigeria†includes the
following:
i. To analyze the impact of inflation and unemployment on balance of payment.
ii. To determine the rate of inflation or unemployment that hampers economic growth and hinders development.
iii. To make useful recommendation based on the empirical find.
1.4 HYPOTHESIS OF THE STUDY
This
hypothesis is formulated to acquire necessary information and basic
assumption of the study. Hypotheses are formulated in two forms namely:
I.
Null hypothesis (Ho): Is a hypothesis which states a no difference or
no relationship exists between two or more variable. It also states a
negative direction.
II. Alternative hypothesis (Hi): It specifies any
of the possible conditions not anticipated in the null hypothesis and
it also states the positive direction.
Ho: Inflation and unemployment have no effect on balance of payment in Nigeria.
Hi: Inflation and unemployment have an effect on balance of payment in Nigeria.
1.5 SIGNIFICANCE OF THE STUDY
The study is significant in many ways:
i. It will bring into live light the salient features of the issues being discussed.
ii.
The study will aid the police makers in Nigeria in terms of management
policies to curb inflation, reduce unemployment especially among the
youths etc.
iii. The study will underscore some of inadequacies of
the authorities in their quest to solve the macro-economic problems and
thus providing a spring board for better decision.
1.6 SCOPE AND LIMITATION OF THE STUDY
The
study was carried out in Nigeria to establish the import between
inflation and unemployment on balance of payment. The scope of the study
covers from 1980-2010.However in the study of this nature there is
usually a possibility of encountering certain difficulties which
eventually act as constraints to the validity of conclusion arrived at.
These difficulties did not discourage the researcher as the challenges
were boldly faced. The limitation to the study includes: the financial
difficulties in an effort to have a sufficient research materials to be
able to write extensively on the subject matter, the researcher was
faced with some financial predicament considering high cost of not only
education materials coupled with the high transport fare. Again time
factor, the research work was conducted simultaneously with normal
academic work within a short period of time in which some valuable
information could be obtained.
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