STATISTICAL ANALYSIS ON THE IMPACT OF SOME MACRO ECONOMIC VARIABLES ON RATES OF UNEMPLOYMENT IN NIGERIA

This research work employed the Fully Modified Ordinary Least Squares (FMOLS) proposed by Philips and Hansen and the error correction Model (ECM) to investigate the long-run and short- run determinants of unemployment rate in Nigeria. In order to achieve this annual data on unemployment rate, Interest rate, exchange rate and population growth from 1981 to 2016 was collected from Central Bank Statistical Bulletins and the World Bank Website. The Augumented Dickey-Fuller (ADF) Test revealed that the macroeconomics variables are stationary at first difference while the Johansen and Juselius Cointegration test revealed that the variables are conintegrated. The long-run relationship of inflation rate, interest rate, exchange rate and population growth on unemployment rate from FMOLS model revealed that the coefficients of exchange rate and population growth are positive significant in relation to unemployment rate while interest rate is negative and significant as it relates to unemployment rate. However, the coefficient of inflation rate is negative as it relates to unemployment but insignificant. The short run relationship among these macroeconomic variables revealed that the coefficient of the ECM (-1) is negative and statistically significant at 5% level which further indicates that the system corrects its previous period disequilibrium at the speed of 48.93% yearly. The estimated models are stable and free from serial correlation, multicollinearity and spurious regression. This study conclude that high exchange rate and population growth could lead to increase in unemployment rate in Nigeria. This study therefore recommends that the government should develop the industrial sector and non-oil sector boost export in Nigeria thereby reducing unemployment.