Abstract
Among the macroeconomic challenges facing Nigeria as a country are weak growth of the economy, ever increasing unemployment rate, and increasing inequality occasioned by increasing poverty. In trying to mitigate these challenges, the Nigeria government usually run aborrowing. In all these, the unemployment rate keep rising year-on-year. In this study, we tried to find out whether borrowing will come to the rescue in reducing unemployment in Nigeria, using time series data from 1981 - 2019. Employing the VECM model, we carried out the stationarity and cointegration tests respectively. While the stationarity test confirmed all variables being stationary at I(1), existence of cointegration was also confirmed indicating a relationship between public debt and unemployment which turned out to be an inverse relationship. A high value of ECM was recorded. It was found that unemployment granger causes government debt and debt servicing. The overall result shows that public debt have rendered little or no assistance in combating unemployment in Nigeria. While we do not discourage government from borrowing for the provision of critical infrastructures, corruption should be put in check so as to allow the amount of borrowing be reflected on the infrastructures available, as public debt also have some adverse effects on the economy.
Highlights
The sustained debate on the issue of economic growth as a panacea for the reduction of unemployment has been resolved by the Keynesians view of fiscal policy
While time series data of the total external debt, debt servicing, government total debt and government expenditure are sourced from Central Bank of Nigeria (CBN) statistical bulletin, 2019, unemployment rate was sourced from National Bureau of Statistics (NBS) annual report, 2017 and 2019
The cointegrtaion, VECM, Granger causality and variance decomposition functions have been employed in analysing time series data sourced from the National Bureau of Statistics (NBS)30 and the Central Bank of Nigeria (CBN)31 for the period from 1981 to 2019
Summary
The sustained debate on the issue of economic growth as a panacea for the reduction of unemployment has been resolved by the Keynesians view of fiscal policy In their view, government’s intervention is necessary to enable market economies stabilize by generating high aggregate demand that will be enough in advancing full employment levels. Government’s intervention is necessary to enable market economies stabilize by generating high aggregate demand that will be enough in advancing full employment levels This is on the assumptions by the Keynesians in the 1930’s that as long as there is unemployment, public debt will not have a crowding out effect on the private sector (Meedee & Nenbee, 2011; Fideli & Forte, 2012; Egbulonu & Amadi, 2016).. In trying to boost the economy, one of the strategies used by governments is debt accumulation by way of borrowing This is done to increase the activities in the country’s economy (Hoag & Hoag, 2006; Ncanywa & Masoga, 2018).. Government expenditures financed using public debt has its detriments (Tsoulfidis, 2007).
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