Unemployment and Current Account Imbalances in Nigeria

Abstract

This study explores the link that exists between unemployment and current account imbalances in Nigeria from 1980 to 2014. It adopted the ARDL bounds test approach. The result gave evidence for a long-run relationship between the variables and also revealed a significant and inverse relationship between current account surplus and unemployment. Showing that a 1% increase in current account balances in favour of export will lead to a drop in the unemployment rate by 0.117893%. This, therefore, implies that current account deficit will cause a fall in employment and in turn a rise in the unemployment rate. Consequently, current account deficit leads to wage differentials in favour of the exporting countries as against importing countries, like Nigeria, and as such triggers a high rate of unemployment. We strongly recommend diversification of the country’s export-base which may increase employment opportunities and in turn reduce the unemployment rate. Keywords: Unemployment, Employment, Current Account Balances, Balance of payment, Output growth