+234 813 0686 500
+234 809 3423 853
info@grossarchive.com

EFFECT OF DEFICIT FINANCING ON UNEMPLOYMENT RATE IN NIGERIA

  • Type:Project
  • Chapters:5
  • Pages:65
  • Format:Microsoft Word
(Banking and Finance Project Topics & Materials)
ABSTRACT
Deficit Financing plays an extraordinary and growing role in achieving full employment in Nigeria sustainable economic growth, price stability and poverty reduction. Theoretically, both Keynesian and neoclassical economists provided tools for government's intervention, particularly with regard to government budget deficit financing. This study is aimed at examining the effect of deficit financing on unemployment rate in Nigeria. The study adopted the ex-post facto research design. Annual time series data for 44years were collected from Central Bank of Nigeria Statistical Bulletin, Federal Office of Statistics and World Bank Handbook of Statistics for the period of 1970-2013. The study indicate that the validity of long run equilibrium relationship between unemployment (UNP) and the explanatory variables (external source of deficit financing (EXF), ways and means source of deficit financing (WM), banking system source of deficit financing (BSF), non-banking public source of deficit financing (NBPF), interest rate (INTR) and exchange rate (EXR)). More so, it is concluded that the Error Correction Model (ECM) is not a spurious model as the computed R2value of 0.913214 is lower than 1.334885 (Durbin Watson Statistics). However, the R2 shows that 91.32% of the total variations in unemployment rate (UNP) is accounted for, by the explanatory variables (external financing (EXF), ways and means (WM), banking system financing (BSF), non-banking public financing (NBPF), interest rate (INTR) and exchange rate (EXR)). The result also indicates that external source of deficit financing (EXF), ways and means source of deficit financing (WM) and interest rate (INTR) has negative and insignificant implications on economic stability through unemployment level in Nigeria while banking system source of deficit financing (BSF), non-banking public source of deficit financing (NBPF), and exchange rate (EXR) has positive and significant implication on economic stability in Nigeria except non-banking system financing which indicates insignificant. The implications of this result is that deficit financing through external source of deficit financing (EXF) and ways and means source of deficit financing (WM) reduces the level of unemployed individuals in Nigeria which maintain economic stability in the short and long run. The result also revealed that deficit financing through banking sector source of deficit financing and non-banking public source of deficit financing increases unemployment and thereby causing instability in the economy. Unemployment rate  (UNP) stands high in 1980 and dropped in 1981. The number of unemployed has been fluctuating from 1970 to 1987, the unemployment rate has continuously witnessed an increase with the highest level of unemployment registered from 1988 to 2013. In conclusion, deficit financing is positively related to unemployment rate indicating that sound policies are needed to achieve economic stability in Nigeria through reduction of the level of unemployment rate in Nigeria.  
KEYWORDS: Deficit Financing, Unemployment Rate, ECM, External Financing, Ways and Means 
INTRODUCTION  
In Nigeria, budget deficit has been blamed for causing much economic crises, high inflation, poor investment performance and growth (Appah and Chigbu, 2013). One of the most important objectives of fiscal policy is to reduce national debt and to check the interest payment on such debt from rising so as to prevent high deficit in the future. However, Nigerian government budget deficit witnessed an increase in the past decades. For instance, from 1981, deficits increased from N3.9billion to N8.2billion in 1986 and it further increased to N15.1billion in 1989. From 1990, the rising trend of budget deficit continued except in 1995 when the budget witnessed or registered a surplus of N1billion. In 1998, an overall deficit jumped to N133.3billion and in 2002, it increased up to N301.4billion. Starting from 2003, government budget deficit declined from N202.7billiom to N188.2billion, N150.6billion and N101.3billion in 2003, 2004, 2005 and 2006 respectively. Another increase was witnessed from 2007 at N107billion to N1.5trillion in 2013 (CBN, 2014).  
Meanwhile, the value of deficits as a percentage of Gross Domestic Product (GDP) declined to -0.1 percent in 1999. The share of deficits in total GDP has been declining from -2.0 percent in 2003 to -1.1 percent in 2005 and -0.6 percent in 2006. Nigeria recorded budget deficit equal to 1.80 percent of the country's GDP in 2013 (Nigerian Budget Office, 2014). The Nigerian government budget averaged 2.10 percent of the GDP from 2006 up till 2013, reaching an all-high  4.60 percent of GDP in 2008 and also recorded low of -6.6 percent of GDP in 2009 (Nigerian Budget Office, 2014).  
Furthermore, the implication of deficit financing on economic stability through growth, stable inflation and unemployment rate has been one of the subjects of a long standing debate in macroeconomics. Three views emerged from the literature revealing the relationship between budget deficit and macroeconomic variables. Keynesian economics supports the ideas that budget deficit has, by the working of the multiplier, a positive effect on the macroeconomic activities (Appah and Chigbu, 2013). Neoclassical economist argues that budget deficit has negative effects on economic stability as much as Ricardian equivalence approach supports the view of neoclassical economist (Appah and Chigbu, 2013). These three contrasting views show that a large budget deficit is a source of economic instability. Ojong and Hycent (2013) further observed that deficit financing in Nigeria is characterized by poor policy implementation, inconsistence of government macroeconomic policies, low growth of private investment, decline growth in real sector and high level of indiscipline in public sector.   
Based on the forgoing relationship between deficit financing and economic stability, a study such as this is necessary. This study, therefore, is designed to investigate the implications of deficit financing on economic stability in Nigeria.  
Statement of the Problem   
The issue of deficit financing certainly is not new but the level of economic stability of the last decades has brought about more interest in fiscal policy issues that will encourage growth. The government expenditure has been increasing each year because of government spending activities. An increase in government revenue is not sufficient to finance increased government expenditure which leads to deficit. Government revenue has not been ever efficient and it causes large difference between expenditure and revenue. Government always borrows from both internal and external sources to finance such large difference.
EFFECT OF DEFICIT FINANCING ON UNEMPLOYMENT RATE IN NIGERIA

Share This

Details

Type Project
Department Banking and Finance
Project ID BFN0844
Price ₦3,000 ($9)
Chapters 5 Chapters
No of Pages 65 Pages
Format Microsoft Word

500
Leave a comment...

    Details

    Type Project
    Department Banking and Finance
    Project ID BFN0844
    Price ₦3,000 ($9)
    Chapters 5 Chapters
    No of Pages 65 Pages
    Format Microsoft Word

    Related Works

      ABSTRACT This study is motivated by the fact that federal expenditure and money supply as a tool on the rate of unemployment. But to which extent, these instrument have contributed either to worsen the problem of unemployment or alleviate it. To... Continue Reading
    ABSTRACT This study is motivated by the fact that federal expenditure and money supply as a tool on the rate of unemployment. But to which extent, these instrument have contributed either to worsen the problem of unemployment or alleviate it. To investigate... Continue Reading
    ABSTRACT This study examined the rate of unemployment in Nigeria. The data used was a secondary data collected from Nigeria Bureau of Statistics (NBS) on forty one observations. The research studied the effect of some factors on unemployment rate in Nigeria, the factors includes gross... Continue Reading
    ABSTRACT This study was carried out to assess the role of National Directorate of employment (NDE) on the unemployment rate in Nigeria. The target population of the study was the youths in Oyo town, OyoState. However, the number of participants was... Continue Reading
    Cause and Effect of Youth Unemployment in Nigeria TABLE OF CONTENTS Pages Title page  Certification  Dedication  Acknowledgement Table of content Abstract Certification CHAPTER ONE  Introduction  Statement of the problem  Significance of the study  Justification of study  Relevant research question Aims and objectives of the study ... Continue Reading
    CHAPTER ONE INTRODUCTION 1.1.          Background to the Study The growth and development of the Nigerian economy has not been stable over the years as a result, the country’s economy has witnessed so many shocks and disturbances both internally and... Continue Reading
    CHAPTER ONE INTRODUCTION 1.1    BACKGROUND OF THE STUDY The issue of unemployment on youths can not be overemphasized like (2009), posited that ‘Nigeria as a country is often described as a rich country majority of poor citizen where 50% of the citizen live below poverty level. Unemployment has been a problem in Nigeria especially since... Continue Reading
    CHAPTER ONE INTRODUCTION 1.1     Background of the Study One of the greatest challenges facing the Nigeria economy is unemployment which has maintained a rising trend over the years. The total labour force in Nigeria is made up of all persons aged 15-64 years excluding students, home keepers, retired persons and stay-at-home to work or not... Continue Reading
    ECONOMIC EFFECT OF UNEMPLOYMENT IN THE NIGERIA ECONOMY (A STUDY OF ENUGU STATE) ABSTRACT Going through the present investigation of problem & prospects of management of unemployment in Nigeria, many finding and results were made in the service and finance oriented organization. The result postulated that prospects of management of unemployment... Continue Reading
    ABSTRACT This research on ‘Effect of unemployment on the economic development of Nigeria, on Nkanu West Enugu State. The research work objectives to: identify factors that cause unemployment in Nigeria, investigate the extent to which government has helped in tackling unemployment problems in Nigeria, determine programmes that can help to tackle... Continue Reading