Impact of Public Expenditure on Unemployment Reduction in Nigeria

Abstract

This study was informed by the persistent rise in unemployment rate in Nigeria despite government increased spending over the years. This work empirically investigates the effect of public expenditure on unemployment reduction in Nigeria. In executing the study, the OLS techniques was applied after determining stationarity of the study variables using the ADF Statistic, as well as the co-integration of variables using the Johansen Approach. , the study discovered that the variables are stationary and have a long term relationship among the variables in the model. From the result of the OLS, it is observed that corruption has a positive impact while government capital and recurrent expenditure have a negative impact on unemployment reduction in Nigeria. This means that if corruption continually increases, it will also continue to increase unemployment in Nigeria, while increase in government capital and recurrent expenditure will bring about a decline in unemployment rate in Nigeria. From the regression analysis, it is observed that all the variables conform to the a priori expectation of the study. The F-test conducted in the study shows that the model has a goodness of fit and is statistically different from zero. In other words, there is a significant impact between the dependent and independent variables in the model. Finally, both R2 and adjusted R2 show that the explanatory power of the variables is moderately high and/or strong in explaining the international trade in Nigeria. Consequently, the study recommends that: The government should direct capital investment on education, electricity generation, economic services, and health. This will improve the productivity of the nation’s workforce and consequently reduce poverty. The government should also channel recurrent expenditure on agriculture, construction, transportation and communication. This will help improve food security, reduce cost of building, and enhance transportation and communication through regulations by government agencies thus reducing poverty. Stringent legislations should be put in place to fight corrupt activities. This will help keep the public sector honest, transparent and accountable.