Revisiting the trade and unemployment nexus: Empirical evidence from the Nigerian economy

• DOI: http://doi.org/10.1002/pa.2053
• Author: Ahmet Ay,Simplice Asongu,Festus Victor Bekun,Stephen Taiwo Onifade
• Published date: 01 August 2020
• Date: 01 August 2020

ACADEMIC PAPER

Revisiting the trade and unemployment nexus: Empirical

evidence from the Nigerian economy

Stephen Taiwo Onifade

1

| Ahmet Ay

1

| Simplice Asongu

2,3

|

Festus Victor Bekun

4

1

Department of Economics, Selçuk University,

Konya, Turkey

2

African Governance and Development

Institute, Yaoundé, Cameroon

3

Department of Economics and Development

Studies, Covenant University, Ota, Nigeria

4

Faculty of Economics Administrative and

Social sciences, Istanbul Gelisim University,

Istanbul, Turkey

Correspondence

Festus Victor Bekun, Faculty of Economics

Administrative and Social sciences, Istanbul

Gelisim University, Istanbul, Turkey.

Email: fbekun@gelisim.edu.tr

The recent exacerbation of unemployment crisis in Nigeria stands to be a serious

threat to both socio-economic stability and progress of the country just as the report

from the Bureau of Statistics shows that at least over 8.5 million people had no gain-

ful employment at all as at the last quarter of the year 2017. It is on the above pre-

mise, that the present study explores the link between trade and unemployment for

the case of Nigeria with the intention of exploring how the unemployment crisis has

been impacted within the dynamics of the country's trade performance. The empiri-

cal evidence shows that the nation's terms of trade were insignificant to unemploy-

ment rate, while trade openness and domestic investment, on the other hand, have

significant opposing impacts on unemployment in Nigeria over the period of the

study. Further breakdowns from the empirical analysis also revealed that the Philips

curves proposition is valid within the Nigerian economic context, while the evidences

for the validity of Okun's law only exist in the short-run scenario. Based on the

empirical results, we recommend that concerted effort should be geared toward stim-

ulating domestic investment by providing adequate financial and infrastructural facili-

ties that will promote ease of doing business while utmost precautions are taken to

ensure that unemployment crisis is not exacerbated when combating inflation in the

economy in the wake of dynamic trade relations.

1|INTRODUCTION

The benefits of trade to economic growth and development have

been highlighted in a bulk of literature, and these benefits have been

upheld by empirical evidences that are repleted in a great number of

studies on the trade discourse

1

. However, one of the big questions

that is still open to extensive discussion is whether free trade has

helped to create more jobs or on the contrary, if it is detrimental to

job creation, going by the rising unemployment rate and job losses

that have cut across various segments of the labor force in some

countries despite the continued decline in unemployment rate on the

global level in the wake of changing trade dynamics and supports for

free trade? In 2018, the global unemployment rate stood at 5% with

over 170 million people estimated to be unemployed with another

140 million people falling under the category of the underutilized

labor in the same year (International Labour Organization [ILO]ILO,

2019).

Since Because unemployment is a major social-–economic crisis

ravaging many economies, its rate has turned out to be one of the

most widely utilized indicators in labor analysis. However, the parame-

ters for measuring this rate often vary from one nation to another

(National Bureau of Statistics, NBS, 2018a, 2018b). The peculiarity of

1

The study of Sachs and Warner (1995) revealed that economic reformations that give room

to more openness can pave ways for better economic growth performances especially in

developing countries, although their work has attracted various criticisms from many other

studies especially that of Rodríguez and Rodrik (2001) on the groundof the appropriateness

of the measurement of openness and general issues that border on endogeneity problems.

However, studies like that of Irwin and Tervio (2002) appear to have corroborated the

findings of Sachs and Warner (1995) as they noted that nations that have larger trade to

GDP ratios have higher incomes even after they have controlled for trade endogeneity in

their studies using data spanning from the pre-World War 1 to pPost- World War.

Received: 5 September 2019 Revised: 1 October 2019 Accepted: 1 November 2019

DOI: 10.1002/pa.2053

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