Fiscal and Monetary Policy for Decent Employment in Nigeria

Abstract

The level of unemployment in Nigeria has risen persistently, increasing the risk of the non-achievement of the SDG goal 8 – decent work and economic growth. Economists have documented that monetary and fiscal policies are effective tools for influencing economic variables such as the unemployment rate. In this study, we attempt to investigate and compare how these tools affect unemployment level in Nigeria. This study comes at an important time in Nigeria when the economy just exited a recession and is still experiencing low production and rising unemployment. This study investigates the nexus between macroeconomic policies and unemployment using the Autoregressive Distributed Lag (ARDL) estimation technique. The study finds that government capital expenditure helps to reduce unemployment in the long run only. On the other hand, the currency in circulation and the real GDP help to reduce unemployment rate in both the short and the long run. The study recommends a policy mix, which proposes that government expenditure be judiciously employed, and simultaneously, the Central Bank of Nigeria (CBN) should regulate the supply of money into the economy to not trigger inflation and unemployment.