IMPACT OF POVERTY ON THE ECONOMIC GROWTH OF NIGERIA

IMPACT OF POVERTY ON THE ECONOMIC GROWTH OF NIGERIA

CHAPTER ONE

GENERAL INTRODUCTION

1.1Background to the study

Poverty is a plague-affecting people all over the world and it is a condition that denies individuals the right to exercise their full potentials. There is no universally accepted definition of poverty, but poverty can be defined as having insufficient income to meet the basic human needs of life. If the real national income of a country is small that country will be poor, and a higher standard of living for its people can be achieved only by an increase in the total volume of production. Poverty often been defined as a situation of low income or low consumption.

Absolute and Relative poverty can also be seen from two perspective microeconomics and macroeconomics. In micro economics terms, poverty refers to a situation in which individual persons or households are not able to satisfy their basic needs. From a macroeconomic perspective, poverty exists when the average inhabitants of a country live below the minimum subsistence level. Thus, while the macroeconomic concept specifies the country, micro economic perspective is concerned with households or individuals.

Governments concern for the fate of the poor in developing countries has heightened in recent years but the economies of these countries were constrained with a rather hostile external and internal economic and environmental hardship. Some of these entanglement encountered are a recurring external debt-servicing burdens, disequilibrium in terms of trade, high and widespread unemployment, high rate of inflation, capital flight, low capacity utilization and high population growth. To that extent, sharp criticisms emanated from the various corners of the country about the inability of the government to design and implement strategies for meeting the basic human needs of the society so as to ensure a just and egalitarian society. Apparently, the plights of the poor and the need to rearticulate development programmes have dominated discussions of contemporary schemes. However, Nigeria is yet to formulate a rehabilitative welfare package directed towards alleviating poverty problems despite the attention and seriousness it deserves. A large proportion of Nigerians in the rural area still lack access to the basic social services. This is unconnected with the nature of the strategies, which are broad based and not targeted at any particular group. Various development plans designed to cushion the social welfare of the people has not been implemented to the latter. Better still, the expenditure structures of the government really give credence and confirm her unflinching commitment to the people’s welfare. Yet, mass poverty has remained the most prevalent socio-economic problem in Nigeria society.

Poverty is one of the intractable problems facing mankind today. In 1995, an estimated 1.3 billion people out of the estimated 5.8 billion people in the world were living in the shackles of extreme poverty, living on less than one dollar a day (Human Development Report, 1998)Nigeria has one of the greatest development potentials in Africa given the vastness of her resources and above all her rich human resource endowment. But regardless of these potentials Nigeria is still among the poorest countries of the world. The economy is mired by multiple difficulties. On the basis of widespread economic crisis, and the recent global economic meltdown, the country is unable to raise the standard of living of its citizens to an appreciable height. Thus poverty, in both absolute and relative terms, constitutes one of the most serious problems confronting Nigeria. Statistically, between 1960 and 1980, the poverty level covered about 28.0 percent of the population; by 1996 it rose alarmingly to about 66 percent of the population (Aliju, 2001).

According to the United Nation Development Program Human Development Report (2008-2009) which combined such components as; level of inequality, life expectancy at birth, standard of living and access to knowledge, and education, between 2004 and 2009 poverty in Nigeria has worsened from 0.43 to 0.49. This shows that despite its vast resources, Nigeria ranks among the 25 poorest countries of the world. In fact, poverty has been a serious challenge to governments in Nigeria. Its effect, which includes lack and deprivation in the basic necessities of life, is worrisome.

Poverty humiliates and dehumanizes its victim Ukpong (1996). To this end government and people in authority almost always strive to ensure that adequate structural programs are enshrined to see that poverty if not eradicated, is reduced to the barest minimum. Poverty alleviation strategies ranging from Operation Feed the Nation of 1978, the Green Revolution of 1982, the Directorate of Foods Roads and Rural Infrastructures DFFRI, the National Directorate for Employment NDE, Poverty Alleviation Program PAP, the National Poverty Eradication Program, NAPEP up to the Seven – Point Agenda were all attempts made by various governments in the country in order to curb the menace of poverty.

Finally, the indicators of poverty in Nigeria will remain alarming. Poverty alleviation in Nigeria requires among other strategies, the access of the poor to productive assets, the raising of their returns on the assets, increasing their access to education and health services, improving their employment opportunities and supplementing their resources with income or resource transfer.

1.2 statement of research problem

Poverty in Nigeria has continued to growth worse and wide spread. Firstly, the high rate of unemployment may also be responsible for poverty in Nigeria. The inability to get good jobs that produce a decent income leads to low productivity. In addition, many graduates wander the streets without any reasonable prospect of gainful employment in Nigeria. Bureau of Statistics puts Unemployment Rate in Nigeria to 23.9% percent in the third quarter of 2018 from 18.80 percent in the second quarter of 2018. Unemployment Rate in Nigeria averaged 10.63 percent from 2006 until 2018, exceeding an all time high rate of 19.70 percent in the fourth quarter of 2009 and a record low of 6.4 percent in the fourth quarter of 2014. By implication, it means that if Nigeria’s population is 186million, which means about 35 million Nigerians where unemployed as at 2018 (NBS 2018).

Secondly, inadequate education often stands as a bottleneck in any economy; according to the World Bank (2007) education plays an important role in economic growth and national productivity as well as innovation and democratic values. Illiteracy as well as a lack of education is common in poor countries. This is because governments in sub-Saharan African countries lack the resources to provide adequate public schools in rural areas, such that less than 60% of children in sub-Saharan Africa have an elementary education. Most times poor people in these countries drop out of schooling to enable them to concentrate on making a minimal wage for a living. This prevents people from having the opportunity to secure decent jobs and opportunities to develop themselves to enable them to fully participate in society. In Nigeria the educational system is very poor when compared with other countries in the world.

Thirdly, Social and economic unrest from the domestic and international scene arose from the failure of the government, which lacked the ability to successfully implement political transition programmes that may have actualized stability such that distortion resulted in recession. A restricted domestic market prevented productive ventures from flourishing because of and withdrawal of investment from such country and subsequent job and economic insecurity. The economy of Nigeria advanced 2.28 percent year-on-year in the third quarter of 2019 compared to an upwardly revised 2.12 percent rise in the previous period. It was the fastest expansion since the fourth quarter of 2018, as oil output grew the most in over three years. GDP Annual Growth Rate in Nigeria averaged 3.81 percent from 1982 until 2019, reaching an all time high of 19.17 percent in the fourth quarter of 2004 and a record low of -7.81 percent in the fourth quarter of 1983 (NBS, 2018).

Fourthly, Corruption has become a cankerworm in Nigeria such that government revenue is shared among political office holders and their cronies, while the masses are left to wallow in poverty. Nigeria is the 144 least corrupt nation out of 175 countries, according to the 2018 Corruption Perceptions Index reported by Transparency International. Corruption Rank in Nigeria averaged 121.48 from 1996 until 2018, reaching an all time high of 152 in 2005 and a record low of 52 in 1997.This indicates that the well-being of the people are practically ignored by political leaders. Thus, corruption has led to increased poverty and income inequality and has contributed to increased crime rates in Nigeria.

Fifthly, Inequality: Inequality implies having large discrepancies in resource distribution, whether one is considering income, consumption or other welfare indicators or attributes (Oyekale, Adeoti&Oyekale 2007). Income disparity occurred in Nigeria as a result of the high economic growth that Nigeria experienced from 1965 to 1975.The result of the 2018 survey by NBS in Nigeria shows that persons between 15 and 64 (the economically active population), constituted 56.3 percent, while those aged 65 years and above constituted 4.2 percent. Before now, not a few economic watchers have queried the recorded Gross Domestic Product, GDP, growth rates in Nigeria, which over time are contrary to the growing rate of poverty. Income inequality has therefore increased the dimension of poverty in the country.

Finally, Laziness: Laziness is rampant among Nigerians and it has become a common disease most especially from youths who hail from wealthy households. Everyone wants to be comfortable, but they are not ready to work towards it. This often leads to greed such that people do whatever possible to keep the family wealth for themselves. In most families, everyone depends on the breadwinner, who works hard to keep the family going, and when he dies the family become poor because the dependants are lazy; they subsequently mismanage the funds that are bequeathed to them and become poor. In most Nigerian families, the death of the breadwinner means the death of the whole family’s fortunes; because everyone depended on him or her to provide for the needs of the household (Aigbokhan, 2008).

1.3 Research questions.

The research work sought to answer the following research questions.

i. What are the impacts of poverty determinants on the growth of Nigerian economy?

ii. What is the trend of poverty on the growth of Nigerian economy?

 1.4 The aim and objectives of the study

The major objective of this research is to examine the impact of the determinants of poverty on the growth of Nigerian economy. Specific objectives of the research include the following.

i. To evaluate the impacts of poverty determinants on the growth of Nigerian economy.

ii. To examine the trend of poverty on the growth of Nigerian economy.

1.5 Statement of research hypothesis

The following hypothesis were determined for testing

Ho: that poverty determinants has no significant impact on the growth of Nigerian economy

H1: That poverty determinants has significant impact on the growth of Nigerian economy

1.6 The significance of the study

The significance of this research work is to determine the various determinants of poverty in the sense that it will give an insight to the government in the formulation of appropriate policies that will effectively reposition the productive sector. This will efficiently serve the developmental needs of the country and also give plausible solutions to ameliorate poverty in the drive for Nigeria to attain economic development.

The study is also expected to serve as a stepping stone to other researchers to acquire more facts about poverty and it’s implications on economic growth as evident in Nigeria gross domestic product (GDP).

1.7 Scope and limitation of the study

The study, implications of the determinants of poverty on the growth of Nigerian economy. it covered a period 20 years (1999 – 2018). The area of major concern is the determinants of poverty, its implications and effect on the growth of Nigerian economy. Due to the vitality and vast nature of the topic under investigation, one of the major limitations was how to approach the study to capture the most significant variables and that of inadequate information or materials like books, journals and periodicals to consult for knowledge development which will enhance a better result. Another hindrance was that of money which restricted the coverage of the work at hand. The last hindrance was that of time which was shared among several activities. However, a drastic step was taken to obtain data from reliable sources such as CBN statistical bulletin, NBS statistical publications etc. to overcome such limitations

1.8 Organization of the study

This research work is divided into five (5) chapters.

Chapter one contains the background to the study, statement of research problems, The research questions, aims and objectives, hypothesis testing, significance of the study, scope and limitation and organization of the study, chapter two undertakes the review of relevant literature on poverty, chapter three considers the theoretical framework and features of poverty as well as delving to criteria for measuring poverty in Nigeria, chapter four focuses on the research methodology, data analysis and interpretation of results and chapter five contains the summary of findings, conclusions and recommendations.

A STUDY ON THE IMPACT OF AGRICULTURAL MARKETING ON NIGERIA’S ECONOMY

A STUDY ON THE IMPACT OF AGRICULTURAL MARKETING ON NIGERIA’S ECONOMY

(A CASE STUDY OF FEDERAL MINISTRY OF AGRICULTURE, ABUJA)

CHAPTER ONE: INTRODUCTION

1. BACKGROUND OF THE STUDY

Agriculture remains the main stay of the Nigerian economy despite its decline in the 1970’s. Greater proportions depend on the agricultural sector for their livelihood and the rural economy is still basically agricultural. The role of the agricultural sector in the overall response of the Nigerian economy is important because given its relatively large size, a large positive response to adjustment policies was expected as means of improving the overall performance of the economy.

According to economist Ekpo. A (1994) Nigeria displays the characteristics of a dual economy, a modern sector heavily dependent on oil earning overlays a traditional agricultural and trading economy. During the colonial era, cash crops were introduced, railways and roads were developed and a market for consumer goods began to emerge. At independence in 1960, agriculture accounted for well over half of our gross domestic product (GDP) and was the main source of export earnings and public revenue, with the agricultural marketing boards playing a leading role; but today this leading role in the economy has been taken over the national oil company, the Nigerian National Petroleum Company (NNPC).

According to the Central Bank’s Nigeria’s data (2003), oil still accounts for our major revenue (gearing towards 80%) and almost 100%of our export earnings.  Bola .O (2007), although agriculture particularly forestry, livestock and fishery activity of Nigerians, is shown to serve as the major activity of Nigerians,it is clear that we indulge in agriculture purely as personal survival strategies rather than as a calculated effort to warming the engine of our country’s economy. This is really where our national economic problems lie.

Well-functioning marketing systems necessitate a strong private sector backed up by appropriate policy and legislative frameworks and effective government support services. Such services can include provision of market infrastructure, supply of market information and agricultural extension services able to advice farmers on marketing. Training in marketing at A levels is also needed. One of the problems faced in agricultural marketing in Nigeria is the hidden hostility to the private sector and the lack of understanding of the role of the intermediary. Apart from this, agricultural marketing is faced with many challenges ranging from limited access to the market information, low literacy level among farmers, poor storage facilities among others.

Agricultural marketing cannot be effective to Nigerian economy unless Nigerian government summons courage to invest and exploit its rich agricultural sector, provides loans for the farmers at low rate of interest so that they will be free from the clutches of local money lenders who squeeze them, build good storage facilities in other to provide it as at when needed. This will go a long way in enhancing agricultural marketing and developing Nigeria economy.

This research work is carried out to examine how agricultural marketing will boost the economic situation of Nigeria with proper attention in the agricultural sector.

Nigeria’s growth shows a general and steady performance in the immediate post-independence period with a healthy balance of payments position through exports of cash crops.

Marketing boards were used to extract surplus from the agricultural sector, which were used to provide basic infrastructure. The development of the economy since 1960 has witnessed a declining of the share of agriculture in the gross domestic product (GDP). At constant factor cost, agriculture which accounted for about 60% of GDP in 1958/89 was estimated at 50% in 1970/71. Part of this decline is traceable to the relatively higher growth rate of manufacturing and mining, which is consistent with the development pattern characteristics of developing countries. Agricultural export was the engine of growth prior to 1973, providing much of the revenue that the government used in developing a basic infrastructural system. Agricultural export also financed the import substitution industrialization program. Increases in import due to increasing income and the import requirements of the emerging industrial sector induced balance of payments of problems in the late 1960’s.

The oil boom of the early 1970’s relaxed the financial constraints to development. The GDP as at 1977/78 factor cost grew at an average of only 50% per annum between 1975 and 1980. One major characteristic of this growth was its very unstable nature. The growth ranged from 1-3% in 1975/76 to 9.5% in 1979/80. Generally government services recorded the highest growth of 177% in constant terms during this period, manufacturing at 13.3% while agriculture recorded a growth rate of 2.3%. the performance of the economy suggests that there was more to under development than financial constraints. The third national development plan acknowledged that the agricultural and manufacturing sectors during the period 1970-1974 performed below expectations. This informed the massive expenditure by government in the following period in an attempt to remedy these and other perceived constraints to growth.

Nigeria’s agricultural strategy is a synthesis of the government framework and action plans for achieving overall agricultural growth and development. The strategy aims at attaining self-sustaining growth in all agricultural sub-sector and structural transformation for the socio-economic development of the country as well as the improvement in the quality of life of Nigerians.

1.1     STATEMENT OF THE PROBLEMS    

Agriculture aims at providing food for the nation and creation of wealth and development of the general economic situation of the nation. But there are several challenges involved in marketing of agricultural product, ranging from limited access to the market information, low literacy among the farmers, multiple channel of distribution that eats away farmers and consumers, poor storage facilities, although technology has improved but it has not gone to the rural levels as it confined to rural areas alone.

There are several loopholes in the present legislation and there is no organized and regulated marketing system for marketing of agricultural products. Farmers have to face so many hardships and have to overcome several hurdles to get fair and just price for their sweat. Most times transportation poses a great problem in marketing agricultural products. This is due to bad roads, and bad vehicles. This research work will therefore look into certain measures that will provide agricultural market reforms that will boost Nigeria’s economy.

1.2    OBJECTIVES OF THE STUDY   

The general objective of this study is to examine the impact of the Agricultural sector on Nigeria’s economic growth. The specific objective includes:

1. To establish the degree of causality existing between the Agricultural sector and economic   growth in Nigeria.
2. To determine the extent to which long-run relationship exists between the Agricultural sector and economic growth in Nigeria.
3. To ascertain if the Agricultural sector can contribute significantly to Nigeria’s economic growth.
   1. RESEARCH QUESTIONS

To serve as study guide, we provide the following lead questions for which this study seeks to provide the answers:

• What degree of causality exists between the Agricultural sector and Economic growth in Nigeria?
• To what extent does long-run relationship exist between the Agricultural sector and economic growth in Nigeria?
• Does the Agricultural sector have any significant impact on the economic growth of Nigeria?

1.4STATEMENT OF THE HYPOTHESIS

As a guide of this study, a hypothesis has been drawn to allow for smoother elaboration of this research. It is therefore hypothesized that agricultural marketing is a very important factor in the development of Nigeria’s economy. This statement is formulated as follows using the null (Ho) and the alternative (Hi) hypothesis.

Ho: Agricultural marketing has serious impact on the Nigeria’s economy

Hi: Agricultural marketing has no serious impact on the Nigeria’s economy

1.5    SIGNIFICANCE OF THE STUDY

The significance of agricultural marketing on the Nigerian economy cannot be overemphasized. It therefore serve as a toll for developing the economic situation of the nation through marketing of agricultural products and developing agricultural products by providing what farmers need to start having long-standing visions that can excel in growth terms to a sustainable private and public economy and that Nigerian banks particularly should not be allowed to define their over-popularized and over-advertised universal banking without relating it to agriculture. Insurance firms have to start picking interest in the area of agriculture to give it some safety and confidence that it ensures that legislature start thinking on ways to enact economic laws that boost agricultural production as well as laws that create an enabling environment for its sustainability and safe practice, because not turning to agriculture will imply our continuous dependency on crude oil and unnecessary reliance on importation of goods that could have otherwise been manufactured in our country.

1.6     SCOPE OF THE STUDY

This study is set out to examine the impact of Agricultural marketing on Nigeria’s economy. This is how agricultural marketing is capable of boosting t e economy of Nigeria if proper attention is given to the agricultural sector.

1. LIMITATIONS OF THE STUDY

This research work which is aimed at examining the impact of agricultural marketing on the Nigerian economy is limited to some constraints such as time factor. There is not enough time for the researcher to carry out this research effectively. Also finance is another limitation of this study because; finance has necessitated the researcher to visit institutions which would have been relevant to this research work.

1. OPERATIONAL DEFINITION OF TERMS

Agriculture: Agriculture is the science, art and business of cultivating soil, producing crops and raising livestock.

Marketing: Marketing is the activity, set of institutions and processes for creating, communicating, delivering and exchanging offerings that have value for customers, client, partners and the society at large. Marketing deals with identifying and meeting human and social needs profitably.

Agricultural marketing: Agricultural marketing is the activity that directs the movement of agricultural products from point of production to point of consumption.

Economy: Economy is the wealth and resources of a country or region especially in terms of the production and consumption of goods and services.

Distribution: Is the action of sharing something out among a number of recipients or the way in which something is shared among a group or spread over an area.

Middlemen: Is a person who buys goods from producers and sells them to retailers or consumers.

Consumer: Is a person who purchases goods and services for personal use.

Questionnaire: Is a set of printed or written questions with choice of answers devised for the purpose of a statistical study

THE CONTRIBUTION OF THE FINANCIAL SYSTEM IN ECONOMIC GROWTH OF NIGERIA

THE CONTRIBUTION OF THE FINANCIAL SYSTEM IN ECONOMIC GROWTH OF NIGERIA

ABSTRACT

The study examines the contribution of the banking industry to the development of Nigeria economy. Specifically, the study seeks to examine the relationship between economic growth and the level of financial intermediation and to determine the impact of interest rate on economic development of Nigeria. The study adopts survey method in order to obtain genuine information needed for the study. The research also make use of questionnaire as the instrument for data collection while the data collected was analyzed using tables, percentage and hypothesis were tested using Chi-Square. The findings of the study shows that there is a significant relationship between economic growth and the level of financial intermediation by the banks, and that banking industry interest rate have significant impact on economic development of Nigeria. Finally, the study recommend that the government should provide enabling environment for the banking industry to enable them carryout their financial intermediation responsibility very well and that the regulatory body responsible for regulating the interest rate charged by the bank should ensure that the banks do not charge too much or higher interest rates on loans.

CHAPTER ONE

INTRODUCTION

1.           Background of the Study

A sound financial system is critical to economic growth. It enhances economic performance of the players by improving the overall welfare of the people. The financial system provides a platform for financial infrastructure to help allocate resources to individuals/units that are potentially more productive, to invest those resources (Odhiambo, 2014). The financial system provides a balance between those who have funds to invest and those in need of funds, if the problem of information asymmetry is solved. The transfer of funds from surplus units (mainly household) to deficit units (mainly business, government and some households) can take place directly, while direct finance, as the process is called is inconvenient both for ultimate provider of funds and the ultimate user of funds.

The Nigerian financial system includes financial markets (money and capital markets), financial institutions including the regulatory and supervisory authorities, development finance institutions (Urban Development Bank, Nigerian Agricultural and Rural Cooperatives bank) and other finance institutions (insurance companies, pension funds, finance companies, Bureau de change, and Primary Mortgage Institutions), among others (Abdi 2017).

The structure of the Nigerian Financial System has been through remarkable changes, ranging from their ownership structure, the length and breadth of financial instruments used to the number of institutions established, regulatory and supervisory frameworks as well as the overall macro-economic environment within which they operate.

The importance of the financial system in any economy cannot be over-emphasized given the symbiotic relationship between the sector and the rest of the economy. In this era of globalization, efficient financial system are essential to attract gains from the world market, and as well insulate the domestic economy from external shocks. The financial system could also responds to the demand created as a result of economic development in the domestic economy. Theoretically the role of the financial sector can be summarized as follows: the financial sector generates wealth in the economy and facilitate the exchange of goods and services, it facilitates the process of resource mobilization, it mobilizes savings etc (Akinboade 2018).

The importance of the financial system as a catalyst in economic development is widely recognized by both monetary and development economists. In fact the need to develop domestic financial system and patterns of behaviour necessary to generate and mobilize scarce capital funds as a key condition to economic growth and development originated in the classic work of Schumpeter (1934). Since then such great interest has been aroused among researchers that the role of financial system in the economic development of African countries has come under increasing scrutiny by researchers (Agu, 2014).

Economic growth is a gradual and steady change in the state of the economy in the long-run which comes about by a general increase in the rate of savings and population (Jhingan, 2015). It can be characterized as an upward change in the level of production of goods and services by a country over a certain period of time. The financial system have been underdeveloped overtime and the underdevelopment in the financial markets has further dampened the level of economic growth in Nigeria. Even though the Nigerian financial system had experienced some progress in the past years, it has encountered some series of challenges. The issue of macroeconomic instability has continued to pose a hindrance to the development of the financial sector in Nigeria. Frequent policy reversals have resulted to disinvestment in the financial and real sectors which have impacted negatively on macroeconomic performance (Oriavwote & Eshenake, 2014). On this note, this study therefore seeks to examine the contribution of the financial system in economic growth of Nigeria: a comparative analysis of market and bank based system.

1.           Statement of the Problem

The fundamental question in economic growth that has preoccupied researchers is why countries grow at different rates. The empirical growth literature has come with numerous explanations of cross-country differences in growth, including factor accumulation, resource endowments, the degree of macroeconomic stability, educational attainment, institutional development, legal system effectiveness, international trade and the financial system. The list of possible factors continues to expand, apparently without limit. One critical factor that has begun to receive considerable attention more recently is the role of financial system in the growth process especially in the wake of the recent global economic and financial meltdown. The positive link between the financial depth and economic growth is in one sense fairly obvious. That is, more developed countries, without exception, have more developed financial markets. Therefore, it would seem that policies to develop the financial sector would be to raise economic growth. Indeed, the role of financial development is considered by many to be the key to economic development and growth (Agu, 2014).  While economists have generally reached a consensus on the central role of financial development in economic development theoretically; empirical works supporting this concept are conflicting. One school of thought asserts that financial system and development plays a limited role in accompanying the development of real activity; the second school of thought accords a crucial role to financial development in boosting the processes of growth, innovation and economic development; while for another group of scholars, the financial market promotes growth, with growth, in turn, comes market formation (Nicet-Chenaf, 2012). This study intends to bridge the existing gap in the literature by examining the contribution of the financial system in economic growth of Nigeria.

1.           Objective of the Study

The overall objective of this study is to examine the contribution of the financial system in economic growth of Nigeria: a comparative analysis of market and bank based system.

To achieve this, the study shall strive to accomplish the following specific objectives;

1.  Determine the impact of Deposit Money Bank Asset on economic growth in Nigeria.
2.  Ascertain the impact of Total Stock Market Capitalization on economic growth in Nigeria.

1.           Research Questions

This study will try to provide answers to the following questions;

1. What is the impact of Deposit Money Bank asset on economic growth in Nigeria?
   1. What is the impact of Total Stock Market Capitalization on long-run growth in Nigeria?

1.           Statement of Hypotheses

Based on these objectives, the following a prioriassumptions will be made;

H01: Bank-based financial structure (Bank Asset) does not have significant influence on growth in Nigeria.

H02: Market-based financial structure (Total Stock Market) does not significant impact on economic growth in Nigeria.

1.           Significance of the Study

This study will be great significance to the following:

1. To Policy Makers: Besides resolving theoretical debates, providing empirical evidence on financial structure will help in formulating growth-enhancing public policies. If the evidence supports either the bank based or market-based theory of financial system and economic growth, then policy makers can focus on formulating and implementing policies to encourage and/or enhance the development of a particular financial system.
   1. The Body of Academic: This study will contribute immensely in resolving the ranging debate on the relationship between financial system and growth. The study will contribute to existing literature, and will be of great value to further studies in Nigeria on financial structure and long-run growth.
   1. Financial Institutions: This study considers the role of banks and stock market in promoting long-run growth in Nigeria. This study, partly will review the channels through which bank and stock market activities promotes economic growth. This considerably is very important information for banks in their credit policy formulation, and for the Nigerian Stock Exchange in regulating stock market activities.
   1.           Scope of the Study

The scope of this study is limited to the contribution of the financial system in economic growth of Nigeria between 2010 to 2020. Making use of available data from other works along this line, the study will focus mainly on financial structure variable such as: total market capitalization, value of shares traded, banking credit to private sector, monetary aggregate such as currency, demand deposits, travelers’ cheque, other chequable deposits, savings deposits, small time deposits, money market deposits accounts, money market mutual fund etc.

The data will be collated from the Nigerian Stock Exchange fact books, the Nigerian Stock Exchange annual report and statements of account, Central Bank of Nigeria statistical bulletin, Central Bank of Nigeria annual statements of accounts.

1.8     Limitation of the Study

Some limitations that were identified and encountered in the process of the study include:

1. Financial constraint: – in running around to gather material for this study considering the economic meltdown, money and other resources where involved delayed the completion of this work.
2. Time: – The researcher was constrained by time in running round for the completion of this project.

1.9     Operational Definition of Terms

Financial Systems: A Financial system is a system that allows the exchange of funds between financial market participants such as lenders, investors, and borrowers.Economic Growth: Economic growth is a term used to indicate the increase of per capita gross domestic product (GDP) or other measure of aggregate income (Samuelson, 2016). It is often measured as the rate of change in GDP. Economic growth refers only to the quantity of goods and services produced and economic growth can be either positive or negative.

EFFECTS OF UNEMPLOYMENT AND INFLATION ON ECONOMIC GROWTH IN NIGERIA

EFFECTS OF UNEMPLOYMENT AND INFLATION ON ECONOMIC GROWTH IN NIGERIA

CHAPTER ONE

INTRODUCTION

1.1     Background to the study

The Nigerian economy has remained largely underdeveloped despite the huge human and natural resources. The country is richly endowed with various mineral types all over the country. Huge amount is generated annually from petroleum products. More than 40 types of solid minerals have been identified in over 500 locations in the country Musa(2010). Yet the per capita income is low, unemployment and inflation rates are high. There are many socio-economic challenges. The economy has continued to witness economic recovery which is immediately followed by economic recession and depression.

The situation in Nigeria is disturbing. The various macroeconomic policies by government have been unable to achieve sustained price stability, reduction in unemployment and sustained growth cannot be achieved. The poor state of the economy has confirmed the need to manage the economy effectively. The essence of macroeconomic management underlines the rationale for the existence of government as a vital economic agent. However, it appears that government intervention has not been able to cure the ills in the Nigerian economy.

The continued economic crisis, with the associated problems of high inflationary pressure, high exchange rate, and debt overhang, adverse balance of payment and high inflation rates is difficult to explain. Against a high rate of unemployment and underemployment, a large public sector, low wages and poor working conditions has been persistent high inflation rates in Nigeria. Also, underemployment and unemployment is a prominent feature of the Nigerian economy. Consequently, the full potentials of labour-surplus economy have not been fully exploited.

In the 1960s and early 1970s, the Nigerian economy provided jobs for most Nigerian and absorbed considerable imported labour while inflation rates were low. The wage rate compared favourably with international standards and there was relative industrial peace in most of the years. Following the oil boom of the late 1970s, there was mass migration of people, especially the youth, to the urban areas seeking for jobs. Following the downturn in the economy in the early 1980s, the problems of unemployment and inflation increased, precipitating the introduction of the Structural Adjustment Programme (SAP). The rapid depreciation of the naira exchange rate since 1986 and the inability of most industries to obtain adequate raw materials required to sustain their output levels fuelled inflation. There was rapid depreciation of the naira which caused sharp rise in the general price level, leading to a significant decline in real wages and increased poverty. The low wages contributed to a weakening of the purchasing power of wage earners and declining aggregate demand. Consequently, industries started to accumulate unintended inventories.

1.2     Statement of the problem

Economic growth in Nigeria has been poor since 1986 when SAP (Structural Adjustment Programme) was introduced. Economic growth in Nigeria was not encouraging between 1986 and 2012. The continuous economic crisis reflected in high inflationary pressure, high level of corruption, exchange rates distortions, debt overhang, high rates of unemployment to mention a few. Unemployment and inflation are two twin evils that have eaten deep into the fabric of the Nigerian economy over the years.

The trends in economic growth rates, unemployment rates and inflation rates in Nigeria from 1986-2012 have been puzzling. The data obtained from the Central Bank of Nigeria (CBN), 2013 Statistical bulletin revealed that by 1986 economic growth rate stood at 3.1 percent, in 1987 the value became negative -0.69 implying retrogression and was the least ever achieved for the period under review; the highest economic growth rates achieved was 11.36 in 1990 after which the rates has been abysmally until in 2003 when the growth rates hits 10.2 percent; from 2003 economic growth rate has been less than 10 percent, in 2012 the growth rate recorded was 6.58. The trend in economic growth has been fluctuating over the years under review.

The trends in unemployment and inflation rates in Nigeria from 1986-2012 was also puzzling. The trend revealed that by 1986 unemployment rate was 5.3 percent while inflation rate was 5.4 percent. Both unemployment rates and inflation rates were not stable but fluctuating over time. The lowest rates of unemployment and inflation recorded were 1.8 percent and 0.2 percent in 1995 and 1990 respectively. Unemployment reaches 24.7 percent by 2012 while inflation reaches the highest in 1999.

The main goals of macroeconomic policies were the achievement of high, rapid and sustained economic growth, stable low unemployment and relative price stability but the trends above shows the contrary. Among the main and major problems of policy makers were how to achieved and maintain low and stable unemployment rate as well as relatively low prices so as to achieve high economic growth.

Studies by (Garba, 2010, and Olowononi and Audu (2012), have examined the nature and causes of unemployment in Nigeria and found disturbing trends. There are very few studies which have been undertaken regarding the effect of unemployment and inflation on economic growth in Nigeria. Some of the existing studies used basically descriptive statistics (see Olowononi and Audu (2012). Aminu and Anono, (2012), Bakare, (2012) and Rafindadi, (2012) conducted similar studies and their findings were controversial especially in the area of impact of the two twin‟s evils (unemployment and inflation) on the growth of the Nigerian economy. Bakare found negative relationship between unemployment, inflation and growth, Rafindadi (2012) found negative non-linear relationship between unemployment and output growth while Aminu and Anono found positive relationship between inflation and economic growth in Nigeria. Another study was also conducted in the same vein in China by Chang-Shuai Li and ZI-Juan Liu (2012) on unemployment rate, economic growth and inflation.

The results revealed that unemployment impacted negatively on growth while inflation impacted positively on growth in China. The puzzling trends of economic growth rate, unemployment rate, and inflation rates in Nigeria and the controversial results obtained in the empirical results provide the need to examine the relationship between unemployment, inflation and economic growth in Nigeria.

1.3 Research questions

Arising from the research problems are the following questions:

1. What is the relationship between economic growth, unemployment and inflation?
2. What is the causes, effects and trends of inflation in Nigeria?
3. What are the trends, structure and causes of unemployment in Nigeria?

1.4     Objectives of the study

The main objective of the study isto examine the impact of unemployment and inflation on economic growth in Nigeria.

The specific objectives of this study include the following:-

• To estimate the relationship between economic growth, unemployment and inflation.
• To analyse the causes, effects and trends of inflation in Nigeria.
• To assess the trends, structure and causes of unemployment in Nigeria.

1.5     The Hypothesis to be tested is as follows:

Null hypothesis (Ho)

Ho: Unemployment and inflation have no effect on economic growth in Nigeria.

Alternative hypothesis (H1)

H1: Unemployment and inflation have effect on economic growth in Nigeria. 5

1.6     Significance/justification of the study

The adverse effects of unemployment and inflation on economic growth has attracted the attention of government and researchers the world over. Among the main and major problems of policy makers are how to maintain low and stable unemployment as well as relatively stable prices so as to achieve high economic growth. Several studies were conducted on the impact of unemployment and inflation on economic growth in Nigeria.

The significance of this study lies on the fact that huge amount of resources (human and capital) are unemployed which could cause poor economic performance. This thesis will help policy makers to establish the extent of the effect of unemployment and inflation rates on economic growth. This thesis will improve the body of existing literature and also serve as a policy document. The problems of high level unemployment and inflation need to be addressed in order to improve economic growth.

1.7     Scope and limitation of the study

The thesis covers 1986 to 2012. This period is chosen because structural adjustment programme (SAP) began in 1986. In the course of the study, the major factors that were responsible for high unemployment and inflation were investigated. The major limitations to this study were the unreliable data on unemployment and inflation rates. Therefore, the interpretation of results obtained from any computations that uses the data must be done with caution. Sometimes there are conflicting data on the same variable from different sources.

1.8     Organization of the studies

This thesis is organized into five chapters. Chapter one which is the introduction started by providing a background of the subject matter, the problems and objectives follow. These are  followed by hypotheses, rationale and scope of the study as well as the organization of the chapters. Chapter two presents related literature concerning conceptual literature, theoretical, and empirical literature. Chapter three contained the research methodology, which consist of the sources of data, model specification and methods of data analysis, while the results and discussion are presented in chapter four. Chapter five contains the summary, conclusions and recommendations of the study. They are followed by references.