UNEMPLOYMENT HYSTERESIS AND PERSISTENCE IN NIGERIA: IMPLICATION FOR POLICY RESPONSE

Abstract

Unemployment has remained a perennial problem in Nigeria in the last three decades. TheNigerian government like every other government around the world is committed to reducingit to a tolerable rate. However, policy measures taken so far to tackle unemployment have notyielded the desired results. Unemployment, especially youth unemployment has been soaring.To tackle this menace, it is important to understand the nature of Nigerian unemployment.This understanding will offer policymakers some policy menu for curbing this threat. Overtime, numerous studies have investigated the determinants of unemployment in Nigeria andhave identified many indicators to be significant. If things were right, manipulating thesefundamentals would necessarily reduce unemployment. But that is not the case in Nigeria;unemployment has been on the rise despite all the policy efforts. This, therefore, necessitatedthe need to study unemployment hysteresis and persistence in Nigeria. This study exploredthis issue using quarterly seasonally adjusted unemployment data from 1970 -2019. Tocapture the issue of structural break in Nigeria, our dataset was divided into sub-samples. Theanalysis was done using a battery of unit root tests with and without break, as well as Markov-Switching regression. The study reveals that unemployment in Nigeria is persistent and thatthere exists hysteresis in Nigerian unemployment. The study therefore, recommends, amongother things, that while the government attempts to improve workers' welfare by a way of good pay package, it should devote and channel more resources to providing productive jobs, like real output-oriented jobs, not just service-oriented ones.