Effect Of Federal Expenditure And Money Supply On The Rate Of Unemployment

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This study is motivated by the fact that federal expenditure and money supply as a tool on the rate of unemployment. But to which extent, these instrument have contributed either to worsen the problem of unemployment or alleviate it.

To investigate this problem, two hypotheses were formulated as follows.

Ho:      There is no relationship between money supply and                          unemployment.

Hi:       There is no relationship between federal expenditure                        and unemployment.

In testing the hypothesis, secondary data was used and analyzed using regression and correlation analysis as well as student t-test. The following are summary of the major findings from the analysis carried out in the study.

Federal expenditure and money supply contributed little to the reduction on the rate unemployment between (1980-2000).

The package of National directorate of employment programme conmcerning encouragement and generation of employment opportunities for most especially school teachers from secondary school and graduate from higher institution seems to be less vigorous since 1992 till date.

The inability of government of both federal and state levels to lift embargo on public sector employment from (1994 to August 1999) could be partly responsible for the high level of graduate unemployment in the Urban areas.

On the strength of the findings, the following recommendations were made.

The use of these tools (federal expenditure and money supply) need to be reviewed to enhance their potential for addressing the rate of unemployment.

Alternative tools may be used to complement federal expenditure and money supply towards the alleviation on the rate of unemployment.

The tool thrust should be the establishment of most micro-credit scheme to assist enterprising unemployed people to set on micro business across the country.

There is need to build up human capital, this mean improving the knowledge, shall, capacities and the mental and physical conditions of the masses.



1.1              Background of the study

1.2              Statement of the problem

1.3              Objective of the study

1.4              Scope of the study

1.5              Research hypothesis.

1.6              Significance of the study

1.7              Limitation of study

1.8              Definitions of basic concepts.



2.0              Review of Literature

2.1       Theoretical Literature

2.2       Empirical Literature

2.3       References


3.0              Research deign and methodology

3.1       Model specification

3.2       Area of study/coverage

3.3       Source of data / analytical techniques

3.4       Decision rule


4.0              Presentation and analysis of data

4.1       Presentation data

4.2       Presentation of table

4.3       Interpretation of table

4.4       Test of hypothesis

4.5       Reference.


5.0              Summary of findings

5.1       Conclusion

5.2       Recommendation

5.3       Suggestion for further research

5.4       Bibliography



1.1              BACKGROUND OF THE STUDY

Unemployment is an issue that has generated debates from every nook and cranny of the world. Its impact was more, felt during the industrial revolution when the dimension of man power absorption changed towards the consideration of skill as a fundamental pre-requisite. However, over the years, government around the world have been concerned with how the unemployment question could be answered – similarly, the Nigeria economy was characterized by severe unemployment, especially after the civil war which necessitated policy measures aimed at reducing it’s.

Different government since 1970 till date have tried different strategies in order to reduce unemployment, but the result still remain persistent unemployment resulting in a number of social and economic problems like crime, destitution, prostitution, corruption etc associated  with it.            Index, unemployment in Nigeria has assumed a frightened proportion. It is even more frightened considering the fact that high rate of unemployment create poverty, misery and threatens social cohesions reduction in the rate of unemployment has thus become a major policy thrust of the government with the assistance of some international agencies such as the international labour organization.

Moreover, since early 1970’s the revenue base of the country has depended largely on the oil sector which has provided over 80% of total government revenue. The growth of resource in the sector private opportunity to initiate huge programme which substantially.


Scrutinizing the time series data on unemployment in Nigeria b/w 1960 and to mind 1980. Nigeria was at a period of economic boom, which means unemployment was something nobody could have dreamt about, but today unemployment has become so severe that nobody likes to embrace it.

However, unemployment in Nigeria is primarily youth unemployment, especially secondary school leaver for instance in 1986, they constituted 65-3 percent of all the employed in Nigeria. The figure for 1987 for this group was 70-7 percent when figures are desegregated by location figures for Urban unemployment were higher for all the years under survey with the exception of 1986. The national figures for unemployment was 6.1 percent in 1986. It tell slightly to 5-3 percent in 1986 for all the year data indicate that unemployment was higher in the urban than within the rural area.

Today, there is a nation wide high rate of unemployment particularly among the youth that are leader of tomorrow unemployment appear to be inherent in the nation economic system, first, because intentionally or unintentionally the policy maker do not resort to measure capable of reducing unemployment to an acceptable level.

Furthermore, tax collected from companies an private individual are misappropriated. The expenditure on capital project are divested to private purses whilst expenditure on personnel emolument are delayed by government officials.

This study is therefore concerned with finding out the effect federal government expenditure and money supply on rate of unemployment. Also, intend to investigate clearly the extent to which these policies have contributed to worsen the problem of unemployment or alleviate it completely.

1.3              OBJECTIVE OF THE STUDY

The objective of the study is to make some reasonably investigations and, then find out some facts paltering to the rate of unemployment and it level of existence in Nigeria.

Hence, the research work will go as far as tracing the root of the problem, ever increasing number of the unemployment rate among Nigerian and the cause of it, mostly especially our youth.

(a)      To determine the effect of federal expenditure & money supply on the rate of unemployment in our society.

(b)     To ascertain the efforts and inputs of past and present government in the area of skill or rented or vocational educative programme in our school toward solving the problem of unemployment.

(c)      To examine the statistical application of the study, that will help to enhance the empirical finding the effect of federal expenditure & money supply.

(d)     To determine a suitable solution toward changing and alleviating the problem of unemployment in our society.

1.4              RESEARCH QUESTION

(a)      What are the effect of federal expenditure and money supply in changing rate of unemployment in Nigeria?

(b)     Does the government make any effort in increasing the education programmes in our school towards changing the rate unemployment?

(c)      What are the problems associated in using statistical application.

(d)     What are the effect of the policies the government have used to change the rate of unemployment in Nigeria.

(e)      What extend have the policies be used.

1.5              RESEARCH HYPOTHESIS.

Unemployment has been characterized as one of the major attributes used to distinguish developing nation such as Nigeria, from most developed nation, such as U.S.A. in fact, the rate at which this phenomenon has been skyrocketing in Nigeria has become much more alarming and beyond expectation.


Ho:      There is no significant relationship between money supply    and unemployment.

Hi:       There is significant relationship between money supply and employment.

Ho:      There is no significant relationship between federal   expenditure and unemployment.

Hi:       There is significant relation between federal expenditure and           unemployment.

Where Ho:       Null hypothesis

Hi:     Alternative hypothesis


In our nation Nigeria, it has been confirmed and indeed apparent that no social or economic welfare equaled finding job for the jobless citizens among us. In fact this has created a dilemma that has inspired the researcher to investigate the roles played by government on the changing or rat of unemployment at a goal.

Therefore, the result of this research will help the provision of much needed information that would enhance the creation of more employment opportunity for the masses in the society, and these jobs may possibly come from three tiers of government (ie) Federal, state & local the private and the citizens themselves.

Much more than that the result will serve as a guide to the government and other employers toward initiating programs for employment of the jobless Nigeria scattered all over the country.


Monetary Policy:

This is constructing to be action by the monetary authorities to influence the national economic objective by controlling or influencing the quantity and direction of money supply, credit and the cost of credit. If is aimed at ensuring adequate supply of money to support financial accommodating for growth and development programs on the one hand and, stabilizes various sector of the economy for sustainable growth and development on the other hand, monetary policy is defined as policy employing the Central Bank Control of the money supply as an instrument for achieving the objective of economic policy. Similarly from synthesis of most of the literature and in the context of the Nigeria.

The ultimate targets of the monetary policy within the time frame are:-

(1)     Helping to stabilize the economy.

(2)     Full employment

(3)     Enhancing the efficiency of resources use

(4)     Price stability

(5)     Sustained increase in growth and output

(6)     Supporting output and employment growth.


The is defined as government expenditure as taxes, borrowing and financial administration to further national economic objective – Government uses it expenditure and revenue activities to effect desired changes in income, production, prices and employment.

These changes concern national economic objectives which are targets of monetary & fiscal policy and include acceleration of economic growth and development, balance of payment equilibrium, price stability and reduction of rate of unemployment.

The main target of federal expenditure

Within these period are:-

(1)       Maintenance of economic equilibrium part to certain inflation, pressures accelerate economic growth and development.

(2)       Job creation and employment

(3)       Promotion of self-reliant development

(4)       Poverty alleviation.


This is the inability of economic cum society provide an opportunity for individual eligible (eg) 18 to 65 years old to work and to exercise their ability for exchange for emoluments. Hence, rendering such skills redundant and useless in the environment through unemployment is a worldwide phenomenon, it has assumed alarming dimension in Nigeria since the year 1980’s.

Types of unemployment.

ü  Above equilibrium unemployment

ü  Demand Deficient unemployment

ü  Structural unemployment

ü  Frictional unemployment

ü  Seasonal unemployment

ü  Equilibrium unemployment

ü  Regional unemployment

Full Employment.

This means that those who are eligible and willing to work at the prevailing rate of pay are able to find work without undue for difficulty.


This result when through one is employed; one is not making full use of ones ability or skill in job place, or working below capacity. It results in disguised unemployment.


Person who constitute the supply of labour for production processes, they are usually between the age of 15-19yrs. This exclude, student, homemaker, related person, the disable and those not interest in work.


This is a tool for revenue generating by taxing the private business enterprise directly.


It is a way a generation of revenue, through taxes that individual or business do not directly pay for, they include, excise duties, import duties value added taxes, sales tax (etc).


These are spending on running cost of the day today running of the economy and government affair such as emolument.


It is one of the fiscal tools, which entail expenditure on capital projects. That is spending on structure, physical asserts such as: schools, roads bridges airports and all forms of social and economic infrastructure facilities by the government.


Central Bank of Nigeria (1998)          Economic and financial Review                                                                     vol. 36 June, P.2.

Ojo M.O. (1995),                                Reflection on some critical                                                                             Aspects Economic                                                                                          Management in Nigeria.                                                                                  Presidential Address at the                                                                             Annual Conferences of Nigeria                                                                      Economic society, Lagos, PP.                                                                         7-10.

Oruwaorie G.C. (1998),                      Direct and Indirect contribution                                                                     of NDE in Nigeria War against                                                               Unemployment. “A case study”                                                                     paper presented at a training                                                               workshop, Abeokuta.

Ojo, M.O. (1999),                               Monetary, credit and other                                                                             financial policies, in the 1996                                                                         federal government budget. “In                                                                         Bullion publication of CBN, Vol.                                                                   23 No 1

Ojo, M. O. (1999),                              A review and appraisal of the                                                                         monetary and other financial                                                              sector policy measure in the                                                                            federal government budget for                                                                       1999. Bullion publication of the                                                                     CBN, Vol-23.

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