Exchange Rate and Unemployment in Nigeria: An Analysis

Abstract

One of the serious challenges to Nigeria today is Unemployment. There have been many studies to investigate variables which affect unemployment in macroeconomics. Considering exchange rate volatility in recent years which has affected most of major variables of Nigerian economy, this paper investigated the relationship between Exchange rate and Unemployment in Nigeria using annual data of Thirty-one Years (1986 to 2017). In order to achieve the objective of the paper, Autoregressive Model with distributed Lag was used to find out the relationship between Real Exchange rate and Unemployment in the country. The Variables used are Unemployment rate, Real Exchange rate, Real Gross Domestic Product (RGDP), Export Value index; and Import Value index. It was found that Real Exchange Rate has positive effect on unemployment during the period. With high exchange rate, unemployment rate increases. The paper advises for efforts to increase supply of foreign exchange earnings in the country so as to curtail excess demand for it. This will lead to producing more goods as industries that would be established for such production will absorb more workforces out of the unemployed. Key Words: Unemployment; Exchange rate; Auto- regression;