Impact of Inflation and Unemployment on Economic Growth in Nigeria

Abstract

This study investigates the relationship between inflation, unemployment, and economic growth in Nigeria, using Generalized Method of Moments (GMM) technique of estimation and data from 1999 to 2023. The results show that both inflation and unemployment have a significant negative impact on economic growth, with unemployment having a more pronounced effect. Specifically, a 1% increase in inflation rate leads to a 1% decrease in economic growth, while a 1% increase in unemployment rate leads to a 10% decrease in economic growth. The results of the study further show that government expenditures have a significant positive impact on economic growth, with a one percent increase in government expenditures leading to a 0.30% increase in economic growth. The study recommends amongst others that policymakers in Nigeria should prioritize strategies aimed at reducing inflation and unemployment rates to stimulate economic growth and improve the overall well-being of the population. In addition, government should prioritizing capital expenditures in strategic sectors that can promote economic growth, improve living standards, reduce corruption, reduce poverty and improve the efficiency of government spending in Nigeria.