Economic Liberalisation and Employment Generation in Nigeria

Abstract

The relationship between economic liberalisation and employment is of growing significance to policymakers, particularly in developing countries. This has become a veritable source of public debate, and the scope of that debate is broadening. Economic liberalisation is a m u l t i d i m e n s i o n a l c o n c e p t e n c o m p a s s i n g telecommunications, trade, finance, and other sectors. This study investigates the relationship between economic liberalisation and employment generation in Nigeria from 1985 to 2023 using the auto-regressive distributed lag (ARDL) bounds testing approach. Labour force participation rate is used to measure employment generation, while current account as a ratio of GDP, real exchange rate, foreign direct investment as a ratio of GDP, and trade openness are used to measure economic liberalisation. The unit root test is conducted using the Augmented Dickey-Fuller test. The results reveal that all the variables are integrated of order one, except FDI, which is integrated of order zero. The CUSUM and CUSUMSQ stability tests show that all the parameters in the error correction model are dynamically stable. The empirical results of the ARDL model indicate mixed effects. The liberalisation of the current account reveals a significant long-run negative relationship with employment generation. However, the liberalisation of exchange rate, foreign direct investment, and trade openness enhances the level of employment generation in Nigeria. The Granger causality test indicates that causality runs from labour force participation rate to foreign direct investment. The study concludes that economic liberalisation significantly promotes employment generation in Nigeria. Therefore, it recommends that policies should be targeted at promoting foreign direct investment, export promotion strategies, and the creation of a conducive environment for investment.