Macroeconomic policy for full and productive and decent employment for all: The case of Nigeria

Employment Working Paper No. 107

This study examines the prospects and challenges of productive employment and decent work in Nigeria within essential macroeconomic policy targets. Premised on the dynamics of expanding labor market in Nigeria and by juxtaposing the labor market and macroeconomic policies in the country, the study examines the contradictions and challenges facing the realization of the goals of gainful and productive employment in Nigeria. By using a recursive structural Vector Autoregressive model, we find that increases in monetary policy rate (MPR) to cut down on inflation have a depressing impact on the economy. The result of this study does not support the assertion that a tight monetary policy coupled with a contractionary fiscal policy will engender natural rate of growth of the Nigerian economy. This is contrary to persuasive monetary policy advice for inflation targeting pursued by central banks and the International Monetary Fund (IMF).
The study suggests that a more flexible inflation rate, increased money supply, access to credit and a modest but upward adjustment to capital and recurrent expenditure have greater potential in accelerating GDP growth and for the attainment of full employment and poverty reduction in Nigeria. Economic activities leading to expansionary trends in GDP growth and the growth rate of credit and money supply pose no unenthusiastic challenge on inflation. Rather, such activities can only be a boost to the labor market in Nigeria.