ECONOMIC GROWTH AND EMPLOYMENT NEXUS IN NIGERIA’S AGRICULTURAL AND NON-AGRICULTURAL SECTORS (1981-2014)

Abstract

There have been rising unemployment in the agricultural and non-agricultural sectors of Nigeria despite sustained economic growth for about fifteen years from 2000 to 2014. The differential determinants and trajectories of unemployment in the agricultural and non-agricultural sectors in Nigeria have been conjectural with scanty empirical studies. The effect of the growth regime in Nigeria on sectoral employment and the factors affecting agriculture and non-agriculture sectoral employment were investigated in this study. Time series secondary data covering 1981 to 2014 on the rebased Gross Domestic Product (GDP) and sectoral Gross Value Added (GVA) at 2010 constant basic prices, employment, wage rate, inflation rate and interest rate were collected from the National Bureau of Statistics and Central Bank of Nigeria on agricultural sector. Similar data were collected on non-agriculture sectors of mining, manufacturing, trade and services, administration, and construction from the same sources. The variables were extracted from statutory publications of the institutions, collated and summarised into a table of data. The unit root test was carried out to test for stationarity of variables. Aggregate and sectoral employment elasticities of growth were measured using Vector Error Correction Model (VECM) regression. Data was analysed using descriptive statistics and VECM at α0.05 The contribution of agriculture to employment reduced from 68.3% in 1981 to 53.5% in 2014, while that of non-agriculture increased from 31.7% to 46.5% for the same period. However, agriculture still employed the greater number, contributing 31,241,000 of the aggregate employment of 58,369,000 in 2014. Gross Domestic Product growth resulted in low employment, with an insignificant elasticity of 0.21. Agriculture sectoral elasticity of employment was -0.13, indicating that output growth in the sector, during the period, was achieved through productivity increases rather than the employment of more persons. In the non-agricultural sectors, except for construction, with significant elasticity of 0.12, the coefficients were low and not significant. The low, negative and insignificant coefficient of -0.05 for the mining sector, similarly, indicated that output growth in that sector was achieved through productivity increases only. Sectoral employment depended on GVA growth (agriculture β=-0.13; non-agriculture, β=0.39), wage rate (β=-0.023), interest rate (β=-0.011), inflation rate (β=-0.002), and the inter-temporal (t-x) and cross-sectoral relationships among economic sectors. Employment in agriculture depended on non-agricultural output (β=0.39) and non-agricultural employment (β=1.15) as well as previous year’s wage rate (β=-0.023) in iv agriculture and previous year’s agricultural output (β=-0.13). The GVA non-agriculturet-2 (β=0.39) and employment in non-agriculturet-2 (β=1.15) positively stimulated employment in agriculture, while employment in agriculturet-2, (β=-1.94) GVA agriculturet-1 (β=-0.13) and wage ratet-1 (β=-0.023) limit current year’s agricultural employment. The Gross Domestic Product and the Gross Value Added growth both affected agricultural employment negatively and non-agricultural employment positively in the period under review. Wage, inflation, and interest rates reduced employment in both agricultural and non-agricultural sectors. Employment in agriculture depended on employment and output in non-agriculture and vice versa. Keywords: Economic growth, Employment elasticity, Gross Value Addition, Sectoral productivity. Word Count: 470