Journal of International Academic Research (2011) Vol.11, No.1.

30 April 2011

Role of Information Communication Technology (ICT): Implications on Unemployment and Nigerian GDP
N.D. Oye, Federal University of Technology, School of Pure and Applied Sciences (SPAS), Department of Mathematics and Computer Science, P M B 2076, Yola,
oyenath@yahoo.co.uk

Inuwa Ibrahim (student), Federal University of Technology, School of Pure and Applied Sciences (SPAS), Department of Mathematics and Computer Science, P M B 2076.
inuwaisa2000@yahoo.com

Muhammad Shakil Ahmad, COMSATS Institute of Information Technology, Department of Management Sciences, Attock, Pakistan, PhD Scholar, University Technology Malaysia, Skudai, Malaysia
onlyshakil@gmail.com

Abstract
ICT is defined as any technology that facilitates communication and assists in capturing, processing and transmitting information electronically. This paper considers ICT to be veritable tools to tackle the rising unemployment in Nigeria. Being without a job is indeed an enforced idleness of wage earners who are able and enthusiastic to work but cannot find jobs. ICT can generate youth employment. The increase in mobile phones has led to job creation. Telecentres are being set up in places like shops, schools, community centres, police stations and clinics. The population of Nigeria, according to the National Population Commission (NPC) figures stands at over 140, 000,000. 60% of this number is made up of youths and many of them just idle away their time with nothing to do. With the institutions of learning in Nigeria churning out graduates of various levels and degrees on a yearly basis, a rising trend has seen these graduates coming out of the nations universities and polytechnics to join those who graduated ahead of them but without any means of livelihood for years. This paper examines the role played by unemployment on the making of the Nigerian Gross Domestic Product (GDP) for a period of nine years (2000 - 2008). The objectives of the study are to examine the effects of unemployment on the Nigerian GDP for the selected years, to observe the kind of association that existing between the unemployment and the makings of the Nigerian GDP. Data was collected and analysed using the regression analysis. Findings showed that unemployment has an enormous effect (over 65%) on the making of the Nigerian GDP and there exist an inverse relationship between the model (unemployment) and the GDP - increase in the model leads to decrease on the GDP and vice versa. Recommendations were proffered based on the study that unemployment can be combated through the Public Sector Reforms and the use of ICT.

Keywords
ICT; Unemployment; Nigerian GDP, Public Sector Reforms
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1.

Introduction

ICT is defined as any technology that facilitates communication and assists in capturing, processing and transmitting information electronically. Some commonly used ICTs in many developing countries include Radio, television and print media (Parliamentary Office of Science and Technology, 2006). Modern ICTs such as software, mobile phones and associated applications such as VOIP (transmitting telephone calls over the internet) have become available to many countries worldwide in recent years. However, the most rapid growth is in mobile phone usage (Parliamentary Office of Science and Technology, 2006). The Ministry of Labour and Productivity in Nigeria says the Federal Government is set to declare total war on unemployment and joblessness in the country with the use of ICT systems and operations which is aimed at training unemployed Nigerians. Fakiyesi (2010), opine that despite the exploitation of negative aspect of Information and Communication Technologies (ICT) by a few Nigerian youths, ICT has raised the economy of the nation, especially the Gross Domestic Product (GDP) to 1.62 per cent. Although he lamented that apart from the improvement on the economy, ICT has also enhanced falsehood, dissemination of harmful information as well as fraudulent activities in the transaction of businesses. Being without a job is indeed an enforced idleness of wage earners who are able and enthusiastic to work but cannot find jobs. In societies in which most people can earn a living only by working for others, being unable to find a job is a serious problem. Because of its human costs in deprivation and a feeling of rejection and personal failure, the extent of unemployment is widely used as a measure of workers' welfare. The proportion of workers unemployed also shows how well a nation's human resources are used and serves as an index of economic movement (positive or negative). Unemployment has call for a greater concern in the Nigeria economy. It has continued to be the major macroeconomic objectives of the government. Unemployment constitutes a series of serious developmental problems and is increasingly more serious all over Nigeria. The major policy of the government and the international agencies is targeted at reducing the rate of unemployment. Since the population explosion begun, the developing nations have been characterised by unemployment (Oluleye, 2006). It is widely recognised that SMEs are very important for economic growth and job creation in both developed and developing countries (Aris, 2006; Mutula and Brakel, 2006; Tan and Macaulay, 2007; Hazbo, Arnela and Chun-yan, 2008). Researchers argue that SMEs play a major role in poverty alleviation in developing countries and also stimulate domestic and regional economic growth in national and regional economies (Golding et al., 2008; Berisha-Namani, 2009). They help to diversify economic activity and are flexible to changing market demands (Ongori, 2009). The Library of Congress Country Studies and the CIA World Fact book (1991 and ), reported that, measures taken under the Structural Adjustment Program (SAP) in Nigeria has resulted to instability in the unemployment rate - the national unemployment rate, estimated by the Office of Statistics as 4.3 percent of the labour force in 1985, increased to 5.3 percent in 1986 and 7.0 percent in 1987, before falling to 5.1 percent in 1988. Most of the unemployed were city dwellers, as indicated by urban jobless rates of 8.7 percent in 1985, 9.1 percent in 1986, 9.8 percent in 1987, and 7.3 percent in 1988. Underemployed farm labour, often referred to as disguised unemployed, continued to be supported by the family or village, and therefore rural unemployment figures were less accurate than those for urban unemployment. Among the openly unemployed rural population, almost twothirds were secondary-school graduates. The largest proportions of the unemployed (consistently 35 to 50 percent) were secondary-school graduates. There was also a 40Role of Information Communication Technology (ICT): Implications on Unemployment and Nigerian GDP 10

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percent unemployment rate among urban youth aged twenty to twenty-four, and a 31percent rate among those aged fifteen to nineteen. Two-thirds of the urban unemployed were fifteen to twenty-four years old. Moreover, the educated unemployed tended to be young males with few dependents. There were relatively few secondary-school graduates and the lowered job expectations of primary-school graduates in the urban formal sector kept the urban unemployment rate for these groups to 3 to 6 percent in the 1980s. Alanana, (2003) opines that unemployment is potentially dangerous as it sends disturbing signal to all segments of the Nigerian Society. The rate of youth unemployment in Nigeria is high, even at the period of economic normalcy i.e. the oil boom of the 1970s (6.2%); 1980s (9.8%) and the 1990s (11.5%). Economy watch, (2005) report that unemployment in Nigeria is one of the most critical problems the country is facing. The years of corruption, civil war, military rule, and mismanagement have hindered economic growth of the country. Nigeria is endowed with diverse and infinite resources, both human and material. However, years of negligence and adverse policies have led to the under-utilisation of these resources. These resources have not been effectively utilised in order to yield maximum economic benefits. This is one of the primary causes of unemployment in Nigeria. As per the reports of World Bank (2005) and Federal Reserve Bank of Boston (2008), the GDP at purchasing power parity of Nigeria was $170.7 billion. Unemployment in Nigeria is a major problem both economically and socially. Unemployment in Nigeria has resulted in more and more people who do not have purchasing power. Less consumption has led to lower production and economic growth has been hampered. Unemployment also has social consequences as it increases the rate of crime. The secondary-school graduates consist of the principal fraction of the unemployed accounting for nearly 35% to 50%. The rate of unemployment within the age group of 20 to 24 years is 40 % and between 15 to 19 years it is 31 %. The downstream effects of youth unemployment are fuelling rapid alienation and social unrest across the Nigerian landscape, the immediate symptoms of which are evidence in the palpable rise in organised crime, armed insurgency, vandalism and drug trafficking. 1.1 ICT Employment Generation for the Youths The worldwide expansion of mobile phone networks and the growth in the number of mobile phone subscribers has been phenomenal in recent years. According to a recent study, out of Nigeria's population of 140 million, 12.1 million own mobile phones and 64 million "are potential mobile phone users through mobile payphones at call centres." The increase in mobile phones has led to job creation as well. According to a Nigerian Communications Commission, one million "indirect jobs" have been created by the mobile telephony sector in the past five years (Ramey, 2008). "This figure indicates that mobile telephony could boost job creation and poverty alleviation if the conditions that would stimulate its spin-offs are introduced and nurtured in a consistent manner." About 10,000 "direct jobs," or people employed by the mobile phone operators in Nigeria, have been created by the industry. Tele centres are being set up through public and private initiatives in many developing countries in telephone shops, schools, libraries, community centres, police stations, and clinics. Sharing the expense of equipment, skills and access amongst an ever-increasing number of users also helps to cut costs and make these services viable in remote areas. 1.2 Research objectives 1. To see how ICT can promote youth employment. 2. To observe the kind association that existing between the unemployment and the makings of the Nigerian GDP. 3. To determine the role of unemployment in the production of the GDP.

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2.

Literature Review

William Phillips, (1958) in his paper The Relationship between Unemployment and the Rate of Change of Money Wages in the United Kingdom 18611957, Phillips describes how he observed an inverse relationship between money wage changes and unemployment in the British economy over the period examined. Phillips in his work he made an explicit the link between unemployment and inflation: when unemployment was high, inflation was low, and vice-versa. Samuelson (2008) noted the same phenomena as he took Phillips' work and made explicit the link between inflation and unemployment: when inflation was high, unemployment was low, and vice-versa. In the 1920s an American economist in his work (Irving Fisher, 1973) noted this kind of Phillips curve relationship. However, Phillips' original curve described the behaviour of money wages A simple curve (Phillips curve) was developed to demonstrate the relationship between the rate of unemployment and inflation. The relationship on the curve shows that as unemployment rate decreases the inflation rate climbs. When the unemployment rate increases, the inflation rate drops. What does this mean? Well essentially, when unemployment decreases more people are employed and output is higher than normal. Higher output and employment leads to an increase in the price level because firms have to pay their workers more. Workers have to pay more because unemployment is low and it is easier for workers to find other jobs and it is difficult for firms to hire new workers; there aren't many people unemployed, i.e. looking for work. Take a look at the math behind this Phillips Curve. Consider the following equation:

Where: t is inflation in year t V is a variable denoting exogenous economic shocks is a constant Ut is the unemployment rate in year t decreases

Unemployment, Ut, goes up the whole right side of the equation,

because becomes bigger. That is, more can be subtracted from so the whole thing becomes much smaller. Or, conversely, as Ut gets smaller, i.e. unemployment goes down, the whole right side of the equation, can be subtracted from inflation behaves: , increases because becomes smaller. That is, less so the whole thing becomes much larger. This explains how

when Ut is HIGH, t is low. when Ut is LOW, t is high. Not much attention was paid to the fact that Phillips curve was not stable over time. Despite that Phillips (1958) and Lipseys (1960) studies found that the relationship shifted over time as indicated by differences in the estimated coefficients for different periods. All the studies carried out in the 1960s tend to show a significant non-linear relation between wage inflation and unemployment. Phillips work has generated many more empirical studies of the relation between the rate of change of money wages, inflation and unemployment. Other studies have incorporated other variables as explanatory variables for wage or price inflation. Some studies found unemployment to be insignificant in explaining wage inflation. Many more empirical studies have used price inflation instead of
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wage inflation. According to Levacic and Rebmann (1982) one can move from a relationship between the rate of change of money wages and unemployment to one between the rate of change of price level and unemployment by allowing for lung-run changes in the productivity of labour . Many countries (In the 1970s) experienced high levels of both inflation and unemployment also known as stagflation (Bello, 1999). Theories based on the Phillips curve suggested that this could not happen, and the curve came under concerted attack from a group of economists headed by Milton Friedman argued that the demonstrable failure of the relationship demanded a return to non-interventionist, free market policies. The idea that there was one simple, predictable, and persistent relationship between inflation and unemployment was, at least, questioned. The Phillips Curve doesn't quite fit the facts perfectly. Remember this curve very accurately depicted the data available in the 1960s, but it actually fell apart and had to be revised thereafter. 2.1 New classical version of the Phillips curve The Phillips curve equation can be derived from the (short-run) Lucas aggregate supply function. The Lucas approach is very different from that the traditional view. Instead of starting with empirical data, he started with a classical economic model following very simple economic principles. Start with the aggregate supply function:

Where: - Y is the log value of the actual output - Yn is the log value of the "natural" level of output - a is a positive constant - P is the log value of the actual price level - Pe is the log value of the expected price level. Lucas assumes that Yn has a unique value. The equation indicates that when expectations of future inflation (or, more correctly, the future price level) are totally accurate, the last term drops out, so that actual output equals the so-called "natural" level of real GDP. This means that in the Lucas aggregate supply curve, the only reason why actual real GDP should deviate from potentialand the actual unemployment rate should deviate from the "natural" rateis because of incorrect expectations of what is going to happen with prices in the future. This differs from other views of the Phillips curve, in which the failure to attain the "natural" level of output can be due to the imperfection or incompleteness of markets, the stickiness of prices, and the like. In the non-Lucas view, incorrect expectations can contribute to aggregate demand failure, but they are not the only cause. To the "new Classical" followers of Lucas, markets are presumed to be perfect and always attain equilibrium (given inflationary expectations). Most economists no longer use the Phillips curve in its original form because it was shown to be too simplistic. This can be seen in a cursory analysis of US inflation and unemployment data 1953-92. There is no single curve that will fit the data, but there are three rough aggregations1955-71, 1974-84, and 1985-92each of which shows a general, downwards slope, but at three very different levels with the shifts occurring abruptly. The data for 1953-54 and 1972-73 do not group easily, and a more formal analysis posits up to five groups/curves over the period.
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According to two influential papers that incorporate a New Keynesian Phillips curve are Clarida, Gal and Gertler (1999) and Blanchard, Gal and Jordi (2007). An equation like the expectations-augmented Phillips curve also appears in many recent New Keynesian dynamic stochastic general equilibrium models. In these macroeconomic models with sticky prices, there is a positive relation between the rate of inflation and the level of demand, and therefore a negative relation between the rate of inflation and the rate of unemployment (Anyanwu, 1993; Blanchard, 2000). This relationship is often called the "New Keynesian Phillips curve." Like the expectations-augmented Phillips curve, the New Keynesian Phillips curve implies that increased inflation can lower unemployment temporarily, but cannot lower it permanently.

3.

Data and method of analysis

The major focus of this paper is to examine the effects and the relationship existing between the unemployment and the GDP (at current prices). As such the GDP data corresponding to that of the unemployment was collected for the period of nine years (2000 2008) for the study as follows:
Table 1 GDP and Unemployment in Nigeria 2000-2008

S/N 1 2 3 4 5 6 7 8 9

YEAR 2000 2001 2002 2003 2004 2005 2006 2007 2008

Y (GDP ($)) 110500000 117000000 105900000 113500000 114800000 125700000 175500000 191400000 294800000

X (Unemployment) 34534590.16 35457975.28 33744170.04 37486876.84 38430877.24 36056156.64 4060102.718 7831807.512 8588118

Source: National Bureau of Statistics, Population Reference Bureau & UNAIDS, CBN, http://www.answers.com/topic/nigeria, CIA World Fact book (2008).

In other to get the better, objectives and findings of this paper the econometrics (simple linear regression) method of analysis would be used on the data collected. 3.1 Findings The results of the analysis presented below shows the effects, contribution and the relationship linking the unemployment and the making of the GDP for the years under study.
Table 2 Coefficients of relationship between GDP and Unemployment

Coefficient of determination R2 0.655

Coefficients 240,089,308.8

-3.43665

Thus, the result is graphically represented below as:

Y
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= -3.43665

= 149900000

} = 240,089,308.8 X = 26243408.27 Notes: Alpha (): Constant of the GDP as the model (unemployment) tends to zero. Beta (): Slope of the model. Change on the GDP as a result of the corresponding changes on the unemployment. The results have shown that 65.5% variation of the GDP is explained by the model (unemployment). Similarly, as the unemployment tends to zero the GDP tends to $240,089,308.8. Increase in the unemployment will lead to decrease in the GDP figures by $3.436646181205 and vice versa. This has shown an inverse relationship between the model and the GDP for the said period (200-2008) in Table 1. X

4.

Conclusion

Unemployment has shown an enormous effect (over 65%) on the making of the Nigerian GDP (that is depending on whether unemployment increase or decrease) for the years under study (2000 - 2008). Increase on the unemployment rate has drastically diminished the making of the Nigerian GDP over the years. Unemployment has a pivotal role to play as increase in its figures will lead to economic drawback and vice-versa. There is indeed an inverse relationship between the unemployment and the GDP for the period under study. This study has revealed that external debt, exchange rate and capacity utilisation among others are significant explanatory variables of unemployment in Nigeria. Mobile phones in Nigeria have transformed the country, economically, socially, and democratically as well.

5.

Recommendations

Unemployment can be combated through the Public Sector Reforms. The government should enhance a proper man management system. The development of any country very much depends on the calibre and organisation of the human resources. So, the government of Nigeria should set on ground a public sector reform that is strong and dependable. The government should encourage and support ICT employment generation through youth entrepreneurship. The government should encourage Telecentres to be set up in places like shops, schools, community centres, police stations and clinics. People should be ready to engage themselves in one work or the other as over dependence on the government work will not be the right idea. To curb unemployment problems in Nigeria, the government must provide power (electricity) and security as this will give an enable grounds for the foreign investors to invest in the economy.
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6.

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