Impact of Foreign Direct Investment on Employment and Unemployment Rate in Nigeria: Application of Vector Autoregression(VAR) Models (1960-2014)

Abstract

Unemployment is one of the major problem affecting Nigeria’s economy and its’ society, the rate of unemployment have increased over the years. This study’s aim is to investigate the impact of Foreign Direct Investment (FDI) on the employment and unemployment rate in Nigeria. The study useyearly data on employment and unemployment rate collected from CBN Statistical Bulletin, National Bureau of Statistics and World Bank Indicators for the period 1960 – 2014 to achieve its objective and all analysis were done with E-view 9.5. The study employ Vector Autoregression (VAR) to model the employment and unemployment rate in Nigeria. The findings of the study suggested that FDI had a significant and positive impact on employment, FDI Granger-cause employment, employment Granger-cause FDI, unemployment Granger-cause employment and employment also Granger-cause unemployment. Also unemployment Granger-cause FDI and FDI Granger-cause unemployment.This implied that FDI has a significant role on employment rate in Nigeria and this should not be minimized. The study therefore recommended that policies should be formulated to exploit the role of FDI on employment in Nigeria, in an attempt to reduce the unemployment rate.