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Unemployment Menace and the Fallacy of Microcredit Policy in Nigeria

African Journal of Economic Review

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Title Unemployment Menace and the Fallacy of Microcredit Policy in Nigeria
 
Creator Abdullahi, Ibrahim Bello
Sakariyahu, Ola Rilwan
Olatunji, Abdulganiy
 
Subject unemployment, microcredit, interest rate, inflation, gross domestic product
 
Description This study examined the issue of unemployment and the impact of microfinance  banks’ credit facilities on its reduction for the period of 22 years between 1992 and 2014. The study employed secondary data obtained from Central Bank of Nigeria and National Bureau of Statistics. The data obtained was subjected to stationarity and cointegration tests with the use of Augmented Dickey-Fuller (ADF) and  Phillips-Perron (PP) tests. Furthermore, ordinary least square regression was  employed in analyzing the relationship between the dependent variable  (unemployment rate) and the independent variables (microfinance banks’ credit facilities, gross domestic product, interest rate and inflation). The outcomes of the study show that three independent variables (microfinance banks’ credit facilities, interest rate and inflation) at 5% alpha level have significant impact on  unemployment while gross domestic product was found not to have any significant impact on unemployment. The study concludes that credit facilities provided by microfinance banks do not actually go to deserving individuals or borrowers, thus, having no impact on reducing the menace of unemployment in the country. The study therefore recommends that the Central Bank of Nigeria re-evaluate the  performances of the operating microfinance banks in order to ascertain the  proportion of their loan portfolio that actually goes to the “unemployed but creative youths”. In addition, the CBN must as a matter of urgency take necessary action in ensuring that loans granted by microfinance banks are serviced at a single digit  interest rate as applied in countries like Kenya and Bangladesh. This is because  employment generation and overall economic development can only be achieved  when entrepreneurial youths can access credit facilities at affordable interest rate.Keywords: unemployment, microcredit, interest rate, inflation, gross domestic productJEL Codes: E24, G21
 
Publisher Centre for Economics and Community Economic Development
 
Contributor —
 
Date 2016-05-24
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
Peer-reviewed Article
 
Format application/pdf
 
Identifier http://www.ajol.info/index.php/ajer/article/view/136055
 
Source African Journal of Economic Review; Vol 4, No 2 (2016); 171-187
1821-8148
 
Language eng
 
Relation http://www.ajol.info/index.php/ajer/article/view/136055/125546
 
Rights The copyright belongs to: African Journal of Economic Review, Centre for Economics and Community Economic Development, The Open University of Tanzania, P.O.Box 23409, Dar es salaam, Tanzania