Financial deepening and unemployment in Nigeria

This study thoroughly examined the impact of financial deepening on the unemployment rate in Nigeria from 1981 to 2023. Data on unemployment rate, private sector credit as a percentage of GDP, broad money supply as a percentage of GDP, and interest rate were sourced from Nigeria's apex bank. The Autoregressive Distributed Lag - ARDL method was used to analyze the short-term and long-term relationships among these variables. Results showed that in both short and long terms, private sector credit as a percentage of GDP has a negative and significant relationship with the unemployment rate in Nigeria, indicating that it helps reduce unemployment. On the other hand, broad money supply as a percentage of GDP has a positive but insignificant relationship with unemployment, suggesting a detrimental effect. Interest rate was found to have a negative but insignificant association with unemployment. The study recommended promoting credit expansion to the private sector to stimulate investment and lower unemployment. Efforts should be made to improve access to credit and strengthen creditor rights. The government is advised to implement policies that strengthen the financial system and introduce new reforms. These policies should support Nigerian businesses in a fair and effective manner.