INFLATION AND UNEMPLOYMENT NEXUS IN NIGERIA: A TEST OF VALIDATION OF THE PHILLIPS CURVE

Empirical analysis of the relationship between inflation and unemployment in Nigeria has produced divergent results. This study investigated the inflation-unemployment nexus in Nigeria as a test of validation of the Phillips curve hypothesis. Per capita real gross domestic product, gross fixed capital formation, and total government expenditure were introduced as control variables. Annual time-series data from 1981 to 2023 were analysed using Augmented Dickey-Fuller (ADF) unit root test, Johansen cointegration test and error correction mechanism (ECM). The findings revealed that inflation rate has insignificant positive impact on unemployment rate. On the other hand, per capita real gross domestic product and gross fixed capital formation have significant negative impact on unemployment rate while total government expenditure has insignificant negative impact on unemployment rate. The study concludes that the Phillips curve does not exist in Nigeria. Rather, what exists in Nigeria is stagflation. Among other things, it is recommended that supply-side economic policies that will boost economic productivity, reduce costs of production, stabilize prices, and create a conducive macroeconomic environment for sustainable economic growth and job creation should be implemented.