Does Capacity Utilization Reduce Unemployment? Evidence from Nigeria

This study empirically investigated the effect of capacity utilization on unemployment in Nigeria over the period of thirty-five years, ranging from 1990 to 2024. The study proxied capacity utilization (independent variable) by capacity utilization, industrial production index and labour force participation rate while unemployment (dependent variable) was measured by unemployment rate. Okun’s Law and Keynesian theory of employment were the theories adopted in the study. Annual time series data were used and these data were sourced from World Development Index (WDI) of the World Bank and National Bureau of Statistics (NBS) reports. The main data analysis technique adopted is Autoregressive Distributed Lag (ARDL) technique. The data analysis was facilitated by E-views 13 statistical package. The findings of the study indicated that, there is a negative and significant relationship between capacity utilization and unemployment rate in Nigeria, there is a negative and significant relationship between industrial production index and unemployment rate in Nigeria while there is a negative and significant relationship between labour force participation rate and unemployment rate in Nigeria. Based on the findings, the study concluded that, capacity utilization plays a significant role in reducing unemployment generation in Nigeria. The researchers recommended among others that government and relevant stakeholders should make genuine efforts towards boosting Nigeria’s capacity utilization.