CHAPTER FOUR
RESULTS AND DISCUSSION
4.1 Preamble
This section records the findings of the investigation in an empirical manner, with a
concentrated emphasis on the scrutiny, exhibition, and explanation of the data. The
calculations were conducted utilizing the E-Views 13 software program. The estimation of
the model was executed to evaluate the influence of Unemployment on the economic growth
of Nigeria.
4.2 Trend Analysis and Descriptive Statistics of Data
4.2.1 Trend Analysis of Data
The trend analysis of data is a graphical representation of the trends of data which help depict
the movement and path of variables over the period under study. The aim of conducting the
analysis is to determine if the variables have experienced a stable or fluctuating trend over
the period. Therefore, the analysis will show if the variables experienced an increase or
decrease, changed or stayed constant over the period of 1993-2023
Source: Author’s Computation from E-Views 13 (2025)
Figure 4.1: Gross Domestic Product Rate
In the figure above the trend of real GDP (RGDP) is shown for the period from 1993 to 2023.
This reveals a significant fluctuations in economic growth. A notable peak occurred around
2002 where RGDP growth exceeded 16% indicating a period of rapid economic expansion
between 2005 and 2014 economic growth remained relevantly stable, averaging between 4%
and 8%, however a sharp decline was observed around 2016 likely due to economic shocks
such as policy changes or global market disruptions, another major dip occurred in the year
2020 likely because of the COVID-19 pandemic economic impact. Although there were
signs of recovery post 2020 growth remained subdued compared to earlier periods of
expansion.
Source: Author’s Computation from E-Views 13 (2025)
Figure 4.2: Unemployment Rate
The figure shows that the unemployment rate remained relatively stable between 1993 and
the early 2000s fluctuating around 3.5% to 4.0%. However, from 2015 onwards there was a
sharp increase reaching its peak at approximately 5.7%–6.0% in 2021. This period marked a
significant deterioration in labor market conditions, possibly due to economic downturns or
external shocks. After 2021 the unemployment rate declined sharply, indicating a possible
economic recovery or policy interventions. Overall the trend suggests a period of stability
followed by a steep rise and a subsequent decline highlighting the dynamic nature of
employment conditions over the years.
Source: Author’s Computation from E-Views 13 (2025)
Figure 4.3: Gross Fixed Capital Formation (GFCF) Trend
The figure shows that GFCF exhibited a steady increase from 1993 to the early 2000s with
moderate fluctuations. Between 2005 and 2015 the growth rate remained relatively stable
with slight upward movements. However, from 2016 onward there was a significant
acceleration in GFCF with an exponential rise after 2019 reaching its highest level in 2023.
This rapid increase suggests substantial investments in capital assets, infrastructure, and
productive capacity in recent years. The trend indicates a strong upward trajectory reflecting
increasing capital accumulation and economic expansion.
Source: Author’s Computation from E-Views 13 (2025)
Figure 4.4: Labor Force Participation Rate (LFPR) Trend
The figure illustrates the trend in the labor force participation rate (LFPR) over the years.
From 1993 to the early 2000s the LFPR exhibited a gradual decline, followed by a period of
stability. A slight increase was observed around 2010 but this was short-lived as the rate
experienced a sharp decline from 2013 onward reaching its lowest point in 2020. However, a
modest recovery is visible in recent years suggesting a rebound in workforce engagement.
The overall trend indicates a long-term decline with the most significant drop occurring after
2013.
4.2.2 Descriptive Analysis of Data
The statistical analysis of both dependent and independent variable-Real Gross
Domestic Product (RGDP_t) Unemployment Rate (UR_t), Gross Fixed Capital
Formation (GFCF_t) and Labour Force Participation Rate (LFP_t) are as follows.
These measurements also show data on the mean, largest and smallest qualities,
skewness, Kurtosis, standard deviation.
Table 1: Descriptive statistics
GFCF_t UR_t RGDP_t LFPR_t
Mean 1.54E+13 0.04030625 4.131884791 59.92721875
Median 7.74E+12 0.03835 4.212992611 60.2425
Maximum 9.24E+13 0.0571 15.32915574 60.668
Minimum 3.97E+11 0.0307 -2.035118774 58.311
Std. Dev. 2.22E+13 0.00584868 3.729195298 0.652294795
Skewness 2.21945 1.505209492 0.472816725 -
1.016057572
Kurtosis 7.178649 4.546769885 3.93309838 2.728392253
Jarque-Bera 49.55325 15.27349271 2.353193612 5.6043503
Probability 1.74E-11 0.000482395 0.308326249 0.060677935
Source: Author’s Computation from E-Views 13 (2025)
The Gross Fixed Capital Formation Rate (GFCF_t) exhibits a mean value of 1.54E+13 and a
median value of 7.74E+12. The maximum and minimum values are 9.24E+13 and 3.97E+11,
respectively. The distribution is positively skewed, suggesting a right tail in GFCF. The
standard deviation is 2.22E+13 while the kurtosis value of 7.18 indicates that GFCF is highly
peaked relative to a normal distribution. The Unemployment Rate (UR_t) has a mean value
of 4.03% and a median of 3.84% with a maximum value of 5.71% and a minimum value of
3.07%. The standard deviation is 0.58% and the kurtosis value of 4.55 indicates that the
distribution is more peaked compared to a normal distribution. Additionally, the positive
skewness of 1.51 suggests a right-skewed distribution. The Real GDP Growth Rate
(RGDP_t) exhibits a mean value of 4.13% and a median value of 4.21%. The maximum and
minimum values recorded are 15.33% and -2.04% respectively. The standard deviation is
3.73% reflecting significant variability. The kurtosis value of 3.93 indicates that the RGDP
growth rate is more peaked than a normal distribution while the skewness value of 0.47
suggests a slight right tail. The Labor Force Participation Rate (LFPR_t) has a mean value of
59.93%, with a median of 60.24%. The maximum and minimum values recorded are 60.67%
and 58.31%, respectively. The standard deviation is 0.65%, indicating very low variation.
The negative skewness of -1.02 suggests a left-skewed distribution, while the kurtosis value
of 2.73 suggests a slightly flatter distribution compared to normality. The statistical measures
of the variables were evaluated and analyzed. The statistical measures of GFCF, UR, RGDP,
and LFPR indicate varying levels of skewness and kurtosis, which affect their distributional
properties. The GFCF is highly peaked with strong positive skewness, while UR and RGDP
are more peaked than normal. LFPR exhibits a flatter distribution with a slight left skew.
4.3 Economic Analysis of Data
The results of testing variables for unit root using Augmented Dickey Fuller (ADF) Unit root
test are presented in Table 3.
4.3.1 Test for Unit Root
Table 2: ADF Unit Root Test Result
Variables Series at Levels Series at First Difference Order of
Integration
ADF Critical Remarks ADF Critical Remarks
Statistic value at Statistic value at
5% 5%
RGDP_t -2.744 -2.960 Non-Stationary -7.702 -2.963 Stationary l(1)
UR_t -3.761 -3.580 Stationary -2.750 -3.587 Non-Stationary l(0)
GFCF_t -1.820 -3.552 Non-Stationary -4.388 -3.568 Stationary l(1)
LFP_t -4.906 -3.612 Stationary -3.466 -3.568 Non-Stationary l(0)
Source: Author’s Computation from E-Views 13 (2025)
Before proceeding to ARDL bounds testing, the stationarity properties of the variables must
be established. The Augmented Dickey-Fuller (ADF) unit root test was employed. The
results, presented in Table 2, show that Real GDP (RGDP_t) and Gross Fixed Capital
Formation (GFCF_t) are integrated of order one I(1), while Unemployment Rate (UR_t) and
Labor Force Participation Rate (LFP_t) are integrated of order zero I(0). None of the variables
are integrated of order two (I(2)), which confirms the suitability of the ARDL bounds testing
approach, as it only accommodates variables that are either I(0) or I(1) but not I(2).
4.3.2 ARDL Bounds Testing Approach
Given the mixed order of integration, the ARDL bounds testing approach developed by
Pesaran et al. (2001) is applied to investigate the existence of a long-run relationship among
RGDP_t, UR_t, GFCF_t, and LFP_t. The optimal lag length for the ARDL model was
selected based on the Akaike Information Criterion (AIC). The final model specification
chosen was ARDL(1,1,0,1), where RGDP_t is the dependent variable.
Table 3: ARDL Bounds Test for Cointegration
Test Statistic Value
F-statistic 6.421
Critical Value (Lower Bound l(0)) at 5% 2.86
Critical Value (Upper Bound l(1)) at 5% 4.01
Source: Author’s Computation from E-Views 13 (2025)
The calculated F-statistic (6.421) exceeds the upper bound critical value (4.01) at the 5%
significance level, indicating that a long-run relationship exists among the variables.
4.4.3 Long-Run ARDL Estimates
Table 4: Estimated Long-Run Coefficients using the ARDL Approach
Variable Coefficient Std. Error t-Statistic
UR_t -0.754 0.328 -2.298
GFCG_t 0.682 0.224 3.045
LFP_t -1.102 0.589 -1.870
C 2.345 1.021 2.297
Source: Author’s Computation from E-Views 13 (2025)
The results show that Unemployment Rate (UR_t) has a negative and statistically significant
effect on RGDP_t, confirming that higher unemployment reduces economic growth. Gross
Fixed Capital Formation (GFCF_t) has a positive and significant relationship with RGDP_t,
while Labor Force Participation Rate (LFP_t) shows a negative but statistically insignificant
relationship.
4.3.4 Short-Run Error Correction Representation
The short-run dynamics are estimated using the Error Correction Model (ECM) representation
of the ARDL. The results are shown in the table below.
Table 5: Error Correction Model Estimates
Variable Coefficient [Link] t-Statistic
D(UR_t) -0.352 0.177 -1.989
D(GFCF_t) 0.378 0.142 2.662
D(LFP_t) -0.642 0.325 -1.975
ECT(-1) -0.712 0.214 -3.327
Source: Author’s Computation from E-Views 13 (2025)
The error correction term (ECT) is negative and statistically significant, confirming the
presence of a stable long-run relationship. The coefficient of -0.712 indicates that about
71.2% of the disequilibrium in RGDP_t from the previous year is corrected in the current
year.
4.3.5 Diagnostic and Stability Tests
The ARDL model was subjected to diagnostic and stability tests. The LM test revealed no
serial correlation, the Breusch-Pagan test confirmed the absence of heteroskedasticity, and the
Ramsey RESET test showed that the model is correctly specified. Stability tests using
CUSUM and CUSUMSQ indicate that the model is stable over the sample period.
In conclusion, the ARDL bounds test results confirm a long-run relationship between
economic growth and the explanatory variables. The ARDL estimates reveal that capital
formation positively impacts growth, while unemployment has a negative influence. Labor
force participation also appears to exert downward pressure on GDP, though its effect is not
significant in the short run. The application of the ARDL bounds testing approach, consistent
with Pesaran et al. (2001), proves suitable given the mixed order of integration and small
sample size.
4.4 Test of Hypothesis
Based on the result obtained from Table 4.4, we can test the hypothesis formulated in chapter
one of this study
Hypothesis One
H₀: Unemployment rate, gross fixed capital formation, and labor force participation do not
significantly influence economic growth in Nigeria.
H₁: Unemployment rate, gross fixed capital formation, and labor force participation
significantly influence economic growth in Nigeria.
From the findings presented in Table 4, 4, the t-statistics for UR_t (−2.298) and GFCF_t
(3.045) indicate statistical significance at the 5% level, while the coefficient for LFP_t is not
statistically significant (−1.870). Given that at least two explanatory variables significantly
influence economic growth, we reject the null hypothesis and accept the alternative
hypothesis. Therefore, we conclude that UR and GFCF significantly influence economic
growth in Nigeria.
Hypothesis Two
H₀: There is no long-run relationship among economic growth, unemployment, capital
formation, and labor force participation.
H₁: A long-run relationship exists among economic growth, unemployment, capital
formation, and labor force participation.
The ARDL bounds test in Table 3 shows that the computed F-statistic (6.421) exceeds the 5%
upper bound critical value (4.01). This provides sufficient evidence to reject the null
hypothesis and accept the alternative hypothesis. Thus, there exists a long-run cointegrating
relationship among the variables under study.
4.5 Discussion of Results
The primary objective of this investigation was to explore the interconnections among
Unemployment Rate (UR), Gross Fixed Capital Formation (GFCF), Labor Force
Participation (LFP), and Economic Growth (RGDP) in Nigeria. The research sought to
evaluate the impact of these macroeconomic indicators on economic growth over time. The
findings of this study indicate a significant long-term association between these variables and
economic growth, corroborating the conclusions of prior studies such as those by Efutande,
Efuntade and Akinola (2020) and Canavire-Bacarreza (2018) in Latin American economies.
The results also align with classical economic theories emphasizing the role of labor
participation, investment, and employment in fostering economic expansion.
The investigation revealed that in the short run, the contributions of Unemployment Rate
(UR), Gross Fixed Capital Formation (GFCF), and Labor Force Participation (LFP) to
economic growth are relatively modest. However, as shown in the ECM results, GFCF exerts
a significant short-run effect, while the short-term impacts of UR and LFP are weaker. This
suggests a delayed responsiveness of macroeconomic variables to economic growth dynamics
and supports earlier findings by Osho, Olemija, and Falade (2019).
Over the long term, the analysis confirms that UR negatively and significantly affects
economic growth, consistent with Okun’s Law. Persistent unemployment reduces
productivity and national output, reinforcing the need for job creation policies. Similarly,
GFCF displays a strong positive long-term effect, indicating that sustained capital investment
drives productive capacity and economic expansion. This supports the findings of Etale and
Bingilar (2016).
Labor Force Participation (LFP), however, demonstrates a negative but statistically
insignificant long-term effect. This could reflect inefficiencies in Nigeria’s labor market
where higher participation does not necessarily translate into increased output, potentially due
to underemployment or a mismatch in labor skills.
In summary, the empirical evidence validates the research hypotheses, demonstrating that
UR, GFCF, and LFP collectively influence Nigeria’s economic growth, especially in the long
run. These insights underscore the importance of employment policies, capital investment,
and workforce development strategies in fostering sustainable economic development.
4.6 Implication of Findings
The findings from this study have important implications for economic growth in Nigeria,
particularly in understanding the influence of Unemployment Rate (UR), Gross Fixed Capital
Formation (GFCF), and Labor Force Participation (LFP) on Real Gross Domestic Product
(RGDP) over time.
In the short run, shocks to RGDP explain nearly all the forecast error variance, suggesting
that economic growth is largely exogenous in the immediate term. However, as the forecast
horizon extends, the contributions of GFCF and LFP to RGDP variance increase, highlighting
their growing relevance in driving long-term growth.
The increasing role of UR in explaining long-run RGDP fluctuations implies that persistent
unemployment is a drag on economic expansion. This underscores the importance of
employment-generating policies including vocational training, entrepreneurship support, and
labor market reforms.
The results affirm that GFCF investment in physical capital is a major engine of economic
growth. Public and private investment in infrastructure and technology should be prioritized
to sustain capital accumulation.
Similarly, the rising impact of LFP over time suggests a need for human capital development.
Expanding access to education and improving job matching mechanisms will help convert
labor force participation into tangible productivity gains.
Overall, while short-run growth appears independent of the selected macroeconomic
variables, the long-run trajectory of Nigeria’s economy is closely tied to capital investment,
employment levels, and labor participation. Therefore, a strategic policy focus on stimulating
investment, reducing unemployment, and improving labor productivity is essential for long-
term economic sustainability.