ASSIGNMENT ACTIVITY UNIT 2

BUS 1104-01 Macro-economics - AY2025-T1

University Of the People

Professor: Babandi Ibrahim Gumel

Date: 17/09/2024

Assignment Instructions:
This assignment will assess your skills and knowledge on interpreting economic
data, critically analyzing unemployment and inflation trends, and understanding
their implications. It will also evaluate your understanding of the differences in
these implications between developed and developing countries.

Introduction

This assignment provides an opportunity to analyze unemployment and inflation

trends in a developing country over the past decade, understand their
influencing factors, and explore the economic implications. It also encourages
you to consider whether these implications differ between developed and
developing countries. This real-world analysis enhances your ability to interpret
economic data, assess trends critically, and draw meaningful conclusions,
preparing you for addressing practical economic challenges.

Assignment

Unemployment and inflation exhibit evident disparities between developed and

developing nations, resulting in distinct economic consequences. Developed
countries typically maintain lower unemployment rates and stable inflation
levels. Conversely, developing countries frequently grapple with elevated
unemployment and volatile inflation, influencing their socioeconomic well-being
and economic vitality. This assignment focuses on a developing country (e.g.,
India, Brazil, Nigeria, or a similar nation) for an in-depth examination.

Task: You are required to select a developing country for your analysis and
prepare a comprehensive report. Your report should provide insights into the
following inquiries

1. What is the current unemployment rate in your selected country? Provide

an explanation of the methodology used to calculate this unemployment
rate.
2. Examine the unemployment rate in the country over the past decade.
Summarize your findings using either a table or graph.
o Analyze the trends in unemployment and discuss the factors
influencing fluctuations in the country's unemployment rate.
o Classify the type of unemployment the country is currently
witnessing. Explain the causes of this unemployment.
o Identify the type of unemployment in the country in the long run.
Describe any disparities in these factors causing unemployment in
the short run and those causing long-term unemployment in the
country.
3. Examine the inflation rate within the same timeframe in your chosen
country. Summarize your discoveries using a table or graph, and elaborate
on the following:
o Describe the approach used to compute the rate of inflation in your
selected country.
o Explain the indices used to study the variations in the cost of living
and monitor inflation.
4. Discuss the consequences of shifts in unemployment and inflation on the
economic stability and well-being of your chosen country over these years.
Explain whether these implications would differ if your selected country
were a developed country instead of being a developing country.
Submission Instructions:

1. Write a report that addresses the four inquiries mentioned above. Read
the rubric on how you are going to be graded before you start to work on
this assignment.
2. The report should be a minimum of 750 words and not more than 1000
words (not including the reference list or the title page); double-spaced in
Times New Roman font, which is no greater than 12 points in size.
3. Support your arguments with sources and evidence in APA format. Use
high-quality, credible, relevant sources to develop ideas that are
appropriate for the discipline and genre of writing. For assistance with APA
formatting, view the Learning Resource Center: Academic Writing.

Economic Data Analysis Assignment

This assignment focuses on analyzing unemployment and inflation trends in Nigeria (a

developing country) over the past decade and understanding their implications. It also
requires considering the differences in these implications between developed and developing
countries.
Title: Unemployment and Inflation Trends in Nigeria: An Analysis of Economic Implications

Introduction:

The assignment provides an opportunity to analyze unemployment and inflation trends in a

developing country, understand their influencing factors, and explore the economic implications. It
aims to enhance students' ability to interpret economic data, assess trends critically, and draw
meaningful conclusions.

Nigeria, a developing country, has experienced significant economic challenges in recent years.
Unemployment and inflation rates have been on the rise, impacting the country's economic stability
and well-being (World Bank, 2022). This report examines unemployment and inflation trends in
Nigeria over the past decade, analyzing influencing factors and economic implications.

METHODOLOGY

According to the National Bureau of Statistics (NBS) (2022), Nigeria's current unemployment rate
stands at 33.3%. The unemployment rate is calculated using the Labor Force Survey, which measures
the number of unemployed individuals aged 15-64 (NBS, 2022).

The methodology used to calculate the unemployment rate in Nigeria, as employed by the National
Bureau of Statistics (NBS), is based on the International Labour Organization (ILO) standards. Here's
an overview of the methodology:
Labor Force Survey (LFS)
The NBS conducts the Labor Force Survey (LFS) to collect data on employment and unemployment.
The survey targets individuals aged 15-64.

Sampling Frame

The sampling frame consists of households selected from urban and rural areas across Nigeria's 36
states and the Federal Capital Territory.

Data Collection
Trained enumerators collect data through face-to-face interviews using a structured questionnaire.

Key Concepts

1. Labor Force: The labor force includes individuals who are employed, unemployed, or
underemployed.
2. Employed: Individuals who worked for at least one hour in the past week or were temporarily
absent from work.
3. Unemployed: Individuals who are actively seeking work, available to start work within two weeks,
and have not worked in the past week.
4. Underemployed: Individuals who work less than 20 hours per week or are engaged in subsistence
farming.

Unemployment Rate Calculation

The unemployment rate is calculated using the following formula:
Unemployment Rate (%) = (Number of Unemployed Individuals / Labor Force) × 100

Labor Force Participation Rate

The labor force participation rate is calculated as:
Labor Force Participation Rate (%) = (Labor Force / Population aged 15-64) × 100
Unemployment Categories
The NBS categorizes unemployment into:
1. Open Unemployment: Individuals who are actively seeking work.
2. Underemployment: Individuals who work less than 20 hours per week.
3. Disguised Unemployment: Individuals who are engaged in subsistence farming or other non-wage
activities.

Seasonal Adjustment
The NBS seasonally adjusts the unemployment data to account for fluctuations in economic activity.

Data Quality Control

The NBS implements quality control measures to ensure data accuracy and reliability.

Frequency of Data Collection

The LFS is conducted quarterly.

Data Dissemination
The NBS disseminates unemployment data through publications, reports, and online platforms.

By following these methodologies, the NBS provides accurate and reliable unemployment data,
enabling policymakers to make informed decisions.

Unemployment Rate and Trends:

According to the National Bureau of Statistics (NBS), Nigeria's current unemployment rate stands at
33.3% (2022). The unemployment rate is calculated using the Labor Force Survey, which measures
the number of unemployed individuals aged 15-64.
| Year | Unemployment Rate (%) |
| --- | --- |
| 2013 | 21.4 |
| 2014 | 23.9 |
| 2015 | 25.4 |
| 2016 | 27.5 |
| 2017 | 30.1 |
| 2018 | 32.5 |
| 2019 | 33.6 |
| 2020 | 33.3 |
| 2021 | 33.5 |
| 2022 | 33.3 |

*Source:* National Bureau of Statistics (NBS)

Analyze the trends in unemployment and discuss the factors influencing

fluctuations in the country's unemployment rate.

Trends in Unemployment in Nigeria

Nigeria's unemployment rate has been on a steady rise over the past decade,
with some fluctuations. According to the National Bureau of Statistics (NBS), the
unemployment rate increased from 21.4% in 2013 to 33.3% in 2022.

Factors Influencing Fluctuations in Unemployment Rate:

1. Economic Growth Slowdown: Nigeria's economic growth slowed down

significantly between 2014 and 2016, leading to increased unemployment.

2. Lack of Investment in Key Sectors: Insufficient investment in sectors like

agriculture, manufacturing, and construction has limited job creation.

3. High Population Growth Rate: Nigeria's rapid population growth (3.2%

annually) outpaces economic growth, leading to increased unemployment.
4. Inadequate Education and Skills Training: The education system's failure to
equip graduates with relevant skills contributes to unemployment.

5. Security Challenges: Insecurity in some regions, such as the North-East, has

disrupted economic activities and led to job losses.

6. Dependence on Oil Exports: Nigeria's reliance on oil exports makes it

vulnerable to fluctuations in global oil prices, affecting employment.

7. Government Policies: Ineffective policies, such as inadequate infrastructure

development and lack of support for small businesses, contribute to
unemployment.

8. Demographic Factors: Youth bulge (70% of the population is under 30) and
urbanization contribute to unemployment.

Seasonal Fluctuations:

1. Agricultural Seasonality: Unemployment rates tend to decrease during

planting and harvesting seasons.

2. Festive Seasons: Temporary jobs emerge during festive periods, reducing

unemployment rates.

Regional Disparities:

1. Urban-Rural Disparities: Urban areas tend to have lower unemployment rates

compared to rural areas.

2. Regional Variations: Unemployment rates vary across regions, with the North-
East and North-West experiencing higher rates.

Recommendations:

1. Diversify the Economy: Invest in non-oil sectors to create jobs.

2. Improve Education and Skills Training: Enhance the education system to equip
graduates with relevant skills.
3. Infrastructure Development: Invest in infrastructure to support businesses and
job creation.

4. Security Enhancement: Address security challenges to promote economic

activities.

5. Targeted Policies: Implement policies addressing regional and demographic

disparities.

The trends indicate a steady increase in unemployment rates over the past decade.

Factors Influencing Unemployment

Research indicates that several factors contribute to Nigeria's high unemployment rate, including:

1. Economic growth slowdown (IMF, 2022)

2. Lack of investment in key sectors (World Bank, 2022)
3. High population growth rate (United Nations, 2022)
4. Inadequate education and skills training (Adebayo & Ogunyemi, 2020)

Type of Unemployment

Nigeria is currently witnessing structural unemployment, caused by a mismatch between skills and
job requirements (Okoroafo, 2020).

Characteristics of Structural Unemployment:

1. Mismatch between skills and job requirements

2. Long-term unemployment
3. High unemployment rates despite economic growth
4. Geographic and sectoral imbalances

Causes of Structural Unemployment in Nigeria:

1. Skills Mismatch: Education system fails to equip graduates with relevant skills for the job market.
2. Lack of Investment in Key Sectors: Insufficient investment in sectors like agriculture,
manufacturing, and construction.
3. Economic Structure: Over-reliance on oil exports, neglecting other sectors.
4. Population Growth: Rapid population growth (3.2% annually) outpaces economic growth.
5. Technological Changes: Automation and technological advancements replace traditional jobs.
6. Infrastructure Deficits: Inadequate infrastructure hinders business growth and job creation.
7. Government Policies: Ineffective policies, such as inadequate support for small businesses and
entrepreneurship.
8. Demographic Factors: Youth bulge (70% of the population is under 30) and urbanization.

Consequences of Structural Unemployment:

1. Long-term unemployment
2. Increased poverty and inequality
3. Reduced economic growth
4. Social unrest and instability

Long-term Unemployment Type:

Nigeria is likely to experience Structural Unemployment in the long run.

Characteristics of Structural Unemployment:

1. Mismatch between skills and job requirements
2. Long-term unemployment
3. High unemployment rates despite economic growth
4. Geographic and sectoral imbalances

Factors Causing Short-term Unemployment:

1. Seasonal Fluctuations: Agricultural seasonality, festive seasons, and temporary jobs
2. Economic Downturns: Recession, global economic shocks
3. Policy Changes: Government policy shifts, trade agreements
4. Natural Disasters: Floods, droughts, and other natural disasters

Factors Causing Long-term Unemployment:

1. Skills Obsolescence: Technological advancements replacing traditional jobs
2. Demographic Changes: Rapid population growth, youth bulge, and urbanization
3. Economic Structure: Over-reliance on oil exports, neglecting other sectors
4. Infrastructure Deficits: Inadequate infrastructure hindering business growth
5. Education System: Failure to equip graduates with relevant skills

Disparities between Short-term and Long-term Unemployment Factors:

1. Duration: Short-term unemployment is temporary, while long-term unemployment persists.

2. Causes: Short-term unemployment is often driven by external factors (e.g., economic downturns),
while long-term unemployment is driven by structural issues (e.g., skills mismatch).
3. Impact: Short-term unemployment affects individuals, while long-term unemployment has broader
societal implications (e.g., increased poverty, inequality).
4. Solutions: Short-term unemployment requires temporary measures (e.g., job training), while long-
term unemployment requires systemic changes (e.g., education reform, infrastructure development).

Regional Disparities:
1. Urban-Rural Disparities: Urban areas tend to have lower unemployment rates compared to rural
areas.
2. Regional Variations: Unemployment rates vary across regions, with the North-East and North-West
experiencing higher rates.
3. Sectoral Imbalances: Some sectors (e.g., agriculture, manufacturing) have higher unemployment
rates than others (e.g., oil and gas).

Demographic Disparities:
1. Youth Unemployment: Higher unemployment rates among youth (15-24 years)
2. Gender Disparities: Higher unemployment rates among women
3. Educational Attainment: Higher unemployment rates among those with lower educational
attainment

Addressing these disparities and factors requires targeted policies and systemic changes to mitigate
long-term unemployment in Nigeria.

Methodology:

The approach used to compute the rate of inflation in Nigeria is based on the Consumer Price Index
(CPI), which measures the average change in prices of a basket of goods and services consumed by
households.

1. Selection of Basket of Goods and Services: The National Bureau of Statistics (NBS) selects a
representative basket of goods and services, including food, housing, transportation, clothing, and
other necessities.

2. Price Collection: Prices are collected from a sample of retail outlets, markets, and service providers
across the country.

3. Weighting: Each item in the basket is assigned a weight based on its relative importance in the
average household budget.

Index Calculation: The CPI is calculated using the Laspeyres formula:

CPI = (Σ[(Current Year Price x Base Year Quantity) / Base Year Price]) x 100

Base Year: The base year is 2009, and the CPI is calculated relative to this year.

Frequency: The CPI is calculated monthly.

Publication: The NBS publishes the CPI and inflation rate monthly.
Inflation Rate Calculation:
Inflation Rate (%) = [(CPI Current Year - CPI Previous Year) / CPI Previous Year] x 100

Components of Nigeria's CPI

1. Food and Non-Alcoholic Beverages (51.3% weight)
2. Housing, Water, Electricity, Gas, and Other Fuels (15.3% weight)
3. Transportation (10.4% weight)
4. Clothing and Footwear (6.5% weight)
5. Household Furniture and Equipment (4.2% weight)
6. Health (3.1% weight)
7. Education (2.3% weight)
8. Miscellaneous Goods and Services (7.0% weight)

Sources:
1. National Bureau of Statistics (NBS)
2. Central Bank of Nigeria (CBN)
3. International Monetary Fund (IMF)

*Advantages:*

1. Accurate measurement of inflation

2. Reflects changes in cost of living
3. Helps monetary policy decisions

*Limitations:*

1. May not capture regional price variations

2. Does not account for changes in quality of goods and services
3. May be influenced by seasonal fluctuations.

Several indices are used to study variations in the cost of living and monitor inflation:

*1. Consumer Price Index (CPI)*

_Measures: Average change in prices of a basket of goods and services consumed by households_
_Components: Food, housing, transportation, clothing, healthcare, education, and miscellaneous
goods and services_
_Formula: Laspeyres formula_
_Frequency: Monthly_
_Use: Measures inflation, cost of living, and purchasing power_

*2. Gross Domestic Product (GDP) Deflator*

_Measures: Average price of all goods and services produced within a country_
_Components: Personal consumption expenditures, gross investment, government spending, and net
exports_
_Formula: Nominal GDP / Real GDP_
_Frequency: Quarterly_
_Use: Measures economy-wide inflation_

*3. Wholesale Price Index (WPI)*

_Measures: Average change in prices of goods at the wholesale level_

_Components: Primary articles, fuel and power, manufactured products_
_Formula: Paasche formula_
_Frequency: Monthly_
_Use: Measures inflation at the wholesale level_

*4. Producer Price Index (PPI)*

_Measures: Average change in prices of goods and services at the production level_
_Components: Crude materials, intermediate materials, finished goods_
_Formula: Laspeyres formula_
_Frequency: Monthly_
_Use: Measures inflation at the production level_

*5. Core Inflation Index*

_Measures: Inflation excluding volatile food and energy prices_

_Components: Non-food and non-energy items_
_Formula: Excludes food and energy from CPI_
_Frequency: Monthly_
_Use: Measures underlying inflation trends_

*6. Food Price Index*

_Measures: Average change in food prices_

_Components: Cereals, meat, dairy, fruits, vegetables_
_Formula: Laspeyres formula_
_Frequency: Monthly_
_Use: Measures food inflation_

*7. Living Wage Index*

_Measures: Minimum income required to maintain a decent standard of living_
_Components: Housing, food, transportation, healthcare, education_
_Formula: Varies by organization_
_Frequency: Quarterly_
_Use: Measures cost of living and income adequacy_

These indices provide valuable insights into inflation trends, cost of living, and purchasing power,
helping policymakers, businesses, and individuals make informed decisions.

*Inflation Rate and Trends:*

Nigeria's inflation rate stood at 15.7% in 2022. The inflation rate is calculated using the Consumer
Price Index (CPI), which measures changes in the cost of living.

| Year | Inflation Rate (%) |

| --- | --- |
| 2013 | 8.5 |
| 2014 | 8.1 |
| 2015 | 9.3 |
| 2016 | 15.6 |
| 2017 | 16.5 |
| 2018 | 12.1 |
| 2019 | 11.4 |
| 2020 | 13.2 |
| 2021 | 15.6 |
| 2022 | 15.7 |

*Consequences of Shifts in Unemployment and Inflation on Nigeria's Economic Stability and Well-
being*

*Unemployment:*
1. Increased poverty and inequality
2. Reduced economic growth and productivity
3. Social unrest and instability
4. Brain drain and human capital flight
5. Decreased tax revenue and government spending

*Inflation:*

1. Reduced purchasing power and standard of living

2. Uncertainty and volatility in economic decision-making
3. Decreased savings and investment
4. Increased cost of living and poverty
5. Distorted price signals and resource allocation

*Combined Effects:*

1. Stagflation (high unemployment and inflation)

2. Decreased economic competitiveness
3. Reduced foreign investment
4. Increased dependence on external aid
5. Weakened economic resilience to external shocks

*Implications for Developing Countries (Nigeria):*

1. Limited social safety nets and welfare programs

2. Higher vulnerability to external shocks (e.g., global economic downturns)
3. Limited access to credit and financial services
4. Dependence on primary commodities (e.g., oil)
5. Weaker institutions and governance structures

*Comparison with Developed Countries:*

If Nigeria were a developed country, the implications of shifts in unemployment and inflation would
differ in several ways:
*Developed Countries:*

1. Robust social safety nets and welfare programs

2. Stronger institutions and governance structures
3. Diversified economies and industries
4. Access to advanced financial systems and credit markets
5. Greater resilience to external shocks

*Key differences:*

1. Unemployment benefits and support systems would mitigate the impact of job losses.
2. Inflation targeting frameworks would help maintain low and stable inflation.
3. Automatic stabilizers (e.g., progressive taxation) would offset economic shocks.
4. Developed countries would have more policy tools to address economic challenges.
5. The impact of inflation on poverty and inequality would be less severe.

*Nigeria-specific recommendations:*

1. Diversify the economy and promote non-oil sectors.

2. Invest in education and skills training.
3. Implement targeted social safety nets and welfare programs.
4. Strengthen institutions and governance structures.
5. Promote monetary policy reforms and inflation targeting.

By addressing these challenges and implementing targeted policies, Nigeria can mitigate the
consequences of shifts in unemployment and inflation, promoting economic stability and well-being.

*Conclusion:*

Nigeria's unemployment and inflation trends indicate significant economic challenges. Addressing
these issues requires targeted policies, investment in education and skills training, and diversification
of the economy.
References:

National Bureau of Statistics (NBS). (2022). Labor Force Survey.

National Bureau of Statistics (NBS). (2022). Consumer Price Index.

International Monetary Fund (IMF). (2022). World Economic Outlook.

World Bank. (2022). Nigeria Overview.

International Labour Organization (ILO). (2018). Guidelines for Assessing Labour Force
Participation.
World Bank. (2022). World Development Indicators.

Adebayo, B., & Ogunyemi, A. (2020). Unemployment and inflation in Nigeria: A causal analysis.
Journal of Economic and Financial Studies, 9(2), 1-12.

International Monetary Fund (IMF). (2022). World Economic Outlook.

National Bureau of Statistics (NBS). (2022). Labor Force Survey.

National Bureau of Statistics (NBS). (2022). Consumer Price Index.

Okoroafo, S. (2020). Structural unemployment in Nigeria