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Macroeconomic Determinants of Employment in Nigeria's Services Sector: Do Foreign Direct Investment and Exchange Rate Matter?

Author

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  • Oziengbe Aigheyisi

    (University of Benin Teaching Hospital)

Abstract

This study employs the ARDL modeling technique to investigate the determi-nants of employment generation in Nigeria’s services sector, focusing mainly on the roles of foreign direct investment and exchange rate movements during the 1991-2019 period. This study found that in the short-run, FDI positively affects employment generation in the services sector, while currency depreciation ad-versely affects it with a one-year lag. The long-term employment generation effect of the FDI in the services sector remains positive. Still, it loses its statistical sig-nificance, while the impact of currency depreciation on services sector employ-ment is positive and significant. It was also found that economic growth positive-ly affects service sector employment generation in the short and long run, though the effect is only meaningful in the short term. The impact of trade openness is positive and significant over a short period but also turns out to be non-signifi-cant in the long run. Financial sector development favors employment generation in the services sector in the short and long run. Based on this evidence, it is recom-mended that the government try to enhance the attractiveness of various sectors of the economy to FDI and guard against undue appreciation of the nation’s cur-rency. It is also recommended that economic growth and the development of the financial system be prioritized. Given the transience of the effect of trade open-ness on employment generation in the services sector, caution must be exercised in implementing trade liberalization policies. These measures, if implemented, are expected to enhance job creation in the nation’s services sector.

Suggested Citation

  • Oziengbe Aigheyisi, 2022. "Macroeconomic Determinants of Employment in Nigeria's Services Sector: Do Foreign Direct Investment and Exchange Rate Matter?," Revista de Economia Mackenzie (REM), Mackenzie Presbyterian University, Social and Applied Sciences Center, vol. 19(2), pages 55-83, july-dece.
    • Handle: RePEc:aft:journl:v:19:2:2022:jul:dec:p:55-83
    DOI: 10.5935/1808-2785/rem.v19n2p.55-83
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    More about this item

    Keywords

    services sector; Employment Generation; Job Creation; Foreign Direct Investment; Exchange Rate Movements.;
    All these keywords.

    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • L80 - Industrial Organization - - Industry Studies: Services - - - General
    • L90 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - General

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