Impact of Bank Lending Rate on Unemployment in Nigeria

Considering the high unemployment rate, available studies for Nigeria are one-sided as they focused only on aggregate unemployment without considering disaggregating unemployment which could provide areas of focus for the monetary policy authority towards tackling unemployment in Nigeria. This study intends to breach this gap by disaggregating unemployment into youth and adult unemployment. This study examines specifically, the impact of banks’ lending rate on youth and adult unemployment rates in Nigeria using annual data from 1981 to 2021. It employed the autoregressive distributed lag technique and estimation procedures under the framework of the Philips curve theory and Taylor’s rule. The data for this study is an annual time series data that covers from 1981 to 2021. The data for the variables were sourced from the Central Bank of Nigeria (CBN) statistical bulletin and the African Development Bank database. The Econometric software for estimation is STATA 17. Results show that banks’ lending had negative and significant impacts on aggregate, and youth unemployment, and negative but insignificant impacts on adult unemployment in the long run. The study concludes that banks’ lending rate affected aggregate, youth and adult unemployment differently. To reduce unemployment in the Nigeria, the monetary authority should implement a tight monetary policy to increase the banks’ lending rate, however, with the youth category in exception.