ABSTRACT
The study examined the effects of global financial
crisis on job insecurity in Nigeria. The other objectives set for the study are
to ascertain the causes and effects of global financial crisis in the Nigeria
using a case study of ECOBANK PLC. Primary data relating to the number of
workers retrenched, profitability and turnover were collected from the
Statistics Department of ECOBANK PLC. Also, the study made use of a
well-constructed, validated and reliable questionnaire to collect data from 120
randomly selected employees of the bank. The multiple regression analysis and
the chi-squared technique were employed to analyze the collected data. The
results indicated that profitability and turnover, which were proxies of global
financial crisis, were statistically significant on job insecurity, which was
proxied by the number of employees retrenched, in the pre-global financial
crisis period and post-global financial crisis period. In furtherance, the
study discovered that high credit culture, inadequate regulatory framework for
financial institutions, high incidence of fraud, high financial outflow amongst
others are the significant causes of
global financial crisis in Nigeria. Also, the results unveiled that oil glut,
declined GDP, increased rates of poverty and unemployment, declined foreign
direct investment amongst others are significant effects of global financial
crisis in Nigeria. To this end, the study suggested that employment friendly
and employment growth strategies should be formulated to mitigate the
pervasiveness of job insecurity in Nigeria.
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Nigeria is interlinked with the global financial
system. The global financial crisis emanated from the economy of the United
States in 2007 and later spread to other developed economies of the world in
2008 and subsequently transmitted in that same year to less developing
countries, inclusive of the Nigerian economy .The global financial crisis
further destabilized the economy of Nigeria, which was initially bedeviled with
the challenges of economic instability, inconsistency in government policies,
lack of transparency in the financial markets, corruption, political
instability, high rates of poverty and unemployment amongst others. Government
till date has been facing the effect of global financial crisis on the domestic
economy. Nigeria a part of the global economy is bounded to face the micro and
macro adverse effects of global financial crisis.
The global financial crisis started as a series of
ineptitude in the financial markets, leading to credit and liquidity crises,
which resulted into the fall of several giant financial institutions in
conjunction with the loss of confidence in the banking sector. The crisis
further spread to the real sectors, resulting to decline in the level of
aggregate demand, economic retardation and job losses. The pace at which the crisis transmitted to
other countries regardless the level of their development has made people to
term the menace as “global financial meltdown”, global economic meltdown”
global credit crunch” etc.
A financial crisis often featured by credit crunch,
which means a disorderly contraction in money supply and wealth creation
((Obadan, 2008). A credit crunch occurs when participants in an economy lose
confidence to have loans as well as recall existing loans. The great depression
occurred after a dramatic expansion in debt and money supply in 1920’s. Then, a
contraction also took place between 1929 and 1933 as debt was defaulted upon
further resulted into a huge decline in the supply of money.
The origin of the global financial crisis is
traceable to rapid risky debt accumulation. The transmission of the crisis
across the globe is due to the fact that the world economy has become
increasingly interlinked as a result of the forces of globalization, operating
through the network of global economic and social linkages (Onudugo, 2009;
Onyukwu, 2009). The domestic economy is
connected to the rest of the world economy through three markets: product
market, factor market and assets market (money and capital markets). The rest
of the world and the domestic economy access the world economy through these
three markets.
Although, the global financial crisis is caused by
the credit crunch in the United States, it has spread to almost all countries’
economies through trade and financial linkages and the implications such as job
insecurity and retrenchment, reduction in foreign development and oversea
development assistance, increased impoverishment, declined revenue amongst
others, have been found to be uniform in the economies affected by this crisis.
1.2 STATEMENT OF PROBLEMS
The impact of global financial crisis on the
Nigerian economy is multisectoral, as it cut across all sectors of the Nigerian
economy. The global financial crisis resulted into depreciation of the naira,
declining capital inflows, capital market collapse, divestment by foreign
investors, decreased profitability and turnover of various firms. These
negative impacts weakened the efficiency of the banking sector and gave rise to
stock market crash, which undermined the confidence of the banking sector.
The global financial crisis led to a decline in the
level of gross domestic product, consumer spending, consumer demand and
industrial output. Unemployment rates rose as firms were no longer able to pay
salaries. The price of crude oil fell from a peak of $147 per barrel in 2007 to
$33 per barrel in December, 2008, given the fact that Nigeria solely depended
on oil during that period. The dramatic decline in price of oil resulted into a
sharp drop in the revenue generated by the Nigerian government due to the fact
that oil contributes over 90% to revenue, over 85% to foreign exchange earnings
and about 33% to GDP as at time frame.
The Nigerian economy was bedeviled with series of
global financial disasters. The purchasing power of the people was eroded as
the prices of commodities sky-rocketed and the living standard of the populace
dwindled. Major businesses, firms and
companies winded up, inflation and unemployment rates were increasing out of
control, food scarcity existed and the prices of stocks defied the predictions
of the bookmakers.
The global economy was in recession as the gap
between global economic potential growth and the actual performance widens in
2009, especially in the first quarter of that year. Many families were rendered
homeless, many people were rendered jobless and peoples’ aspirations were
killed. This crisis penetrated among
different economic agents across the countries.
1.3 OBJECTIVES OF THE STUDY
The main objective of the study is to examine the impact
of global financial crisis on job insecurity in Nigeria. Other sub- objectives
of the study are:
1. To examine the causes of
global financial crisis in Nigeria.
2. To ascertain the effects of
global financial crisis in Nigeria.1.4 RESEARCH QUESTIONS
Based on the objectives stated above, the study
attempts to provide satisfactory answers to the following research questions.
1. To what extent did global
financial crisis impact on job insecurity in Nigeria?
2. What are the causes of
global financial crisis in Nigeria?
3. What are the effects of
global financial crisis in Nigeria?
1.5 RESEARCH HYPOTHESES
In accordance with the objectives of the study, the
following hypotheses were formulated.
Hypothesis 1:
H0: Global
financial crisis has no significant impact on job insecurity in Nigeria.
H1: Global
financial crisis has significant impact on job insecurity in Nigeria.
Hypothesis
2:
H0: Consumption-driven
economy, poor savings, high credit culture, huge financial outflow, inadequate
regulatory framework for financial institutions, High cases of fraud and
corruption are not causes of global financial crisis in Nigeria.
H1: Consumption-driven
economy, poor savings, high credit culture, huge financial outflow, inadequate
regulatory framework for financial institutions, High cases of fraud and
corruption are causes of global financial crisis in Nigeria.
Hypothesis
3:
H0: Oil
glut, decline GDP, collapse of capital markets, reduced foreign direct
investment, decreased living standard, unemployment, increased poverty and inflation
are not effects of global financial crisis in Nigeria.
H1: Oil
glut, decline GDP, collapse of capital markets, reduced foreign direct
investment, decreased living standard, unemployment, increased poverty and
inflation are effects of global financial crisis in Nigeria.
1.6 SIGNIFICANCE OF THE STUDY
The study examined the impact of global financial
crisis on job insecurity in Nigeria. Since Nigeria is part of the global
village, it therefore necessitates that whatever happens in the Western world
especially the developed economies will surely affect the Nigerian economy.
The study through the findings will enable Nigeria
to think globally and act domestically to maximize the benefits of
globalization and minimize its inherent costs and challenges. It is no doubt
the study will be useful individuals, firms, financial sectors, private
investors, stakeholders in the Nigerian economy, telecommunication sector,
foreign investors, government and many
others on how to formulate sound policies that will offset the adverse
consequence of prospective domestic, continental and global financial crisis.