The Effects Of Global Financial Crisis On Job Insecurity In Nigeria

The Effects Of Global Financial Crisis On Job Insecurity In Nigeria

ABSTRACT

The study examined the effects of the global financial crisis on Nigeria’s employment insecurity. Other objectives of the study include determining the causes and effects of the global financial crisis in Nigeria by examining ECOBANK PLC as a case study. The Statistics Department of ECOBANK PLC was consulted for primary information regarding the number of workers laid off, profitability, and revenue. In addition, the study utilized a well-designed, validated, and dependable questionnaire to acquire information from 120 randomly selected bank employees. To analyze the collected data, multiple regression analysis and the chi-squared test were employed. In the pre-global financial crisis and post-global financial crisis periods, profitability and turnover, which served as proxies for the global financial crisis, were statistically significant predictors of job insecurity, as measured by the number of employees laid off. In addition, the study found that a high credit culture, an insufficient regulatory framework for financial institutions, a high incidence of fraud, and a high financial outflow are among the major causes of the global financial crisis in Nigeria. In addition, the results revealed that oil glut, declining GDP, rising destitution and unemployment rates, and falling foreign direct investment are significant effects of the global financial crisis in Nigeria. In order to combat the pervasiveness of job insecurity in Nigeria, the study recommended the development of employment-friendly and employment-growth strategies.

First Part

Introduction

1.1 Introduction To The Study

Nigeria is attached to the international financial system. The global financial crisis originated in the economy of the United States in 2007, spread to other developed economies in 2008, and then expanded to less developed countries, including the economy of Nigeria, in the same year.The global financial crisis further destabilized Nigeria’s economy, which was already plagued by economic instability, inconsistent government policies, lack of transparency in the financial markets, corruption, political instability, high poverty and unemployment rates, among others. Government has faced the effects of the global financial crisis on the domestic economy to date. As part of the global economy, Nigeria is destined to experience the micro and macro negative effects of the global financial crisis.

The global financial crisis was precipitated by a series of incompetence in the financial markets, which led to credit and liquidity crises and ultimately led to the failure of several large financial institutions and a loss of confidence in the banking industry. The crisis spread further to the real sectors, resulting in a decline in aggregate demand, economic sluggishness, and employment losses. People have labeled the threat “global financial meltdown,” “global economic meltdown,” “global credit crunch,” etc. due to the rate at which the crisis has spread to other nations, regardless of their level of development.

A financial crisis is frequently accompanied by a credit crunch, which refers to a disorderly contraction in money supply and asset creation ((Obadan, 2008)). A credit crisis occurs when borrowers and borrowers of existing loans lose confidence in the economy. The Great Depression followed a dramatic increase in debt and money supply during the 1920s. In addition, a contraction occurred between 1929 and 1933 as defaulted debt led to a significant decrease in the money supply.

The origin of the global financial crisis can be traced to the rapid accumulation of hazardous debt. As a consequence of the forces of globalization operating through the network of global economic and social ties, the global economy has become increasingly interdependent, thereby facilitating the spread of the current economic crisis (Onudugo, 2009; Onyukwu, 2009). Three markets connect the domestic economy to the remainder of the global economy: the product market, the factor market, and the assets market (money and capital markets). These three markets connect the domestic economy and the rest of the globe to the global economy.

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 its repercussions, such as job insecurity and retrenchment, reduction in foreign development and overseas development assistance, increased poverty, and declining revenues, have been found to be uniform across all affected economies.

1.2 STATEMENT OF PROBLEMS

The global financial crisis has a multisectoral impact on the Nigerian economy, as it has affected all economic sectors. The global financial crisis resulted in the depreciation of the naira, a decline in capital inflows, the collapse of the capital market, the withdrawal of foreign investors, and a decline in the profitability and turnover of numerous businesses. These negative effects weakened the banking sector’s efficiency and contributed to the stock market collapse, which undermined the banking sector’s confidence.

The global financial crisis caused a decline in gross domestic product, consumer expenditure, consumer demand, and industrial production. As businesses became unable to pay salaries, unemployment rates rose. The price of crude oil fell from a high of $147 per barrel in 2007 to $33 per barrel in December of 2008, Nigeria’s solitary source of income at the time. The dramatic decline in the price of oil resulted in a significant decline in the revenue generated by the Nigerian government, as oil contributed over 90% of revenue, over 85% of foreign exchange earnings, and approximately 33% of the country’s gross domestic product at the time.

The Nigerian economy was plagued by a string of global financial catastrophes. As commodity prices skyrocketed and the standard of living of the populace decreased, the purchasing power of the people decreased. Major businesses, firms, and corporations ceased operations, inflation and unemployment rates grew out of control, food scarcity existed, and stock prices confounded the bookmakers’ forecasts.

As the disparity between global economic potential growth and actual performance widened in 2009, particularly in the first quarter of that year, the global economy entered a recession. Numerous families were rendered destitute, numerous individuals were rendered unemployed, and people’s aspirations were crushed. This crisis permeated various economic agents throughout the world.

1.3 OBJECTIVES OF THE STUDY

The primary purpose of this study is to investigate the effect of the global financial crisis on job insecurity in Nigeria. Other sub-goals of the study include:

To investigate the causes of the global economic crisis in Nigeria.

Determine the impact of the global financial crisis on Nigeria.

1.4 Research Questions

The study endeavors to provide satisfactory answers to the following research questions based on the aforementioned objectives.

How has the global financial crisis affected Nigeria’s job insecurity?

What are the causes of Nigeria’s global financial crisis?

What effects does the global financial crisis have on Nigeria?

1.5 Research Hypotheses

In accordance with the study’s aims, the following hypotheses were developed.

First Hypothesis:

The global financial crisis has little effect on job insecurity in Nigeria.

The global financial crisis has a substantial effect on job insecurity in Nigeria.

Second Hypothesis:

Consumption-driven economy, low savings, high credit culture, enormous financial outflow, inadequate regulatory framework for financial institutions, and high fraud and corruption rates are not the causes of Nigeria’s global financial crisis.

Nigeria’s global financial crisis is caused by its consumption-driven economy, lack of savings, high credit culture, enormous financial outflow, inadequate regulatory framework for financial institutions, and widespread fraud and corruption.

Third Hypothesis

H0: Oil glut, decline in GDP, collapse of capital markets, reduction in foreign direct investment, decline in standard of living, unemployment, increase in destitution, and inflation are not effects of the global financial crisis in Nigeria.

Effects of the global financial crisis in Nigeria include an oil glut, a decline in GDP, the collapse of capital markets, a reduction in foreign direct investment, a decline in the standard of living, unemployment, an increase in destitution, and inflation.

1.6 Importance of the Research

This study investigated the effects of the global financial crisis on job insecurity in Nigeria. Since Nigeria is a part of the global village, whatever occurs in the Western world, particularly the established economies, will inevitably affect the Nigerian economy.

The findings of the study will enable Nigeria to think globally and act locally in order to maximize the benefits of globalization while minimizing its inherent costs and difficulties. Without a doubt, the study will be useful to individuals, firms, financial sectors, private investors, stakeholders in the Nigerian economy, the telecommunications sector, foreign investors, and the government, among others, in formulating policies that will mitigate the negative effects of a potential domestic, continental, or global financial crisis.

1.7 RADIUS OF THE STUDY

The study examined the effects of the global financial crisis on job insecurity in Nigeria, with ECOBANK PLC serving as the primary case study.

1.8 Limitations Of The Examination

The study encountered three limitations: time constraints, financial constraints, and the disposition of respondents.

In light of the researcher’s other academic obligations, the time allocated to conduct the study was relatively brief.

Due to a lack of funds, the researcher was unable to expand the scope of the study to include other companies from various economic sectors in Nigeria.

The attitude of the ECOBANK employees who responded was not remarkable. Few of them resisted participating in the survey. Some of them responded diplomatically to the inquiries because they feared revealing the organization’s secrets.

1.9 Methodology

For the first research question, two models were developed: one for the period preceding the global financial crisis (2003-2006) and one for the period following the crisis (2008-2011). As the dependent variable, the number of ECOBANK employees who were laid off served as a proxy for job insecurity, while the profitability and revenue of ECOBANK represented the global financial crisis. Plc variables were used as explanatory variables.

These three proxy variables’ information was obtained from the Bank’s headquarters. The impact of the global financial crisis on employment security was estimated through regression analysis.

For the second and third research questions, ECOBANK employees were given well-structured questionnaires to gather their perspectives on the causes and effects of the global financial crisis in Nigeria. At a 5% level of significance, the Chi-Squared Technique was used to test the hypothesis regarding the causes and effects of the global financial crisis in Nigeria.

1.10 DEFINITIONS OF TERMS

Financial Crisis refers to a precipitous decline in the value of financial assets or the firms administering those assets.

This term refers to the abrupt decline in economic conditions.

The decline in the development of the gross domestic product between two successive economic periods. It is characterized by a decline in economic trade and industrial activity.

Economic Meltdown refers to the slowdown in economic activity that began in the United States between 2008 and 2009 and spread to the rest of the globe.

This refers to the condition in which employees lack confidence that their employment will remain stable from day to day, week to week, and year to year.