Economic Development Implications of the International Financial Institutions Loans: A Focus on Employment Generation in Nigeria

ABSTRACT : Employment generation has remained central to the policy goal of economic development inNigeria. In view of this, an empirical investigation into the link between international financial institutions loansand employment rate was carried out in this study. Specifically, the effects of loans from the InternationalFinance Corporation (IFC), International Development Association (IDA), Paris Club and African DevelopmentBank on employment rate were examined. The data for the variables were obtained from the United NationsDevelopment Programme Human Development Report, National Bureau of Statistics, World DevelopmentIndicators and International Debt Statistics. The empirical investigation followed an ex post facto researchdesign with the application of descriptive statistics, unit root and cointegration tests as well as error correctionmodel and Granger causality tests as the data analysis techniques. The unit root test results revealed that all thevariables are stationary at first difference, which justifies the test for cointegration using the Johansen method. Itwas found from the cointegration test results that long run relationship exists among the variables in the model.The parsimonious ECM revealed that IDA and African Development Bank loans have a significant positiveeffect on employment rate. This highlights the substantial role played these funding sources in generatingemployment in Nigeria. On the contrary, International Finance Corporation and Paris Club do not have anysignificant effect on employment rate. Owing to the findings, it is recommended that loans available to Nigeriafrom the international development association should be channeled to investments in critical infrastructure andagriculture development to generate employment and achieve economic development.

KEYWORDS: Employment generation, institutions loans, International Finance Corporation, IDA, Paris Cluband African Development Bank