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This research work examines the inflation and unemployment nexus in Nigeria by testing if the
original Phillips curve proposition holds for Nigeria. The study adopted a distributed lag model
with data covering the period 1970-2011. The consumer’s price index (a measure of inflation rate),
was regressed on unemployment rate, growth rate of money supply, budget deficit, real gross
domestic product, interest rate and the lag of current interest rate. The result reveals that
unemployment is a significant determinant of inflation and that there is a positive relationship
between inflation and unemployment rate in Nigeria. This finding invalidates the original
proposition on the Phillips curve hypothesis in Nigeria. The study therefore recommends that the
economy should be diversified and appropriate policies should be put in place by Government and
the monetary authorities in order to curb the menace of inflation and unemployment and
consequently reduce the problem of stagflation in Nigeria. Again, there is a need for strong
institutional collaboration in dealing with these two macroeconomic variables; unemployment and
inflation as have been recommended in the paper.
