KASU Journal of Economics and Development Studies, Vol 10 (2), June 2024

IMPACT OF DIGITAL ECONOMY ON YOUTH UNEMPLOYMENT IN NIGERIA

Miftahu Idris1 & John Moses Maikomo2

1
Department of Economics, Taraba State University Jalingo – Nigeria
2
Department of Political Science and International Relations, Taraba State University Jalingo;
Nigeria.
Corresponding Author: [email protected], +234 8033805595

Abstract
The new Information and Communication Technologies (ICTs) are widely perceived as major tools
for kick-starting ailing economies and consequently assist developing societies `catch up' with the
developed world, including those groups that have lost out of the mainstream of development. This
study examined the impact of the digital economy on youth unemployment in Nigeria. The study
adopts an ex post facto research design, utilizing pre-existing time series data from the National
Bureau of Statistics (NBS) for the years 2000 to 2023. Data analysis techniques such as descriptive
statistics and regression analysis are employed to explore the relationship between variables. The
findings indicate that the digital economy has a significant impact on youth unemployment in Nigeria,
with approximately 67.3% of the variation in youth unemployment being explained by the digital
economy variable. The inclusion of the digital economy variable improves the model's performance,
as evidenced by higher coefficient of determination (R²) and lower Root Mean Square Error (RMSE).
The study also reveals a positive relationship between the rate of youth unemployment and youth
unemployment itself. While ICT usage does not show a statistically significant relationship, the
percentage change in GDP is found to be significant. Recommendations include enhancing digital
skills development, fostering entrepreneurship and start-up support, improving internet access and
infrastructure, promoting digital financial inclusion, collaborating with the private sector and
encourage collaboration between educational institutions and industries.
Keywords: ICT, digital economy, youth unemployment, regression, Nigeria
JEL classification:

1. Introduction
Digital economy is a rapidly growing field that encompasses a wide range of activities and industries.
There are various definitions of digital economy based on different perspectives and contexts. The
Organisation for Economic Co-operation and Development (OECD) defines digital economy as "the
economic and social activities enabled by the internet and related technologies" (OECD, 2019). The
European Commission defines digital economy as "the economy that results from billions of
everyday online connections among people, businesses, devices, data, and processes" (European

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Commission, 2016). The World Bank defines digital economy as "the production, distribution, and
consumption of goods and services, mediated by digital technologies" (World Bank, 2019). In fact,
the importance of digital technology has rarely been greater understood than during the 2020 global
economic shutdown as a result of the COVID-19 pandemic (De’ et al., 2020). Around the world,
governments mandated social distance measures to slow the spread of the virus, catalysing the use of
digital technology for the virtual delivery of school classes and for remote working (Brynjolfson et
al., 2020; Prasad et al., 2020; Willcocks, 2020).
There is a well-documented contention that digitalisation creates economic growth (Bukht & Heeks,
2017). Digitalisation is enabled through information and communication technology, which is defined
by Kabongo and Okpara (2014) as “any communication device or application, including radio,
television, mobiles phones, computers, network hardware and software and satellite systems as well
as any associated applications.” From e-commerce to business process outsourcing, digital
technology has transformed how firms operate globally (Lacity et al., 2016). Furthermore, it has
revolutionised how people communicate (e.g., social media) and how governments engage with
citizens through e-government platforms. The implications of successful implementation of digital
technologies are substantial (Tong & Wohlmuth, 2019).
Unemployment creates negative impact on the standard of living of entire citizenry. The unemployed
can be described as numbers of the economically active population who are without work but
available for and seeking work, including people who have lost their jobs and those who have
voluntarily left work. International Labour Organization (ILO) defines the unemployed as numbers of
the economically active population who are without work but available for and seeking work,
including people who have lost their jobs and those who have voluntarily left work (World Bank,
2018). According to Fajana (2013), unemployment refers to a situation where people who are willing
and capable of working are unable to find suitable paid employment. It is one of the macroeconomic
problems which every responsible government is expected to monitor and regulate.
The new Information and Communication Technologies (ICTs) are widely perceived as major tools
for kick-starting ailing economies and consequently assist developing societies `catch up' with the
developed world, including those groups that have lost out of the mainstream of development. (Levi,
Inayatullah & Tony, 2013). Despite investment efforts, African countries have faltered in reaping the
expected economic prosperity associated with digitalisation because of a persistent digital divide,
including digital skills shortages, deficits in ICT infrastructure, and high-cost structures (Banga &
Velde, 2018; Melia, 2020; Yoon, 2020).
According to African Development Bank (AfDB) (2018) in their report of Jobs for Youth in Africa,
Africa has a population of 420 million between ages 15 and 35 years and is regarded as the world’s
youngest continent. This is a great asset and suggestive of abundant untapped potential that if
properly harnessed, the young growing working-age population would drive Africa’s economic
transformation. These potentials may not be attained as majority of African youths are without
secured jobs or economic future. The situation is more worrisome in the case of sub-Saharan Africa,
where youth unemployment is roughly double the rate for adults (AfDB, 2018). For instance, 60% of
the total unemployed in Africa, the youth make up the bulk of the underemployed and unemployed
(Soucat, Nzau, Elaheebocus, & Cunha-Duarte, 2013). Also, International Labour Organisation (ILO)
(2019) shows that youth unemployment rate in sub- Sahara Africa (SSA) was 13.27% in 2018,
surpassing other populous regions such as East Asia and South Asia.

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The menace of youth unemployment in Africa is very severe, pervasive and multifaceted, as tens of
millions of youths join the labour market every year, while only about 3 million formal jobs are
available per annum (AfDB, 2018). One of the recommendations given by AfDB (2018) is ICT
development and penetration, aided by digital literacy, computational thinking as well as developing
coding academics that teach skills ranging from basic digital design to advanced coding languages.
The recent advancement in ICTs is changing old ways of carrying out activities, as well as creating
new ones, from the agricultural sector to industry, and to service sectors.
This advancement in ICTs makes digital literacy imperative, not only for wage employment, but also
for the creation of new businesses by individuals. This is so because ICT development and literacy
qualify people for employment in the job market driven by technologically advancement, as well as
the opportunities to participate in rapidly growing markets inform of business process crowdsourcing
and microwork (Coward et al., 2014). Hence, a great opportunity presents itself for the youths who
take the right steps. Youths with knowledge and access to ICTs are in better positions to harness the
power of ICTs in new and magical ways than those without the required knowledge and access to
ICTs. This calls for serious concern on how to maximize these opportunities.
There are three lacunae in the literature that this study aims to fill regarding the relationship between
digitalisation and youth unemployment. First, the preponderance of qualitative digitalisation studies
(Dewa et al., 2018) may not fully enable the causal effects of digitalisation on productivity to be
established. Second, despite the established link between digital infrastructure and productivity in
several studies (Evangelista et al., 2014), there is a deficit of knowledge about this relationship for
African countries, particularly regarding the impact of the usage of digital technology on economic
growth, employment, and trade (Myovella et al., 2020). In fact, Wamboye et al. (2015) called for
more research to be conducted on these relationships in an African context due to the rapid growth in
ICT and the use of cellular technology in the expansion of digital financial transactions. The present
study seeks to examine the impact of digital economy on youth unemployment in Nigeria.

2. Literature Review
In this section, various issues would be debated across developed and developing countries on the
relationship between digital economy and youth unemployment.
2.1. Digital Transformation
Digital transformation represents a real opportunity for youth employment, especially of the most
qualified young people, and has the potential to accelerate West African countries’ achievement of the
goals set out under Agenda 2063, adopted by the African Union (AU). This jobs dividend can be
realised by shifting activity to the formal economy to create stable and decent jobs. Digital
transformation also offers an opportunity to remove the barriers facing companies when they start the
formalisation process.
Accounting for more than 92.4% of total employment in West Africa (ILO, 2019a), the informal
sector is a major obstacle to the achievement of the Sustainable Development Goals (SDGs)2 and
Goal 4 of the African Union’s Agenda 2063 to build transformed economies able to create jobs. For
example, SDG 8 on stable and decent employment was only 16% achieved in 2019, and West Africa’s
performance on this goal remains low (12%). Although the informal sector enables a large proportion
of the population to participate in economic activity and facilitates labour market flexibility, it also

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increases workers’ vulnerability. The in-work poverty rate remains very high in most countries,
especially in the most informal economies: 61.7% in Guinea-Bissau, 47.9% in Mali and 44.8% in
Benin (ILO, 2019b).
Young people are most at risk of unemployment in West Africa, with average unemployment rates
twice as high as among people aged over 25, according to African Development Bank (AfDB)
figures. In Senegal, 63% of unemployed people are aged 15-34, with unemployment particularly high
among the 20–29-year-old age group (18.8% of 20-24 year olds and 16.3% of 25-29 year olds) and
graduates, with 22.8% unemployed among those with two years of higher education (ANSD, 2018).
At around 9% in Ghana, youth unemployment goes hand in hand with widespread underemployment,
where young graduates work in small businesses in the informal sector. In Nigeria, youth
unemployment (15–24-year-olds) stands at 36.5% (NBS, 2018). Moreover, political crises and post-
conflict situations have an impact on youth unemployment, which peaked at 18% in Mali in 2015 and
settled at around 15% in 2019 (ILO, 2019b).
Digital transformation in West Africa presents a real opportunity to address the challenges of
employment and financial inclusion. Beyond creating direct jobs, the digital ecosystem improves
productivity in many sectors. Furthermore, the COVID-19 health crisis has shown that digital
transformation will provide innovative solutions in many vital sectors. Access to communications
infrastructure is assessed using the telephone penetration rate and Internet and 4G coverage rate.
Despite the number of mobile subscribers continuing to grow, West Africa’s digital connectivity is
still weak. Overall, in 2018, less than half the population (41.5%) had access to a mobile network,
while more than a third (35.1%) had 4G coverage. Only one in four people have Internet access.
These figures clearly show that West Africa does not yet have sufficient access to communications
infrastructure to draw upon for growth and job creation.
The digital transformation of West African countries has been stimulated by the development of
communications infrastructure, particularly submarine cables. In 2019, sub-Saharan Africa was
connected to the global telecommunications network via 18 active multilateral submarine cables
(excluding bilateral submarine cables), including eight on the west coast. This expansion has led to a
3-5% increase in the Internet penetration rates in West Africa compared with the rest of the continent
(Cariolle, 2020).
Access to communications infrastructure remains uneven across the sub region, dampening the
benefits not only at the country level, but also at the regional level, due to the difficulty of ensuring
digital interconnectivity. Some countries such as Ghana, Côte d’Ivoire, Senegal and to some extent
Nigeria have coverage rates above the regional average, but major efforts are yet to be made in Benin,
Burkina Faso and Togo. Small countries often face challenges in achieving economies of scale, due to
the level of investment required to connect the whole territory.
In addition to the poor digital coverage of many West African countries, the quality of coverage is
weak (telephone network, Internet access) leading to suboptimal use. In most countries, mobile
phones have replaced fixed-line phones, which have a penetration rate of less than 1%. This situation
reduces the potential for asymmetric digital subscriber line (ADSL) connections. On-going
investments by individual countries and mobile operators to adopt fibre and accelerate the migration
to 4G will ensure that Internet speeds are reasonable over the coming years. For example, in 2019, the
Orange Group announced the creation of an international fibre optic network, called the “BAFO”
(African fibre optic backbone), which will link eight West African countries where the operator is

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active, including major regional capitals (Dakar, Bamako, Abidjan, Accra, etc.). Despite difficulties
around access, many companies are using digital tools to increase their visibility by creating websites,
to communicate with their customers and to conduct business transactions via online platforms.
High Internet connection costs also discourage the use of applications or technologies that require a
continuous connection. Twenty gigabytes (GB) of mobile data cost EUR 30 in Côte d’Ivoire, while
the same provider sells packages that include free phone calls and SMS with 100 GB of mobile data
for EUR 19.99 throughout Europe (Kouamé, 2019). This high cost is attributable to the lack of
communications infrastructure and two types of vulnerability: the risk of submarine cable breakage
and “digital isolation” (Cariolle & Goujon, 2019). The multiplicity of stakeholders, competition with
incumbent operators, the question of ownership of transactional data and the lack of communications
infrastructure in rural areas remain major challenges (World Bank, 2019a).
Although having a website is now essential for running and managing a company, this tool is still
underutilised in West Africa. Only 24% of companies have a website, despite its benefits in terms of
marketing and access to a very large customer base. This proportion is even lower among small
businesses (14%). Moreover, 36% of large companies do not have a website, reflecting low digital
coverage and the dominance of the informal sector, especially in small countries with few
communications infrastructure, such as Sierra Leone, Liberia, and Guinea-Bissau.
3. Empirical review
In the literature, Edewor, Kollie & Olaoye (2023) evaluated the Conditions Driving Youth
Employment in Key Sectors of the Nigerian Economy. They analysed the differential impact of
sectoral growth on youth employment across rural and urban areas through a gender lens and
identified the specific conditions needed for investment in sectors with potentials for job creation in
the Nigerian economy. Data were analysed using descriptive statistics, revealed comparative
advantage (RCA), employment elasticity, and Logit regression model. It was observed that Nigeria
has demonstrated a comparative advantage in the export of 17 products. Our findings also revealed
that all the economic sectors in Nigeria have potential for creating employment at different levels
with financial services contributing the highest (0.734) and manufacturing the lowest (0.056). The
increase in education influenced employment and a higher likelihood of male youths’ employment in
the services, construction, and industry sectors as compared to more female youths in the trade sector.
Some common conditions that could aid firms’ production scale-up and increase job creation across
all sectors include increased access to finance, improved infrastructure (road, water, air, power, and
rail), and favorable interest rates and exchange rates. The implication is that, the rising incidence of
youth unemployment, especially in emerging economies, calls for prompt attention of development
experts and policy makers given its effect on sustainable growth. This challenge has worsened in
recent times in Nigeria, hence, making it crucial to understand the factors driving youth employment.
In a study by Edewor et al. (2023) analysed sectoral growth and employment elasticity. the focus was
on evaluating the conditions driving youth employment in key sectors of the Nigerian economy,
considering rural and urban areas and analysing the gender lens. The present study intends to
investigate the relationship between the digital economy, ICT usage, youth unemployment, and
economic growth. It seeks to provide insights into the role of digital technologies, digital
entrepreneurship, and the digital job market in generating employment opportunities for the youth. By
delving into the specific impacts of the digital economy, the present study aims to contribute to a
more comprehensive understanding of the factors driving youth employment in Nigeria.

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In a qualitative study by Oladeji, Oyediji, Adenika, Ayinla, Otayokhe and Ajiboye (2022), an
empirical review of entrepreneurial youth empowerment initiatives in south-western Nigeria was
carried out. It was shown that youth empowerment prepares candidates for new venture initiation by
transferring knowledge and developing relevant skills that improve the self-efficacy and effectiveness
of the potential entrepreneur. Entrepreneurial opportunity recognition is a relevant vehicle for
economic development contributing to youth employment worldwide. Findings show that business
opportunity recognition influences business sustainability of small-scale businesses. This implies that
impact of identifying business opportunities, entrepreneurial knowledge, spotting a particular
business industry, transforming business ideas into reality and empowerment initiatives structures
influence business sustainability of youth empowerment candidates.
Furthermore, Oladeji et al.'s (2022) study utilized a qualitative approach to gain an in-depth
understanding of entrepreneurial youth empowerment initiatives South-Western Nigeria. it focused on
examining the effectiveness of various empowerment schemes and their impact on youth
entrepreneurship. In contrast, the present study intends to employ a quantitative approach, analysing
data through statistical techniques such as descriptive statistics, regression models, and comparative
analysis. By employing a quantitative methodology, the present study aims to provide empirical
evidence and statistical insights into the specific impacts of the digital economy on youth
unemployment in Nigeria.
Tatiana and Zrc (2021) conducted a study on conceptualizing youth empowerment entrepreneurship
in European Union policy discourse. The study examined the formation of young entrepreneurs as
subjects in European Union policy and the roles that they have been accorded in policy discourse.
The study concluded that the evolving European Union policy framework is both political and
legalistic in nature, based on precedents set by previous documents that are, in turn, laid out in most
subsequent documents and serve as a framing mechanism and a tool for demonstrating each new
document’s relevance. However, a gap in their study is the lack of examination of the specific impact
of youth empowerment entrepreneurship on youth unemployment rates within the European Union.
The present study aims to fill this gap by investigating the relationship between youth empowerment
entrepreneurship initiatives and youth unemployment rates in European Union member states. By
analysing the effectiveness of these initiatives in reducing youth unemployment, the present study
aims to provide valuable insights into the policy discourse surrounding youth entrepreneurship in the
European Union.
Xavier, Manel, Pere and Jaume, (2020) investigated a study titled exploring the conceptualization and
research of empowerment in the field of youth entrepreneurship. The concept of empowerment has
become increasingly widespread in recent years. Its use is still, however, somewhat controversial, and
diverse, particularly when referring to young people. The study presents a systematic analysis of how
empowerment has been conceptualized over the past 15 years and has been applied to young people.
The study recommends programme formed of ideas such as leadership, self-efficacy, personal well-
being and participation in addition to a defining trait when compared to the global understanding of
empowerment. The study concludes that the unanimity among most authors regarding the current
ambiguous, imprecise nature of the concept, the cause of its versatile use in the various disciplines in
which it appears and the number of ways in which it can be applied. While their study provided a
systematic analysis of how empowerment has been conceptualized and applied to young people, it did
not specifically address the impact of empowerment on youth entrepreneurship and employment. The
present study intends to address this gap by examining the relationship between empowerment,
entrepreneurial skills development, and youth employment outcomes. By investigating the role of

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empowerment in promoting youth entrepreneurship and employment, the present study aims to
contribute to a deeper understanding of the mechanisms through which empowerment initiatives can
effectively reduce youth unemployment rates.
Sathyamurthi (2021) conducted a study titled entrepreneurship on youth empowerment model. In the
study, the author tries to theorize ‘Slum Entrepreneurship’ as a Sociological concept which transcends
geographical limitations. Experts view slums not as a homogenous but heterogeneous entity
depending upon the socio-ecological characteristics. Field investigations were carried out to study the
relationship between the slum types such as the central city, industrial and residential slums in
Chennai and the level of slum entrepreneurship. Based on the field data, the study developed youth
entrepreneurship model for youth empowerment. The study concludes that age of the slum
entrepreneurs is associated with the level of slum entrepreneurship. Although the study provided
insights into the concept of slum entrepreneurship and its association with youth empowerment, it did
not extensively explore the broader context of youth entrepreneurship and unemployment. The
present study seeks to fill this gap by examining the relationship between youth entrepreneurship,
including both slum and non-slum contexts, and youth unemployment in India. By investigating the
factors that contribute to successful youth entrepreneurship and their impact on unemployment
reduction, the present study aims to provide a comprehensive understanding of the role of
entrepreneurship in empowering youth and reducing unemployment rates.
Brimah, Olanipekun, Wahid, Abu, and Awe (2021) explored a study on evaluation of youth
employment and social support operation programme on unemployment reduction in Ilorin
Metropolis. Data for the study is obtained from primary sources with the aid of a structured
questionnaire. The study in its descriptive nature adopted a survey design. Pearson Product Moment
Correlation Coefficient was used to test the hypothesis at 5% level of significance. The findings
revealed that there is significant relationship between YESSO Skills for Jobs programmes and
employment generation, economic well-being of beneficiaries and skill job enhancement. The
correlation coefficients were all found to be higher than 0.70 hence signifying a strong positive
relationship between YESSO and employment generation. Based on the findings, the study concluded
that Youth Employment and Social Support Operation Programme significantly impacted on
Unemployment Reduction in Ilorin Metropolis.
However, the study did not specifically analyse the relationship between vocational and
entrepreneurship training schemes and youth unemployment reduction. The present study aims to
address this gap by investigating the effectiveness of vocational and entrepreneurship training
schemes in reducing youth unemployment in Nigeria. By assessing the correlation between these
training programs and employment generation, the present study seeks to provide insights into the
role of skill development in enhancing youth employment opportunities and economic well-being.
Isiaka, Kadiri, Salman and Alabi, (2017) explored a study on effect of entrepreneurial practices in
managing small-scale business or sustainable development in Nigeria, their study was based on
empirical evidence. The study used secondary data, some which are previous research and analyses of
scholars, and related journal articles. Findings shown that most SMEs particularly in Nigeria
liquidated within their first five years of their operations due to contributing factors such as
insufficient capital, lack of focus, inadequate market research, over-concentration on one or two
markets for finished products, and lack of succession plan. It is concluded that, the secret behind the
success of self-reliant strategy is mainly in peoples’ positive attitudes to enterprise, and in the extent
to which the right incentive, adequate to make risk worth taking rather than in any political

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philosophy. Although their study provided insights into the challenges faced by small-scale
businesses in Nigeria, it did not directly address the relationship between entrepreneurial practices
and youth unemployment. The present study intends to bridge this gap by examining the impact of
entrepreneurial practices on youth employment and sustainable development in Nigeria.
In summary, while previous studies have explored the conditions driving youth employment and the
effectiveness of entrepreneurial youth empowerment initiatives in Nigeria, the present study seeks to
bridge the gap by specifically examining the impact of the digital economy on youth unemployment.
By focusing on the digital economy, ICT usage, and their contributions to youth employment and
economic growth, the present study aims to provide valuable insights into the evolving landscape of
employment opportunities for Nigerian youth in the digital era.

4. Materials and Method

In consistent with the study objective, an ex post facto research design is adopted. Ex post facto
research design is a type of non-experimental design that explores the relationship between
independent variables and dependent variables after the events have occurred. This research design is
suitable when conducting studies that involve pre-existing conditions, events, or situations where the
researcher cannot manipulate the independent variables. Ex post facto studies are useful in situations
where it is not feasible or ethical to manipulate variables. This research design is suitable for
investigating the impact of digital economy on youth unemployment and the influence of ICT usage
on economic growth in Nigeria using the available historical data.
The data for this study are sourced from the National Bureau of Statistics (NBS). The NBS is the
official agency responsible for collecting, analysing, and disseminating statistical data in Nigeria.
They provide a wide range of data on various economic and social indicators. Also, relevant data on
indicators such as youth unemployment rates, digital economy metrics, and other socioeconomic
variables can be found there. Additionally, the NBS periodically publishes reports, surveys, and
statistical publications that provide valuable insights and analysis on various indicators on the
Nigerian economy.
Furthermore, the study employs both the descriptive statistics and regression analysis to determine
the relationship between variables and to estimate the impact of the digital economy on youth
unemployment and ICT usage on economic growth.

The regression equation for the model is specified as follows:

Youth Unemployment= β0 + β1Digital Economy + β2ICT Usage + β3Control Variables + ε

Where,
β0 represents the intercept, which captures the baseline level of youth unemployment when all
independent variables are zero.
β1, β2, β3 represent the coefficients that quantify the relationship between each independent variable
and youth unemployment.
Control Variables are included to control for other factors that may influence youth unemployment.

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ε represents the error term, which captures the unexplained variation in youth unemployment not
accounted for by the independent variables.
The coefficients (β1, β2, β3) obtained from the regression analysis provides insights into the direction
and significance of the relationship between the digital economy, ICT usage, and youth
unemployment in Nigeria.

5. Analysis of Results
In this section, the results of regression analysis and other estimated findings are presented as
follows:

Table 1: Regression
Model Summary - Digital Economy
Durbin-Watson
Model R R² Adjusted R² RMSE Autocorrelation Statistic P
H₀ 0.708 0.501 0.468 2.803 0.419 1.156 0.033
H₁ 0.820 0.673 0.597 2.438 0.594 0.810 0.002

Note. Null model includes Rate of Youth Unemployment

Source: Author’s computation, 2024

Table 2: ANOVA
Model Sum of Squares df Mean Square F P
H₀ Regression 118.244 1 118.244 15.049 0.001
Residual 117.863 15 7.858
Total 236.107 16
H₁ Regression 158.866 3 52.955 8.913 0.002
Residual 77.241 13 5.942
Total 236.107 16

Note. Null model includes Rate of Youth Unemployment

Source: Author’s computation, 2024

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Table 1 presents the regression analysis results for the relationship between the digital economy and
youth unemployment in Nigeria. The regression model aims to examine the impact of the digital
economy on youth unemployment rates. The following sections provide an explanation and
interpretation of the key findings. The model summary section provides important statistical measures
to assess the regression model's performance. The coefficient of determination (R²) measures the
proportion of variance in the dependent variable (youth unemployment) that can be explained by the
independent variable (digital economy). In the null model (H0), the R² value is 0.501, indicating that
approximately 50.1% of the variation in youth unemployment can be explained by the digital
economy. When the digital economy variable is included (H0), the R² value increases to 0.673,
suggesting that the digital economy accounts for approximately 67.3% of the variation in youth
unemployment.
The adjusted R² takes into account the number of predictors in the model and adjusts the R²
accordingly. In the null model, the adjusted R² is 0.468, while in the model with the digital economy,
it becomes 0.597. The increase in the adjusted R² from the null model to the digital economy model
indicates that the inclusion of the digital economy variable improves the model's explanatory power.
The root mean square error (RMSE) measures the average difference between the observed and
predicted values. In the null model, the RMSE is 2.803, which represents the average deviation of
youth unemployment from the predicted values. When the digital economy variable is included, the
RMSE decreases to 2.438, indicating a better fit of the model.
The Durbin-Watson statistic measures the presence of autocorrelation in the residuals (errors) of the
model. In the null model, the Durbin-Watson statistic is 1.156, and in the digital economy model, it is
0.810. Values between 0 and 2 are generally considered acceptable, with 2 indicating no
autocorrelation. The decrease in the Durbin-Watson statistic suggests a potential presence of
autocorrelation in the digital economy model's residuals.
In Table 2, the ANOVA result provides information about the significance of the regression model.
The table is split into two sections: one for the null model (H₀) and one for the digital economy model
(H₁). The null model's ANOVA table shows that the regression component has a sum of squares of
118.244, degrees of freedom (df) of 1, and a mean square of 118.244. The F-statistic of 15.049 and its
associated p-value of 0.001 indicate that the regression model with the digital economy variable is
statistically significant compared to the null model.
In the digital economy model, the ANOVA table reveals a sum of squares of 158.866, df of 3, and a
mean square of 52.955. The F-statistic of 8.913 and its associated p-value of 0.002 suggest that the
overall model, including the digital economy variable, is statistically significant in explaining the
variation in youth unemployment rates.
The regression analysis indicates that the digital economy variable has a significant impact on youth
unemployment rates in Nigeria. The inclusion of the digital economy variable in the model improves
its explanatory power and significantly contributes to explaining the variation in youth
unemployment. However, the presence of autocorrelation in the model's residuals suggests that
further investigation is needed to address potential issues of autocorrelation.

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Table 3: Coefficients
Collinearity
Statistics
Standard
Model Unstandardized Standardized t p Tolerance VIF
Error
H₀ (Intercept) 33.999 1.523 22.325 < .001
Rate of Youth
0.422 0.109 0.708 3.879 0.001 1.000 1.000
Unemployment
H₁ (Intercept) 32.391 1.471 22.017 < .001
Rate of Youth
0.332 0.120 0.557 2.770 0.016 0.622 1.607
Unemployment
ICT Usage -0.003 0.023 -0.028 -0.147 0.885 0.708 1.412
% change in GDP 0.434 0.182 0.437 2.383 0.033 0.750 1.334

Source: Author’s computation, 2024

Table 3 presents the coefficients and collinearity statistics for the regression model examining the
impact of the digital economy on youth unemployment in Nigeria. The coefficients represent the
estimated effects of the independent variables on the dependent variable (youth unemployment). The
collinearity statistics assess the presence of multicollinearity among the independent variables. The
following sections provide an explanation and interpretation of the key findings.
Coefficients: In the null model (H₀), the intercept is 33.999, indicating the expected value of youth
unemployment when the digital economy variable is not included. The coefficient for the rate of
youth unemployment is 0.422, indicating that a one-unit increase in the rate of youth unemployment
is associated with a 0.422-unit increase in youth unemployment when controlling for other factors.
This coefficient is statistically significant (p < .001), suggesting a significant relationship between
youth unemployment and the rate of youth unemployment.
In the model with the digital economy variable (H₁), the intercept is 32.391, representing the
expected value of youth unemployment when the rate of youth unemployment, ICT usage, and %
change in GDP are held constant. The coefficient for the rate of youth unemployment is 0.332,
indicating that for every one-unit increase in the rate of youth unemployment, youth unemployment is
expected to increase by 0.332 units, on average. This coefficient is also statistically significant (p =
0.016).
Additionally, the coefficient for ICT usage is -0.003, suggesting a weak negative relationship between
ICT usage and youth unemployment, although this relationship is not statistically significant (p =
0.885). The coefficient for % change in GDP is 0.434, indicating that a one-unit increase in the %

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change in GDP is associated with a 0.434-unit increase in youth unemployment. This coefficient is
statistically significant (p = 0.033).
Collinearity Statistics: The collinearity statistics assess the presence of multicollinearity among the
independent variables. The tolerance values provide an indication of the degree of collinearity, with
values close to 1 indicating low collinearity. The variance inflation factor (VIF) is the reciprocal of
the tolerance and measures the extent of multicollinearity, with values above 1 suggesting the
presence of collinearity.
In both models, all independent variables have tolerances of 1.000 or higher, indicating no issues of
severe collinearity. The VIF values are below 2 for all variables, further supporting the absence of
significant multicollinearity. This suggests that the independent variables are relatively independent
of each other and can be included in the model without concerns about multicollinearity.
The coefficients in Table 3 provide insights into the relationships between the independent variables
and youth unemployment in Nigeria. The rate of youth unemployment demonstrates a significant
positive relationship with youth unemployment, while the coefficients for ICT usage and % change in
GDP show weaker or non-significant associations. The collinearity statistics indicate no severe
multicollinearity among the independent variables, enhancing the reliability of the regression model.
Table 4: Collinearity Diagnostics
Variance Proportions
Condition Rate of Youth ICT % change
Model Dimension Eigenvalue (Intercept)
Index Unemployment Usage in GDP
H₀ 1 1.895 1.000 0.053 0.053
2 0.105 4.244 0.947 0.947
H₁ 1 2.840 1.000 0.018 0.014 0.012 0.020
2 0.943 1.735 0.004 0.000 0.643 0.015
3 0.134 4.603 0.493 0.016 0.069 0.809
4 0.083 5.845 0.484 0.970 0.276 0.155

Source: Author’s computation, 2024

Table 4 presents the collinearity diagnostics for the regression model examining the impact of the
digital economy on youth unemployment in Nigeria. The collinearity diagnostics provide information
about the variance proportions, eigenvalues, and condition indices, which help assess the presence of
collinearity among the independent variables. The following sections provide an explanation and
interpretation of the key findings.
Variance Proportions: The variance proportions represent the proportion of variance in the
independent variables that can be explained by the dimensions (latent variables) extracted from the

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correlation matrix. A higher proportion indicates that the dimension captures a larger share of the
variance in the corresponding independent variable.
In the null model (H₀), there is only one dimension, which accounts for 1.895 (100%) of the variance.
The variance proportions for the intercept and the rate of youth unemployment are both 0.053,
indicating that these variables are equally represented by the dimension.
In the model with the digital economy variable (H₁), there are multiple dimensions. The first
dimension accounts for 2.840 (100%) of the total variance, while the variance proportions for the
intercept, rate of youth unemployment, ICT usage, and % change in GDP are 0.018, 0.014, 0.012, and
0.020, respectively. These proportions indicate that each variable contributes to the first dimension to
varying degrees.
The second-dimension accounts for 0.943 (35%) of the variance and captures additional information
not explained by the first dimension. The variance proportions for the ICT usage variable are
relatively high at 0.643, while the rate of youth unemployment and % change in GDP have smaller
proportions of 0.000 and 0.015, respectively.
The third and fourth dimensions explain smaller proportions of the variance, indicating that they
capture relatively less information compared to the first and second dimensions.
Condition Index: The condition index measures the severity of multicollinearity by assessing the
magnitude of the eigenvalues associated with the dimensions. A higher condition index suggests a
higher degree of collinearity, with values above 10 indicating potential issues.
In both models, the condition index is 1.000 for the first dimension, indicating no severe collinearity.
However, in the null model, the second dimension has a condition index of 4.244, suggesting a
potential moderate collinearity issue.
In the model with the digital economy variable, the condition indices for the second, third, and fourth
dimensions are 1.735, 4.603, and 5.845, respectively. These values indicate a low to moderate level of
collinearity, but not to a concerning degree.
Overall, the collinearity diagnostics in Table 4 suggest that while there may be some collinearity
present among the independent variables, it is not severe. The variance proportions show that each
independent variable contributes to the extracted dimensions to varying degrees. The condition
indices indicate a generally low to moderate level of collinearity, with no severe collinearity detected.
6. Conclusion and Recommendations
This study has established the significant impact of digital economy on youth unemployment in
Nigeria. Findings indicate that the digital economy variable has a substantial influence on youth
employment patterns, with approximately 67.3% of the variation in youth unemployment being
explained by the digital economy. The study also highlights the importance of considering the rate of
youth unemployment and its relationship with overall youth unemployment. It emphasizes the need to
address the rising incidence of youth unemployment to promote sustainable growth and development.
While the study identifies the presence of collinearity among the independent variables, it still
provides valuable insights into the specific impacts of ICT usage and economic factors on youth
unemployment. However, the weak relationship between ICT usage and youth unemployment
suggests the need for further investigation into the specific mechanisms through which ICT
contributes to employment opportunities for young people. In view of the foregoing, the study

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recommends that government should enhance and invest in programmes and initiatives that promote
digital skills development among young people. This can be done through vocational training,
educational curricula revisions, and partnerships between educational institutions and industry
players. By equipping youth with relevant digital skills, they will be better prepared to leverage the
opportunities presented by the digital economy. In addition, there is need to foster entrepreneurship
and start-up support by creating an enabling environment for youth entrepreneurship by providing
access to funding, mentorship, and business development resources. Encourage the establishment of
start-up incubators and accelerators that focus on digital technologies and innovation. Supporting
young entrepreneurs can drive job creation and stimulate economic growth. Furthermore, government
should foster partnerships with private sector and civil society organizations to create job
opportunities in the digital economy. Encourage private sector investment in sectors with high
potential for digitalization, such as e-commerce, software development, and digital marketing.

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