Productivity and employment are issues that are central to the social and economic life of every country. The extant literature refers to productivity and unemployment as constituting a vicious circle that explains the endemic nature of poverty in developing countries. And it has been argued that continuous improvement in productivity is the surest way to breaking this vicious circle. Growth in productivity provides a significant basis for adequate supply of goods and services thereby improving the welfare of the people and enhancing social progress. As pointed out by Dernburg (1985:63), "Without it there would be no growth in per capita income, and inflation control would be all the more difficult". In fact, the observation has been made that continuous enhancement of productivity has been very central to the brilliant performance of the Asian Tigers and Japan in recent years (Simbeye, 1992; World Bank 1993). Recent developments in the world economy have also shown that countries with high productivity are not only central to the determination of global balance of powers (e.g Japan and Germany), but also serve as centres of stimulus, where world resources (including labour) are redirected to, as opposed to countries with low or declining productivity. Recent studies, for example, Rensburg and Nande (1999) and Roberts and Tybout (1997) have also shown that high productivity increases competitiveness in terms of penetrating the world market. Thus, a country with high productivity is often characterized by a very high capacity utilization (optimal use of resources), high standard of living, low rate of unemployment and social progress. Unemployment, on the other hand, has been categorized as one of the serious impediments to social progress. Apart from representing a colossal waste of a country's manpower resources, it generates welfare loss in terms of lower output thereby leading to lower income and well-being (Akinboyo, 1987; and Raheem, 1993). Unemployment is a very serious issue in Africa (Vandemoortele, 1991 and Rama, 1998) and particularly in Nigeria (Oladeji, 1994 and Umo, 1996). The need to avert the negative effects of unemployment has made the tackling of unemployment problems to feature very prominently in the development objectives of many developing countries. Incidentally, most of these countries' economies are also characterized by low productivity. Thus, it seems obvious to many policy makers that there must be a straight forward connection between productivity and employment/unemployment. However, the theoretical linkage between productivity and unemployment is yet to be settled in the literature. While some researchers posit that higher productivity may increase unemployment (e.g. Diachavbre, 1991; Krugman, 1994), some others argue that it could increase employment (e.g Yesufu, 1984; Akerele, 1994; CEC, 1993). In view of the unfolding reality coupled with the protracted debates this paper attempts to examine the linkage between productivity and unemployment. Specifically, it examines the dimensions of productivity and unemployment in Nigeria as well as the direction of causality between them. To this end, the rest of the paper is organized thus. Following this introduction is part II, which examines the conceptual and theoretical is sues. Part III discusses the profile of productivity and unemployment in Nigeria while the empirical link between them is examined in part IV. The final part contains the policy implications and conclusions.