ABSTRACT
This study
examined the effect of Government Expenditure on Economic Growth of Nigeria for
the period 2002 to 2016. Time series data for the fifteen (15) years period was
sourced from Central Bank of Nigeria Statistical Bulletin and Ordinary Least
Square (OLS) multiply regression technique was used to estimate the parameter.
Real Gross Domestic Product, proxy for economic growth is adopted as the
dependent variable while Total Recurrent Expenditure and Total Capital
Expenditure constitute the independent variables. The result of the study
showed that the Government Capital Expenditure has a positive and insignificant
impact on the economic growth of Nigeria for the period under study, while
recurrent expenditure was positive and significant. In view of this, it was
recommended amongst others that government should allocate more of its
resources to the priority sectors of the economy such as agriculture and
industry as well as to infrastructure development, in order to encourage growth
of the economy.
TABLE OF CONTENT
Cover page i
Title page ii
Declaration iii
Dedication iv
Certification v
Abstract vi
Table of content
CHAPTER
ONE
INTRODUCTION
1.1
BACKGROUND TO THE STUDY
1
1.2
STATEMENT OF THE PROBLEM 3
1.2 OBJECTIVE OF THE STUDY 4
1:3. RESEARCH QUESTION 4
1.4
RESEARCH HYPOTHESES 4
1.5
SCOPE OF THE STUDY 5
1.6
SIGNIFICANCE OF THE STUDY 5
CHAPTER TWO
REVIEW OF RELATED LITERATURE 6
2.1 Conceptual framework 6
2.1.1Concept of government
expendituree 6
2.1.2 TYPE OF GOVERNMENT EXPENDITURE 7
2.1.3 HOW GOVERNMET EXPENDITURE IS AFFECTED BY DIFFERENT FACTOR 8
2:1.4 OVERVIEW OF ECONOMY
GROWTH 9
2.1.5 SOME ESSENTIAL CONDITIONS FOR
STRONG ECONOMIC GROWTH 10
2.2 THEORETICAL FRAMEWORK 13
2.2.1 Musgrave theory of public
expenditure 13
2:2:2 Endogenous growth model 13
2.2.3 Economic Growth Theories 14
2.3. Empirical
Review 15
CHAPTER THERE
RESEARCH METHODOLOGY 19
3:1. Research Design 19.
3:2 Area of study 19
3:2 Area of study 20
3:4. Model specification 20
CHAPTER FOUR
PRESENTATION OF DATA,
ANALYSIS AND DISCUSSION 22
4.1 Presentation of Data 22
4.2 Data Analysis and Discussion of Results 22
4.2 Descriptive
Statistics 23
4.3 Regression Analysis 24
4.3.1 Discussion
of Findings and Hypotheses Testing 25
CHAPTER FIVE
SUMMARY OF FINDINGS,
CONCLUSION AND RECOMMENDATIONS 26
5.1 Summary of Findings 26
5.2 Conclusion 26
5.3 Recommendations 26
APPENDIX 27
REFERENCES 30
CHAPTER ONE
INTRODUCTION
1.1
BACKGROUND TO THE STUDY
Over the past decades, the public sector spending has been
increasing in geometric term through government various activities &
interactions with its Ministries, Departments & Agencies (MDA’s), (Niloy et
al. 2003). Although, the general view is that public expenditure either
recurrent or capital expenditure, notably on social & economic
infrastructure can be growth-enhancing although the financing of such
expenditure to provide essential infrastructural facilities-including
transport, electricity, telecommunications, water & sanitation, waste
disposal, education & health-can be growth-retarding (for example, the
negative effect associated with taxation & excessive debt). The size &
structure of public expenditure will determine the pattern & form of growth
in output of the economy (Taiwo, & Abayomi, 2011).
The structure of
Nigerian public expenditure can broadly be categorized into capital &
recurrent expenditure. The recurrent expenditure are government expenses on
administration such as wages, salaries, interest on loans, maintenance etc.,
whereas expenses on capital projects like roads, airports, education, telecommunication,
electricity generation etc., are referred to as capital expenditure. One of the
main purposes of government spending is to provide infrastructural facilities
(Taiwo & Abayomi, 2011).
Nurudeen & Usman (2010), added that, in
Nigeria, government expenditure has continued to rise due to the huge receipts
from production & sales of crude oil, & the increased dem& for
public (utilities) goods like roads, communication, power, education &
health. Besides, there is increasing need to provide both internal &
external security for the people & the nation. Available statistics,
according to Nurudeen & Usman
(2010) show that total government expenditure (capital & recurrent)
& its components have continued to rise in the last three decades. For
instance, government total recurrent expenditure increased from N3, 819.20
million in 1977 to N4, 805.20 million in 1980 & further to N36, 219.60
million in 1990. Recurrent expenditure was N461, 600.00 million & N1,
589,270.00 million in 2000 & 2007, respectively. In the same manner,
composition of government recurrent expenditure shows that expenditure on
defense, internal security, education, health, agriculture, construction, &
transport & communication increased during the period under review.
Moreover, government capital expenditure rose from N5,004.60 million in 1977 to
N10, 163.40 million in 1980 & further to N24,048.60 million in 1990. The
value of capital expenditure stood at N239, 450.90 million & N759, 323.00
million in 2000 & 2007, respectively. Furthermore, the various components
of capital expenditure (that is, defense, agriculture, transport &
communication, education & health) also show a rising trend between
2002-2016.The effect of government spending on
economic growth is still an unresolved issue theoretically as well as
empirically. Although the theoretical positions on the subject are quite
diverse, the conventional wisdom is that a large government spending is a
source of economic instability or stagnation. Empirical research, however, does
not conclusively support the conventional wisdom. A few studies report positive
& significant relation between government spending & economic growth
while several others find significantly negative or no relation between an
increase in government spending & growth in real output.
In the light of the above, this study intends to examine
the impact of government expenditure on economic growth of Nigeria.
1.2
STATEMENT OF THE PROBLEM
In the last
decade, Nigerian economy has metamorphosed from the level of million naira to
billion naira & postulating to trillion naira on the expenditure side of
the budget. The effect of this expenditure are largely
unnoticeable on the citizenry (Muritola 2011).Empirically,while a positive
& significant relationship between government spending & economic
growth have been established, there are much significant negative or no impact
of an increase in government expenditure & economic growth in Nigeria.
Unfortunately,
the rising government expenditure has not translated to meaningful growth &
development, as Nigeria ranks among the poorest countries in the world. In
addition, many Nigerians have continued to wallow in abject poverty, while more
than 50 percent live on less than US$2 per day. Couple with this, is
dilapidated infrastructure (especially roads & power supply) that has led
to the collapse of many industries, including high level of unemployment
(Nurudeen & Usman, 2010).Among other identified problems in
this study include ;the level of technology is very low & as a result primitive
technology is till date, being used in agriculture which brings about low
productivity, high degree of unemployment in the country, as the functional
firm are not commensurate with the increasing population, basic infrastructures
such as good road, health faculties are lacking, power is epileptic & highly unreliable, income
per head is low, savings & investment are also low in Nigeria.
1:2
OBJECTIVES OF THE STUDY
The broad
objective of the study is to examine the effect of government expenditure & economic growth of
Nigeria.
The specific
objectives are:
1.
To examine the effect of total capital expenditure on economic
growth in Nigeria.
2.
To examine the effect
of total recurrent expenditure on economic
growth in Nigeria.
1:3. RESEARCH QUESTION
In other to achieve the objective of
the study the following research questions were raised:
1. To what extend does total capital expenditure have effect on
economic growth in Nigeria.
2. To what extend does total
recurrent expenditure have effect on economic growth in Nigeria.
1.4
RESEARCH HYPOTHESES
In order to adequately evaluate the
impact of government expenditure on the economic growth of Nigeria, the null
hypotheses are used as follow:
Hypothesis 1
Ho: There is no significant relationship
between total capital
expenditure & economic growth of Nigeria
Ho2: There is no significant relationship
between total recurrent
expenditure & economic growth of Nigeria.
1.5
SCOPE OF THE STUDY
This study is
undertaken to examine the impact of government expenditure on economic growth.
In term of time series, a period of fourteen years is used (i.e. 2002 to 2016) as means of assessing
the effect of
government expenditure on the growth of Nigerian economy. It is hoped that this
will help to achieve the stated objective of the study.
1.6
SIGNIFICANCE OF THE STUDY
It is
expected that this study would consolidate existing literature on the issues
surrounding the relationship between government expenditure & economic
growth. The study would also facilitate the examination of the effects of
government expenditure & economic growth in Nigeria & thus boosting the
empirical evidence from Nigeria.
Furthermore,
given the empirical nature of the study, the outcome of this study would aid
policy makers & regulatory bodies & policy simulation with respect to
the selected variables examined in the study.
The result of
the study would be of benefits to the following=
Education
analysts, & Institutions in examining the effectiveness of government
expenditure & economic growth.
It will also
be useful in stimulating public discourse given the death of empirical
researchers in this areas from emerging economies like Nigeria.
Finally, it
would also add to the available literature on the areas of study while also
providing a platform for other researchers who may want to further this study.
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