ABSTRACT
This research work examined the effect of government expenditure on economic growth of Nigeria, chapter one dealt with the introduction, the background of the study, the statement of the problem, hypothesis, objective of the study etc. The objective of the study is to determine the effect of government expenditure on economic growth of Nigeria. However, chapter two dealt with the literature review of different authors, textbooks and related journal were reviewed. The chapter three focus on the research methodology use, the research designed employed was ex post facto research design. Data were sourced from secondary sources, from the Central Bank Statistical Bulletin. Analyses of data and testing of hypotheses were done through the aid of statistical tools such as tables, and simple regression model. In chapter four, the researcher analyze the data, the findings from data analysed indicates that capital expenditure has an insignificant and positive relationship on GDP growth rate of Nigeria, recurrent expenditure has a negative and significant effect on GDP growth rate of Nigeria and finally, capital expenditure has a positive and significant effect on per capita income of Nigeria. The study however revealed that Capital expenditure are funds used by the government to acquire, upgrade and maintain physical assets such as property, roads, bridges, water provision, education and other basic human necessities. It is of utmost necessity to for the government to maintain its investment towards these projects to facilitate the development of its economy and also better the living condition of its citizens. We therefore recommend that government should keep careful monitoring of its investments in the capital projects investment to the extent of showing a significant beta coefficient with the GDP growth rate of the nation.
TABLE
OF CONTENTS
Title page i
Declaration ii
Certification iii
Dedication iv
Acknowledgements v
Table of Contents vi
List of Tables ix
Abstract x
CHAPTER ONE: INTRODUCTION
1.1 Background to the Study 1
1.2 Statement
of the Problem 3
1.3 Objectives
of the Study 4
1.4 Research Questions 4
1.5 Statement
of Hypotheses 4
1.6 Significance
of the Study 5
1.7 Scope
of the Study 6
CHAPTER TWO: REVIEW OF RELATED LITERATURE
2.1 Conceptual Framework 7
2.1.1 Overview of Nigeria Economy 7
2.1.1 Concept
of Government Expenditure 10
2.1.2 Classification
of Government Expenditure 11
2.1.3 Concept
of Economic Growth and Development 15
2.1.4 Merits
of Per Capita GDP as a Measure of Economic Growth 18
2.1.5 Limitations
of Per capita GDP as a Measure of Growth 20
2.2 Theoretical
Framework 23
2.2.1 Wagner's
Law: 23
2.2.2 Wiseman-Peacock
Hypothesis: 23
2.2.3 Neoclassical
Growth Theory 29
2.3 Empirical
Review 31
2.4 Summary/Gap
in Literature 35
CHAPTER THREE: METHODOLOGY
3.1 Research
Design 37
3.2 Area
of the Study 37
3.3 Sources of Data Collection
38
3.4 Method
of Data Collection 39
3.5 Method
of Data Analysis 39
3.6 Model
Specification 39
3.7 Validity
and Reliability of the Data 40
CHAPTER 4: DATA
PRESENTATION AND ANALYSES
4.1 Data
Presentation 42
4.2 Descriptive
Analyses 42
4.3 Analyses
of Hypotheses 43
4.3.1 Hypothesis
I 43
4.3.2 Hypothesis
II 45
4.3.3 Hypothesis
III 46
4.3 Discussion
of Findings 48
CHAPTER 5: SUMMARY
OF FINDINGS, CONCLUSION AND RECOMMENDATION
5.1 Summary
of Findings 50
5.2 Conclusion
50
5.3 Recommendations 51
REFERENCES 52
APPENDIX 56
LIST OF TABLES
Table 4.1 Descriptive
Analyses of Variables 42
Table 4.2 Regression
of Capital and Recurrent Expenditures on GDP growth rate 42
Table 4.3
Regression of Capital and
Recurrent Expenditures on Per capita income 44
Table 4.4 Appendix I 45
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
Government
expenditures play key roles in the operation of all economies. It refers to
expenses incurred by the government for the maintenance of itself and provision
of public goods, services and works needed to foster or promote economic growth
and improve the welfare of people in the society (Oziengbe, 2013).
“Over the past decades, the public sector
spending has been increasing in geometric terms through government various
activities and interactions with its Ministries, Departments and Agencies (MDA‟s)”
(Abdulrahman, 2016). The consensus is
that Government expenditure either recurrent or capital expenditure, notably in
social and economic infrastructure can be growth-enhancing. Also, the financing of such expenditure to provide
essential infrastructural facilities by the government, including transport,
telecommunications, water, electricity and sanitation, waste disposal,
education and health can as well be growth-retarding (for example, the negative
effect associated with taxation and excessive debt). The size and structure of
government expenditure will determine the pattern and form of growth in output
of the economy.
One of the main purposes of government
spending is to provide infrastructural facilities. Nurudeen and Usman, (2017)
stated that, in Nigeria, government expenditure has continued to rise due to
the huge receipts from production and sales of crude oil, and the increased
demand for public (utilities) goods like roads, communication, power, education
and health.
Government
expenditure is a major component of national income as seen in the expenditure
approach to measuring national income: (Y = C+I+G +(X – M)). This implies that government expenditure is a key
determinant of the size of the economy and of economic growth. Public sector expenditure
has been identified as an important investment which the government uses to
influence the performance of the economy (Iheanacho, 2016).
However, it could act as a two-edged sword: It
could significantly boost aggregate output, especially in developing countries
where there are massive market failures and poverty traps, and it could also
have adverse consequences such as unintended inflation and boom-bust cycles.
The effectiveness of government expenditure in expanding the economy and
fostering rapid economic growth depends on whether it is productive or
unproductive. All things being equal,
productive government expenditure would have positive effect on the economy,
while unproductive expenditure would have the reverse effect.
This
has been the wholly dependent state of Nigeria’s economy in terms of growth on
her Government’s capital and recurrent expenditures over decades or for the
sake of accountability. Nigeria’s economy has had its growth dictated and
navigated largely by all expenditures made by government. These expenditures
have either led to a decrease or increase in the gross domestic product (GDP)
growth rate of Nigeria’s economy which is used in measuring growth of the
economy.
Despite
the rise in government expenditure in Nigeria over these years, there are still
public outcries over decaying infrastructural facilities (Chude and Chude,
2013).
A
crucial question that requires an urgent answer is whether the government
aggregated, disaggregated and sectoral expenditures have positive effect on
economic growth of Nigeria. It is against this background that this study seeks
to evaluate the effects of government expenditure on economic growth of Nigeria
from 1981 to 2018.
1.2 STATEMENT OF THE
PROBLEM
Since
independence, Nigeria has been a Developing country. Quite some time enough I
would say for a country to have experienced transition from Developing to
Developed. Growth of economy continues to show as impressive statistically.
Rising gross domestic product per capita income has surely not been found
missing.
This should be due to the judicious and
religious act of the government towards the nation’s expenditures. In the last
decade, Nigeria’s economy has metamorphosed from the level of millions of
Billions of Naira and postulating to trillions Naira on the expenditure side of
the budget. This will not be surprising if the economy is experiencing surplus
or equilibrium on the records of balance of payment (Jelilov, 2016). Better
still, if there are infrastructures to improve commerce with the system or
social amenities to raise the welfare of the average citizen of the economy.
All these are not there, yet we always have a very high estimated expenditure.
Unfortunately, the rising government
expenditure has not translated to meaningful growth and development, as Nigeria
ranks among the poorest countries in the world.
Coupled with this, is the dilapidated
infrastructure (especially roads and power supply) that has led to the collapse
of many industries, including high levels of unemployment (Nurudeen and Usman
2010). Moreover, macroeconomic indicators like the balance of payments, import
obligations, inflation rate, exchange rate, and national savings problems
reveal that Nigeria has not fared well since the 1980‟s
Nigeria in the macroeconomic view is not fully
benefiting from her government expenditures. This is well said as the fact that
the nation falls into recession as often as a baby wets his pampers is
evidenced by our day to day lives. Also, Nigeria has maintained slow growth
rate or even stagnancy in the transition in Developing to Developed economy.
This is the problem this study seeks to look into by assessing, determining,
evaluating crucially the effects of government expenditure on the economic
growth from when Nigeria became democratic till 2016.
1.3 OBJECTIVES OF THE
STUDY
The main objective of the study is to
determine the effect of government expenditure on economic growth of Nigeria
from 1981 to 2016.
The
specific objectives of the study are:
(i). to
determine the effect of capital expenditure on GDP growth rate of Nigeria.
(ii). to evaluate the effect of recurrent expenditure on GDP growth
rate of Nigeria.
(iii). to ascertain the effect of capital
expenditure on per capita income of Nigeria.
(iv). to examine the effect of recurrent
expenditure per capita income of Nigeria.
1.4
RESEARCH QUESTIONS
(i). what
is the effect of capital expenditure on GDP growth rate of Nigeria?
(ii). what effect does recurrent expenditure has on GDP growth rate of
Nigeria?
(iii). what is the effect of capital expenditure
on per capita income of Nigeria?
(iv). what effect does recurrent expenditure has
on per capita income of Nigeria?
1.5 STATEMENT OF
HYPOTHESES
Ho1: Capital
expenditure has no significant effect on GDP growth rate of Nigeria.
Ho2: Recurrent
expenditure has no significant effect on GDP growth rate of Nigeria.
H03:
Capital expenditure has no significant
effect on per capita income of Nigeria.
H04: Recurrent expenditure has no significant
effect on per capita income of Nigeria
1.6 SIGNIFICANCE OF THE
STUDY
Economic
growth of any nation is a major issue of concern and attention because the
growth of a nation’s economy determines its state of development. Abu and
Abdulahi (2010) opine that the greater the intervention of government, the more
negative is its impact on the economy.
Thus
the findings of this research will significantly assist: policy makers, the
general citizens, government and students.
1.6.1 Policy Makers
The
result of this study will have an important implication on policy and budget implementation.
Policy makers would find this work of imperative use as it will assist them in
coming up with better national policies aiming at increasing economic growth.
The conclusion reached from this study would help make obvious, the erroneous
strategies which are presently being used by the Government.
1.6.2 The General
Citizens
This work with respect to the series of
historical researches carried out on it shall be able to serve as a mirror
reflecting our economic performance over the years studied in this work.
Citizens have amongst their birth rights, the right to know the extent to which
proper planning is executed in making productive expenditures by government as
well as governments are liable to be accountable to its citizens. Hence the study
of this work is very significant to Nigerian citizens as a whole.
1.6.3 Students
It is also significant to students in
institutions of learning for research purposes as knowledge itself is built on
the foundation of its former.
1.6.4
Government
This
work will be to the government a mirror or a self-assessment tool of past
performance in relation to the nation’s economic growth and its expenditure
whether capital or recurrent in relation to their corresponding degree of
productivity over the period of time being studied in this work.
1.7 SCOPE OF THE STUDY
The
study covers the effect of government expenditure of economic growth of
Nigeria. It is also using time span of thirty-eight years running from 1981 to
2018. The choice of my period (1981 to 2018).
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