ABSTRACT
The study investigates the impact of government expenditure on
economic growth of Nigeria from the period 1980-2011. The
objective was set to address the problem of utilization of revenue
targeted to improving the economic condition of Nigeria. The review
of theoretical and empirical literature provided a basis for the
selection and specification of model which was used to show if
government capital and recurrent expenditure has positive or
negative impact on economic growth. The data were got from CBN
statistical bulletin. To proper solution to the problem, policies were
recommended to tackle the setbacks to economic growth.
TABLE OF CONTENT
Title page
Approval page
Dedication
Acknowledgement
Abstract
Table of content
CHAPTER ONE- INTRODUCTION
1.1 Background of study
1.2 Statement of problem
1.3 Objective of the study
1.4 Statement of hypothesis
1.5 Significant of study
1.6 Scope and limitation of study
CHAPTER TWO
LITERATURE REVIEW
2.1 Theoretical Literature
2.1.1The Role of Public Expenditure
2.2 Empirical Literature
CHAPTER THREE
3.0 Research Design and Methodology
3.1 Model Specification
3.1.1Regression Model
3.2 Method of Estimation
3.3 Method of Evaluation
3.4 Economic Apriori Expectation
3.5 Source of Data
CHAPTER FOUR
4.0 Presentation and Analysis of Result
4.1 Interpretation of Result
4.2 Evaluation of Result
4.2.1Economic Apriori Criteria
4.2.2Statistical Criteria {first order test}
4.2.2.1 Coefficient of Multiple Determinants {R2}
4.2.2.2 The student’s t-Test
4.2.3F-Statistics
4.3 Economic Criteria
4.3.1Test for Autocorrelation
4.4 Policy Implication
CHAPTER FIVE
SUMMARY, RECOMMENDATION, CONCLUSION
5.1 Summary
5.2 Recommendation
5.3 Conclusion
Bibliography
CHAPTER ONE
1.1 BACKGROUND OF THE STUDY
In all most all economics today government intervention in
undertaking fundamental roles of allocation, stabilization,
distribution and regulation, especially where or when market proves
inefficient or its outcome is socially unacceptable. Government also
intervenes, particularly in developing economics to achieve
macroeconomics objective such as economic growth and
development, full employment, price stability and poverty
reduction.(AESS PUBLICATION 2011).
Public finance is to provide information to all arms of
government in other to provide use full data as done for the develop
nations that transferred public finance technology to developing
nation. Public finance is used for allocation, stabilization and
distribution (Musgrave and Musgrave 1989).
Public finance is the study of the principle underlying the
spending and raising of funds by public authorities (shirras, 1969).
It is the field of economics that studies government activities and
alternative means of financing expenditure (hymann 1993))
It is a fact that no society though out history has ever attained
a high level of economic affluence without a government. Where
government do not exist anarchy reigned and little wealth was
accumulated by productive economy activity. After government took
hold the rule of law and the establishment of private property right
often contributed and it has similarly impacted on their societies as
well.
Economic growth represents the expansion of a country GDP
or outputs. Growth means an increase in economic activities.
Todaro (1995) Citing Kuznets defined a country economic
growth as a long term rise in capacity to supply increasing diverse
economic goods to is population, this growth capacity based on
advancing technology and the institutional and ideological
adjustment that is demand. The board objective of this project is
the role of government expenditure in economic growth.
Government is necessary through by no means sufficient
condition for prosperity it is also a facts, however, that where
government have monopolized the allocation of resources and other
economic decisions, societies have been successful in attaining
relatively high level of economic affluence. Economic progress is
limited both when it is at or near 100%. The experience of the old
Soviet Union is revealing as well the comparison of east and West
Germany during the cold war era or of north and South Korea
today.
In the Nigeria context, the public sectors consist of the federal
government, state government and local government. The second
national development, just as it considered public enterprise as
crucial to growth and self reliance due to capital scarcity, structural
defects in the private sector. Third nation’s development plan(1975-
1980) advocated some shift in resources allocation in favors of rural
areas which were said to have benefited little from the economic
growth of the 1970’s.
Thus smaller farmer and the rural population were expected to
benefit from public expenditure.
During the first nation rolling plan (1989-1991), government
aimed at effort to combat inflation, hence large budgetary deficits
were to be made more avoided. Government expenditures were to be
made more cost effective and kept at level that were consistent with
the nations resources realistic growth target and general economic
stability
The major instruments by which the government can ensure
an effective growth in economic activities are;
i. Expenditure that induce the firm or workers to produce
certain goods and services.
ii. Taxes that reduce private consumption or investment and
thereby free resource for public expenditure.
iii. Regulation and controls that direct people performance or
desist for economic growth to attain economic growth.
These objectives are summarized as;
a. Provision of infrastructural facilities such as good roads, light,
water, transport and communication facilities etc in both
urban and rural area with the view to adequate support to the
productive sector and enhancing private sector participation
on the various sectors of the economy.
b. Streamlining public expenditure to give priority to the
completion of the initial ongoing viable project.
Direct expenditure is that incurred in an establishment of
economically viable commercial enterprises such as iron and steel
complex, oil and gas refineries etc.
Government expenditure in addition to raising the level of
economic growth also influences the pattern of production and the
component of output.
Generally government expenditure is classified into two which
are by current expenditure which involves all expenditure by
government for maintenance of existing or new institutions and
services, they are salaries, wages of public offers and fringe benefits
and expenses for servicing activities which involves administration,
defense and other social services like education, health and pension
schemes.
The other one is capital expenditure this are the cost of
bringing into existence new institutions, services and project. It is
simply all government expenses on building road, factories, schools,
and equipment requirement for providing social and economic
services.
1.2 STATEMENT OF PROBLEM
The size of government expenditure and its effects on long-run
economic growth and vice versa has been as issued of sustained
interest for decades.
According to Dunnet (1990) economic growth is an increase in
real per capita gross national product (GNP).
Economic growth is the steady process by which the
productivity capacity of an economy is increased over time to bring
about rising level of national output and income.
Growth is an engine of development, there can be no
development without growth hence, and economic growth is
desirable since it associated an increase in welfare.
At the new dawn of millennium Africa in general and Nigeria in
particular still face monumental development like low level of
income characterized by low per capita income, inequality, poor
health and inadequate education. All this are consequences of
poverty Nigeria present a paradox the country is rich but the people
are poor. Per capital income today in Nigeria is around the same
level as 1970.
Meanwhile between1970-2000 over 200million dollars has
been earned from the exploitation of countries resources.
Nigeria is rich in land, oil, people and natural gas resources,
yet Nigeria has been bedeviled with debts problem.
Nigeria has been classified by the World Bank as a low
developing country. She is characterized by the wide spread
poverty not less than 60% of Nigerian population are below poverty
line according to the united national development report (UNDP)
1998.
The better reality of the Nigerian situation is not yet that the
poverty line is getting worse by the day but more than fourteen of
Nigerians live in condition of extreme poverty of less than ₦320 per
month which barely provide for a quarter of the nutritional
requirement of health living.
The sluggish growth of the Nigerian economy despite the
increase in government expenditure has been rather surprising.
Since independent according to Kweka, P.J (1969, 1986,
1999), government consumption and investment expenditure in
Nigeria has been on the increase.
On the other hand, the GDP growth rate of Nigerian economy
has not been regular; in fact it has been less static. In order to
successfully map out a strategy for accelerating Nigeria’s growth
rate in the year ahead it is necessary to full understand the sources
of economic growth in Nigeria during the past four decades. One
will notice that government expenditure in Nigeria has been on the
increase.
1.3 OBJECTIVE OF THE STUDY
1. To find out if government expenditure significantly affects
economic growth in Nigeria.
2. To find the causality direction of the relationship between
government expenditure and economic growth in Nigeria.
1.4 STATEMENT OF HYPOTHESIS
The following null hypothesis will be tested at 5% level of
significance.
1. H0= government capital expenditure has no impact on the
Nigerian economy.
2. H0= government recurrent expenditure has no significant
impact on the Nigerian economy.
3. H0=there is no direction of causality between gross domestic
product and government expenditure.
1.5 SIGNIFICANCE OF THE STUDY
This study has much significance on household, stakeholders
and no government as a whole, because economic growth is an
engine of the economy.
i. This research will serve as a research as a references on the
other researcher who may carryout research work in this field
of study.
ii. This research would help Nigerian government and her policy
makers to restore fiscal discipline in Nigeria.
iii. This study would help in the debt management in Nigeria.
1.6 SCOPE AND LIMITATION OF THE STUDY
In any research study of this nature, there is normally the
enthusiasm to touch as many areas as possible which are
connected to the various needs of such study.
However due to the nature and scope of the work, such a wild
scope is out of the question since a work of this nature can hardly
achieve a feat.
This study will examine mainly the Impact of government
expenditure on economic growth of Nigeria covering the period 1980
to 2011.