ABSTRACT
This study examines the impact of
government expenditure on economy growth in Nigeria. In the light of the
empirical review and other discussions, a number of questions arose as to
whether there is significant relationship between government recurrent
expenditure and economic growth of Nigeria, if there is significant
relationship between government capital expenditure and economic growth of
Nigeria as well as to determine if there is significant relationship between
government transfer expenditure and economic growth of Nigeria. Using the
Ordinary Least Square (OLS) regression technique with the aid of computer
software, for a 1993 – 2012 time series data, the empirical findings revealed
among other things, that government investment expenditure has a significant
impact on Nigeria’s economic growth. The study is recommends that Transfer
expenditure such as provident fund, pensions and other Social Security benefits
such as NHIS scheme positively affect the economic growth of Nigeria, and by
using government expenditure to achieve supply-side improvements in the
macro-economy, such as spending on education and training to improve labour
productivity, the economic growth of Nigeria increases it also considers that
Administration expenditure, Capital and recurrent expenditure also affect the
economic growth of a country. On the strength of these evidences, this work
recommends that the Federal Government should be very conscious about how it
uses the fiscal policy to regulate government expenditure; government should be
consistent with its expenditure/payments as this will stimulate economic
growth. Finally, the government should take full advantage of the benefits of
capital expenditure, for instance, establishment of industries, setting up of
cottage industries, road constructions; the operations could be labour
intensive so as to increase employment. If these recommendations are efficiently
implemented, the impact of government expenditure on economic growth will be
enhanced.
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 and interactions with its Ministries, Departments and Agencies
(MDA’s), (Niloy et al. 2003). Although, the general view is that government
expenditure either recurrent or capital expenditure, notably on social and
economic infrastructure can be growth enhancing although the financing of such
expenditure to provide essential infrastructural facilities including
transport, electricity, telecommunications, water and sanitation, waste
disposal, education and health can 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 (Taiwo, and Abayomi, 2011).
The structure of Nigerian government
expenditure can broadly be categorized into capital and 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 and Abayomi, 2011).
Nurudeen and Usman (2010) added 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. Besides, there is increasing need to provide both internal and external
security for the people and the nation. Available statistics, according to
Nurudeen and Usman (2010) show that total government expenditure (capital and
recurrent) and 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 and further to N36, 219.60
million in 1990. Recurrent expenditure was N461, 600.00 million and N1,
589,270.00 million in 2000 and 2007, respectively. In the same manner,
composition of government recurrent expenditure shows that expenditure on
defense, internal security, education, health, agriculture, construction, and
transport and 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 and further to N24, 048.60 million in 1990. The value of
capital expenditure stood at N239, 450.90 million and N759, 323.00 million in
2000 and 2007, respectively. Furthermore, the various components of capital
expenditure (that is, defense, agriculture, transport and communication,
education and health) also show a rising trend between 1977 and 2007.
Some scholars have argued that
increase in government spending can be an effective tool to stimulate aggregate
demand for a stagnant economy and to bring about crowed in effects on private
sector. According to Keynesian view, government could reverse economic
downturns by borrowing money from the private sector and then returning the
money to the private sector through various spending programs. High levels of
government consumption are likely to increase employment, profitability and
investment via multiplier effects on aggregate demand. Thus, government
expenditure, even of a recurrent nature, can contribute positively to economic
growth. On the other hand, endogenous growth models such as Barro (1990),
predict that only those productive government expenditures will positively
affect the long run growth rate. 3
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
and significant relation between government spending and economic growth while
several others find significantly negative or no relation between an increase
in government spending and growth in real output.
Gregarious and Ghosh (2007) made use
of the heterogeneous panel data to study the impact of government expenditure
on economic growth. Their results suggest that countries with large government
expenditure tend to experience higher economic growth.
Gemmell and Kneller (2001) provide
empirical evidence on the impact of fiscal policy on long run growth for
European economy. Their study required that at least two of the
taxation/expenditure/deficit effects must be examined simultaneously and they
employ panel and time series econometric techniques, including dealing with the
endogeneity of fiscal policy. Their results indicate that while some public
investment spending impacts positively on economic growth, consumption and
social security spending have zero or negative growth effects.
Mitchell (2005) evaluated the impact
of government spending on economic performance in developed countries. He
assessed the international evidence, reviewed the latest academic research,
cited examples of countries that have significantly reduced government spending
as a share of national output and analyzed the economic consequences of these
reforms. Regardless of the methodology or model employed, he concluded that a
large and growing government is not conducive to better economic performance.
He further argued that reducing the size of government would lead to higher
incomes and improve American’s competitiveness.
According to Olorunfemi, (2008)
studied the direction and strength of the relationship between public
investment and economic growth in Nigeria, using time series data from 1975 to
2004 and observed that government expenditure impacted positively on economic
growth and that there was no link between gross fixed capital formation and
Gross Domestic Product. He averred that from disaggregated analysis, the result
reveal that only 37.1% of government expenditure is devoted to capital
expenditure while 62.9% share is to current expenditure.
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 RESEARCH PROBLEM
The purpose of this study is to
analyse the effect of government expenditure on the rise of economic growth
with a view of showing the rising trend between 1993 and 2012. In the light of this,
the following problems have been identified, recurrent expenditure, capital
expenditure, transfer expenditure, administration expenditure.
1.3 OBJECTIVES OF THE STUDY
The broad objective of the study is to
examine the impact of government expenditure and economic growth of Nigeria.
The specific objectives are:
1. To determine if there is
significant relationship between government recurrent expenditure and economic
growth of Nigeria.
2. To examine if there is significant
relationship between government capital expenditure and economic growth of
Nigeria.
3. To evaluate if there is significant
relationship between government transfer expenditure and economic growth of
Nigeria.
TOPIC: IMPACT OF GOVERNMENT EXPENDITURE ON ECONOMIC GROWTH IN NIGERIA
Format: MS Word
Chapters: 1 - 5
Delivery: Email
Delivery: Email
Number of Pages: 80
Price: 3000 NGN
In Stock

No comments:
Post a Comment
Add Comment