Government Expenditure and Economic Growth in Nigeria: a Disaggregated Analysis.
CHAPTER ONE
OBJECTIVES OF THE STUDY
The basic objective of this study will be to empirically examine the impact of government expenditure on economic growth in Nigeria. Other specific objectives include;
- To analyze the trend of recurrent and capital expenditure, as proportions of Gross Domestic Product (GDP) in Nigeria.
- To examine the relationship between government expenditure components (transportation and communication, education, health, agriculture) on economic growth in Nigeria.
- To discuss the role of government expenditure
- To examine the structure component-of government expenditure in Nigeria
CHAPTER TWO
LITERATURE REVIEW
Theoretical framework
This section discusses relevant literature and theoretical framework on the linkage between government expenditure and economic growth. In the Keynesian model, increase in government expenditure (on infrastructures) leads to higher economic growth. Contrary to this view, the neo-classical growth models argue that government fiscal policy does not have any effect on the growth of national output. However, it has been argued that government fiscal policy (intervention) helps to improve failure that might arise from the inefficiencies of the market. The seminal work of opened new ground for the investigation of the impact of fiscal policy (government expenditure) on economic growth. In line with this, and, emphasized that government activity influences the direction of economic growth. Similarly, pointed out that in the endogenous growth models, fiscal policy is very crucial in predicting future economic growth. Many researchers have attempted to examine the effect of government expenditure on economic growth. For instance, examined the effect of government (consumption) expenditure on economic growth for a sample of 96 countries, and discovered a negative effect of government expenditure on growth of real output. examined the association between government expenditures and economic growth in Thailand, by employing the Granger causality test. The results revealed that government expenditures and economic growth are not co-integrated. Moreover, the results indicated a unidirectional relationship, as causality runs from government expenditures to growth. Lastly, the results illustrated a significant positive effect of government spending on economic growth. investigated the relationships between government expenditure and economic growth for a group of 30 OECD countries during the period 1970-2005. The regression results showed the existence of a long-run relationship between government expenditure and economic growth. In addition, the authors observed a unidirectional causality from government expenditure to growth for 16 out of the countries, thus supporting the Keynesian hypothesis. However, causality runs from economic growth to government expenditure in 10 out of the countries, confirming the Wagner’s law. Finally, the authors found the existence of feedback relationship between government expenditure and economic growth for a group of four countries. In their paper, studied the relationship between government expenditure and economic growth for a sample of wealthy countries for 1970-95 period, using various econometric approaches. The authors submitted that more meaningful (robust) results are generated, as econometric problems are addressed. In India, examined the effect of government development expenditure on economic growth during the period 1950-2007. The authors discovered a significant positive impact of government expenditure on economic growth. They also reported the existence of cointegration among the variables. indicated that government spending has a positive relationship with economic growth in Saudi Arabia. On his part, studied the linkage between government expenditure and economic growth for a group of 115 countries during the period 1950-1980. The author used both cross section, time series data in his analysis, and confirmed a positive influence of government expenditure on economic growth.
CHAPTER THREE
RESEARCH METHODOLOGY
INTRODUCTION
In this chapter, we described the research procedure for this study. A research methodology is a research process adopted or employed to systematically and scientifically present the results of a study to the research audience viz. a vis, the study beneficiaries.
RESEARCH DESIGN
Research designs are perceived to be an overall strategy adopted by the researcher whereby different components of the study are integrated in a logical manner to effectively address a research problem. In this study, the researcher employed the survey research design. This is due to the nature of the study whereby the opinion and views of people are sampled. According to Singleton & Straits, (2009), Survey research can use quantitative research strategies (e.g., using questionnaires with numerically rated items), qualitative research strategies (e.g., using open-ended questions), or both strategies (i.e., mixed methods). As it is often used to describe and explore human behaviour, surveys are therefore frequently used in social and psychological research.
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
INTRODUCTION
This chapter presents the analysis of data derived through the questionnaire and key informant interview administered on the respondents in the study area. The analysis and interpretation were derived from the findings of the study. The data analysis depicts the simple frequency and percentage of the respondents as well as interpretation of the information gathered. A total of eighty (80) questionnaires were administered to respondents of which only seventy-seven (77) were returned and validated. This was due to irregular, incomplete and inappropriate responses to some questionnaire. For this study a total of 77 was validated for the analysis.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
Introduction
It is important to ascertain that the objective of this study was to ascertain government expenditure and economic growth in Nigeria: A disaggregated analysis. In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of government expenditure and economic growth in Nigeria: A disaggregated analysis
Summary
This study was on government expenditure and economic growth in Nigeria: A disaggregated analysis. Four objectives were raised which included: To analyze the trend of recurrent and capital expenditure, as proportions of Gross Domestic Product (GDP) in Nigeria, to examine the relationship between government expenditure components (transportation and communication, education, health, agriculture) on economic growth in Nigeria, to discuss the role of government expenditure and to examine the structure component-of government expenditure in Nigeria. The study adopted a survey research design and conveniently enrolled 80 participants in the study. A total of 77 responses were received and validated from the enrolled participants where all respondents were drawn from staffs of CBN in Abuja. Hypothesis was tested using Chi-Square statistical tool (SPSS).
Conclusion
This study was about how a government can allocate its spending across various sectors to maximize prospects for achieving its growth and development objectives. In an effort to tackle this problem, an economic growth model was formulated and estimated within an error correction framework. Within this framework, we have captured reactions of economic growth to short-run movements in disaggregated public spending as well as some control variables individually; and to changes in their cointegrating relationships. We consider disaggregated analysis invaluable from the policy point of view. The study has provided evidence suggesting that the structure of public spending is an important factor for economic growth. However, we have found that government spending was not consciously structured with growth promotion in mind. We find investment in education and infrastructure not only highly significant, but the magnitude of their impacts on economic growth is considerable. This may be due to the effect of strong externalities of these investments in raising the productivity of both human and physical capital as canvassed in the new growth literature. A notable strength of our work is the finding that the key sectors to which public expenditure should be targeted are education and economic infrastructure. In this respect, our opinion is that though increasing public investment in these sectors could generate more growth than focusing only on one sector, Nigeria cannot afford an agricultural sector that is not contributing to economic growth
Recommendation
Therefore, commanded so as to make the agricultural sector relevant in the Nigerian economy. More funds be allocated to capital expenditure to enhance capacity for sustainable growth.
References
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