AN APPRAISAL OF THE IMPACT OF GOVERNMENT DISBURSEMENT ON ECONOMIC INTENSIFICATION IN NIGERIA

Abstract

The research work explores the impact of government expenditure such as expenditure on General administration, Defense, Education and Health on GDP of Nigeria (1983-2016) the work identifies that despite the continuous increase in government expenditure, there is still a persistent economic backwardness in  Nigeria. The researcher sought to determine the relationship and impact of the identified variables on the economic growth of Nigeria. Time series data were generated from the Central Bank of Nigeria (CBN) statistical bulletins of various years spanning from 1983 to 2016. The Ordinary Least Square (OLS) method of estimation was used in the multiple regression analysis. The result showed that expenditure on General Administration has a positive impact and significant relationship with economic growth; Expenditure on Defense has a negative impact but significant relationship with GDP; Expenditure on Education has a positive and highly significant relationship with economic growth; and Expenditure on Health has a positive but insignificant impact on GDP. Among the recommendations were that government should ensure that her expenditure whether capital and recurrent should be managed and monitored at the implementation stage to enhance comparable achievement viz-a-viz on economic growth. Keywords: Government Expenditure, Economic growth, recurrent expenditure      

  Introduction

 The need to better the lots of citizens through government expenditure (viz-a–viz recurrent and capital expenditure) has raised questions on the impact of government expenditure on  economic development and growth of nations. In Nigeria and other developing economies, over the years, there have been a steady increases in government spending without an appreciable and comparable increases in economic growth and development. These have led to several researches and  interest on the  role   of government spending in the long term growth of  national economies  by economist. In both developed and developing countries there is a concern for raising living standards over time, but this need is much more pronounced in developing countries, given the extent and depth of poverty in these countries. In the relative absence or perpetual weakness of institutions to mobilize and direct savings, the role of the state is crucial in harnessing the resources for development (Gwartney, 1998). Since the regulatory apparatus is weak and market signals imperfect, the state has an important role to play in allocating resources to all sector of the economy. Further, with widespread poverty, there is the expectation that fiscal expenditures would play a major role in anti poverty programs. In Nigeria for instance, despite the huge amount of expenditures, there is still insignificant  level of development witnessed. Public expenditures on all  sectors of the Nigerian economy is expected to lead to economic  growth in the sense that capital and recurrent  expenditure will boost the productive  base of the  economy which in turn will lead to growth. The interest by financial experts and economist in Nigeria and other  jurisdictions on the  role of government expenditure  is  still  inconclusive.  The  relationship  between  economic  growth  and  government  expenditure  is  an important subject of analysis and debate Mitchell, (2005). A central question is whether or not public sector expenditure increases the long run growth rate of the economy. Some scholars are of the opinion that public expenditure, notably on physical infrastructure and human capital, can be growth enhancing although the financing of such expenditures can be growth retarding in the short-run. Public expenditure is an important instrument for government to control the economy. It plays an important role in the functioning of an economy whether developed, developing or under developed. It is the expenses which  government incurs for the maintenance of the government and the society in general (Oriakhi 2004). They can also be refer to as expenses  which government  incurs in  carrying  out its programmes (Okoh 2008). While Anyanwu (1997) posit that government expenditure involves all the expenses which the public sector  incurs  for its maintenance for the benefit  of the economy. 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. 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  (Wang  and  Wen,  2013).  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.   Baro(1990) endogenize government  spending  in a growth  model and analyze the  relationship  between  size of the government and rates  of growth and saving. He concluded  that an  increase in  resources devoted to non- productive  government services is  associated  with lower per capital growth  therefore, government expenditure which enhances economic growth  should be  tailored  towards  productive services. Therefore, it is on the basis of the above, this seminar paper would want to find out the impact of some selected recurrent and capital expenditure indices on the growth of the Nigeria Economy.  The variable index for recurrent expenditure would General Administration and expenditure on Defense. While the variable index for capital expenditure would be expenditure on education and health. A critical  look at the structure  of the above independent variable, that will be analyze in this seminar paper,  will be more appreciable  if two among  the variable associated  with the recurrent expenditure structure, be use. Same also will be applied to the capital expenditure structure.  Economic growth is measure by real gross domestic product. The study which will cover a period  of   34 years (1983 – 2016) will be  carried  out to compliment and  cover  up the gap of the work of other researchers who had carried  out a similar study in Nigeria have created. Statement of the Problem For a resource- and cash- rich country(Nigeria) having nearly 70% of its population living in relative poverty conditions, whose infrastructures are in a  state of  decay, whose health, education and other growth-promoting and welfare – enhancing institutions are in a state of near-collapse, whose roads (most of them) have become death traps due to their deplorable conditions, whose power sector is in a state of moribund, whose  rates of unemployment, illiteracy rate, poverty rate (evidenced in the number of people living in shanties, with little or no access to quality education, medi-care, potable water, etc.) is increasing as the clock ticks, whose human development index its  continuously reducing, etc. Amidst all these problems the government has continuously increased her expenditure. Therefore one would expect that there will be a comparable achievement on economic growth in Nigeria, but otherwise has been the case.  The problems highlighted above have been there over the years despite various works done by researchers and authors on the field of study. It will be unwise for the researcher of this work to also base the problems of this study on the above stated problems. It is  on the above premise the researcher chooses to look at the problem of obsolency of information that is the last time the research was carried out, the geographical problem, that is the areas other researches have not covered and which variables among the government expenditure component have not been tested and as well as the methodological problem, that inform the gaps of this study and which also form the foundation that arouse the interest of the researcher.