Government Expenditures and Economic Growth in Nigeria
Chapter One
Objective of the study
The objectives of the study are;
- To find out whether government capital expenditure has impact on the Nigerian economy
- To find out whether government recurrent expenditure has significant impact on the Nigerian economy
- To find out the direction of causality between gross domestic product and government expenditure
CHAPTER TWO
REVIEWED OF RELATED LITERATURE
CONCEPTUAL REVIEW
Economic growth
Kimberly (2019), defines economic growth as an increase in the productive capacity of a state in terms of production of goods and services over a specific period of time. The economic growth of a nation or state can be measured using gross domestic product. This measure takes into account the country’s productive capacity and output. The gross domestic product uses all goods and services that are produced in the country. Maingi (2017) opine that economic growth is caused by many factors, however, they are more associated with higher rate of investment by the private or government sector than on other factors like; consumption spending, higher school enrollment rates, and greater political stability. This proposition has altered the neo-classical view about causes of growth, which they believe can occurs as a result of technical change caused by chance, but economic growth can be fostered and promoted by appropriate policies. Government policies can be targeted toward enhancing the economic growth rates by taxing consumption, subsidizing investment and research, and shifting resources from government consumption to government investment and provide the enabling environment for private sector to drive the growth. However, government policies can deter the level of economic growth, for instance, government borrowing to finance recurrent expenditure, high tax rate for companies, lack of investment in capital stock, high exchange rate and interest rate
The concept of public expenditures arises from the thinking that expenditures undertaken by the government is public. Government expenditures are also called public sector spending or government purchases. Government expenditure has been growing over the years and is very large. Therefore, the determination of the size of the public sector is done by dividing the total expenditures of government by the total national output (GDP). This ratio is defined as the size of the public sector; it is this ratio that was used in this thesis. Also, the data for public expenditures used in this research (thesis) was the expenditures of all the three tiers of government in Nigeria.
Government expenditure
Public expenditures can be disaggregated or classified into subheadings, such as recurrent expenditures and capital expenditures. The recurrent expenditures are expenditures or purchases of stationeries, wages and salaries of workers, fuel, electricity bills and other bills, etc. Capital expenditures are constructions undertaken by the government on roads, bridges, health centres, military installations and hardware, etc.
Recurrent Expenditure
Recurrent expenditure refers to all payments other than for capital assets, made on goods and services which include wages and salaries, employer contributions, interest payments, subsidies and transfers (Akpan, 2005).
Government recurrent expenditure on goods and services is expenditure, which does not result in the creation or acquisition of fixed assets (new or second-hand). It consists mainly of expenditure on wages, salaries and supplements, purchases of goods and services and consumption of fixed capital. So government recurrent Expenditures or Government final consumption expenditure on goods and services for current use is to directly satisfy individual or collective needs of the members of the community (Akpan, 2005).
CHAPTER THREE
REASEARCH DESIGN AND METHODOLOGY
This chapter will concentrate on the method of the study adopted in the collection of data required and analysis of result. The core of this research report explain how work will be undertaken and how the researcher intend to known from his result whether he has found a solution to the problem or not.
The variable included in this model are based on data collected from a period of (1991-2022) through which the impact of government expenditure and other variables like money supply, inflation and foreign debt was explained. The necessary information needed to explore this economic phenomenon can be illustrated in a functional relationship.
SOURCES OF DATA
A secondary data was employed in this analysis as is suit the economic research nature of the work. The data used were gotten from major sources which are; Central bank of Nigeria statistical bulletin, CBN annual report. Economic journals and textbooks
REGRESSION MODEL
Economic relationship is not however assumed to be exact. Other variable apart from the ones stated exist which can influence economic growth but are omitted in the model. These factors omitted in the model are considered by introducing the error term or random variable (disturbance term) in the model to capture all kind of disturbance that might distort the structure of the model
As stated earlier, the variables to not be used are gross domestic product as the independent variable and government recurrent expenditure, government capital expenditure, inflation rate, money supply and foreign debt
The model can be specific in mathematical form as:
CHAPTER FOUR
PRESENTATION AND ANALYSIS OF RESULT
Interpretation of Result
Dependent variable: GDP.
Method: Ordinary Least Square.
Period of study: 1991 – 2022
Included Observations: 32
CHAPTER FIVE
SUMMARY, POLICY RECOMMENDATION AND CONCLUSION
SUMMARY OF FINDINGS
Based on the empirical result, the main finding of the research can be briefly summarized as follows.
- That government expenditure has a positive relationship on economic of Nigeria.
- That inflation rate has a negative impact on economic of Nigeria.
That money supply has a positive impact on economic of Nigeria.
That foreign debt has a negative impact on economic of Nigeria within the period under study
RECOMMENDATION
One most have seen from the study that the contribution of government expenditure to economic growth is significant at 5%level based on the findings; these are some possible recommendation to the government.
- The independent corrupt practices and other related crimes commission and the economic and financial crime should be reformed, strengthened and modernized to engender transparency in the conduct of government affairs.
- The government should implement tax reforms to increase revenue.
- The government should also adopt a public expenditure rule that prohibits the deficits from exceeding GDP.
- The government should adopt a public medium term expenditure framework to ensure predictable and sustainable public financing at all level of government.
- The federal budget strategy of constraining spending growth below output growth particular attention paid to constraining transfer payment should be encouraged
- There should be all increased promotion of private enterprises by creating a macroeconomic framework a kind of over arching national keeping that will ensure that Nigeria make the most what it earns as a nation, that is spend only what it can afford and that all level of government uses the same budget
CONCLUSION
From the empirical result, it is found out that government expenditure has a positive impact on the economic from the period covered (1991- 2022).
Therefore government is advised to encourage the federal government expenditure through various policy measures like granting of subsidies, increasing sectorial allocation to the sector, expenditure on education, health infrastructures, industries and other project to facilitate the productive base of the economy. On the other hand, it was seen that inflation rate, foreign debt, have no significant impact on economic growth
This shows that government have not provided all the needed measures to check price stability, excess money supply, lowindustrialization, subsistence agriculture and other sources of inflation rate, foreign debt in the country.
Thus government and policy worker should do everything within their reach to ensure that price is stable money supply is not excessive (contractionary measures) so as to reduce inflation and promote economic growth
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